The Value of Smartphones

Over the past few weeks, I have been asked a lot whether the prices of smartphones will continue to increase and if such an increase is justified. The success of the iPhone X took those who said people would never pay $1,000 for a phone by surprise. The iPhone X also gave hope to smartphone vendors that, while sales might be capping there is an opportunity to grow average selling price and possibly profits. Yet, the success of the iPhone X must be considered with some caution. Not everybody is prepared to pay that kind of money for a phone, and, even more importantly, not every brand can charge as much.

The Bill of Materials is growing

It should not come as a surprise that the cost of making phones is rising. Smartphones have come to offer as much as a PC does, sometimes even more. Storage, screen quality, more sensors, bigger batteries, premium materials, cameras, and a lot more software. While some of the technologies are well established, so their cost has come down, others are cutting edge and add a fair chunk to the bottom line. Think, for instance, at the different biometric solutions from iris scanning to fingerprint readers.

Let’s look at the two trend setters in the market to see what has been happening over the past year. According to the teardown analysis conducted by IHS Markit, Apple’s total cost to make the iPhone 8 Plus rose to $295.44, $17.78 higher than that of the iPhone 7 Plus. IHS Markit also estimated that the iPhone 8 bill of materials is $247.51, or $9.57 higher than the Phone 7 at the time of release. The Samsung Galaxy S9+ (64GB) carries a bill of materials (BOM) cost of $375.80, much higher than for previous versions of the company’s smartphones. The preliminary estimated total is $43.00 higher than costs for the Galaxy S8+. It is too early for a tear down of the Samsung Note 9 and we know nothing about the iPhone X successor but we know the 64 gigabytes iPhone X model carries a BOM of $370.25 and betting on a higher BOM wouldn’t be a bad idea.  

The Return on Investment is High

We understand now why the cost of the phones at the high-end of the spectrum is going up. But why are consumers prepared to pay those rising prices?   The answer is in the return users see in the phone they buy.

Smartphones have become a must-have for most. They have replaced other consumers electronics such as MP3 players, digital cameras, video cameras, portable navigation devices as well as some other things like watches, alarms, and wallets. We use them throughout the day, every day, whether we are at home, commuting, at school or at the office. Our dependence has grown so much that we have started to talk about addiction. Whether you are addicted or not, there is no question that a lot of value is given to this thing we carry in our pockets.

Adding to the practical side of what the phone does for us there is a more irrational value we see in these devices. The pictures we store, and for some even the music, offer a deep emotional connection to the piece of hardware. While your computer can store the same things, the phone has the huge advantage of being that thing in your pocket you always pull out, much like you used to do with those pictures in your wallet. Plus as much as your phone is the same as everybody else you feel you made it yours through your pictures, your apps…You now even start to feel that your phone knows you!

No Sticker Shock

The smartphone market is not that different from the car market where the price spectrum is more and more polarized. The higher end is getting more expensive while the lower end is getting cheaper and more reliable.

Moving from contracts to installment plans helped consumer appreciate that not all phones cost $199. But even then, consumers do not have to face the full price of a phone in one go. The biggest increase they see is on the initial payment which includes tax but that percentage on a $100 increase is negligible.

Buyers could object to the price more on principle. It is really, the idea of spending $1000 that seems ridiculous to some. This is precisely where the weight one puts on the usefulness of the device and that emotional connection I mentioned will determine if you are a “you must be kidding me” or a “where do I sign” buyer.

The Power of a Brand

There is also a final component that plays a big role at the high-end and that is brand. The brand is what turns the device into a status symbol, something some consumers are prepared to pay more for. And I am not talking about the technology, the design, the quality that goes into the devices made by these brands. I literally mean the name, the logo.

In the smartphone world, this is true for Apple and Samsung and possibly Google. Consumers see these brands as leaders and are willing to pay more for their products. Other brands, like Huawei or Xiaomi, while getting recognition for their technology advancements or design have not quite earned the right to grow their price tags as much.

How far prices can continue to grow is hard to say, but I do not see this formula of rational plus irrational value and brand change much over the next five years.

 

Tablets, Notebooks and Desktops Are The New “Other”

I have been following personal computing since the 1970s (yes, I am ancient). I was introduced to computing categories in the following order:

— First, there was the Desktop. The original Desktops were text input only. Then monitors were added. Then mouse input was added, which allowed Desktop computers to be user by a whole new class of users.

— Next there was the Notebook, which broke from the Desktop only in form factor. The Notebook made the Desktop transportable.

— Then there was the modern Smartphone, which broke from the Desktop and the Notebook both in form factor and in user input. While the form factor of the Notebook made it transportable, the form factor of the modern Smartphone made it mobile, pocketable and, with cellular and wifi connectivity, always connected to the internet. While input via a mouse was the preferred input metaphor for the Desktop and the Notebook, touch became the preferred input metaphor of the Smartphone.

— Then Steve Jobs introduced the modern Tablet and asked if there was room for a third category of personal computing device between the Notebook and the Phone. Note he did not identify the Desktop and the Notebook as different categories, which was probably correct. The Desktop and the Notebook are very similar to one another, while the gap then existing between the Notebook and the Smartphone was, and is, great. Steve Jobs was asking whether there was room in that gap for yet another category (the Tablet) and some are still asking that question today.

— Now, we see wearables as a potentially new computing category.

Input

In addition to dividing personal computers by category — Desktop, Notebook, Tablet, Smartphone and Wearable — I have also always been careful to divide personal computers by user input.

While the Desktop and the Notebook use a mouse and a touchpad to manipulate a cursor, the Smartphone and the Tablet use the finger as the input device. Touch input is so different from cursor input, it required a radical re-writing of the computing operating system. Some, to this day, still do not recognize how very different — and how very incompatible — the mouse metaphor and the finger metaphor user inputs are.

Distinguishing between user inputs caused me to draw a bright line between Desktops/Notebooks that use cursor input and Tablets/Smartphone that use finger input.

Black device icons

Mea Culpa

Please pardon me for being late to the party, but I think I’ve been looking at personal computing all wrong. Because I divided personal computing by categories and because I divided personal computing by user input, I failed to see that what is really happening here is personal computing has divided into two camps: Smartphones…and everything else.

Smartphones Are The New PC

I’ve known for a while the Smartphone was a Super Computer in our Pocket and it is outselling other personal computing devices by more than 2 to 1.

mobile-is-eating-the-world-8-1024

mobile-is-eating-the-world-20-1024

However, I’ve never really given the Smartphone its due. I’ve always seen the Smartphone as being at the bottom of the personal computing pyramid, with Desktops at the top. Ben Bajarin says this is because we, who have grown up with personal computing, have a PC bias, and he is right. For most of those who did not grow up with desktops and notebooks, those devices are totally irrelevant. Old-timers like me find ourselves debating silly questions, like whether the tablet might be capable of replacing the Notebook when, in fact, the phone is more than capable of replacing the Notebook for many.

The Smartphone Is A Supercomputer In Our Pocket

For those in the West, the Smartphone combines many devices into one and for those who have never previously had access to computers, it gives them access to a plethora of devices and services they never had access to before.

ComboComputer

The Smartphone puts previously unimaginable computing power at the service of the masses. While the richest nations benefit from the Smartphone, those who inhabit the poorest nations benefit most. Smartphones act as the great equalizer.

PicSuper

Some even postulate that “Mobile at work is the next Industrial Revolution“.

Running The Numbers

The are 6 billion people on Earth and it is estimated 5 billion of them will own Smartphones. Of that 5 billion, perhaps 2.5 billion will decide to own an additional Tablet, Notebook or Desktop.

You have a small screen in your pocket. You may also have a big one at home. It may be a laptop, desktop, or tablet, or some combination. ~ Benedict Evans (@BenedictEvans) 12/9/14

What this means is, in the very near future, everyone who has a computing device will have a Smartphone and only a subset of those Smartphone owners will have an additional computing device. And for many, the Smartphone will turn over every 2.5 years while the “additional” computing device may not turn over for 4 or 5 years.

Tablets, Notebooks and Desktops Competing Against One Another

While I have always thought of Tablets, Notebooks and Desktops as being separate categories, they really need to be lumped together as “Other”, i.e. other than Smartphones. Tablets, Notebooks and Desktops compete against one another for the coveted role of being our second computing device. Smartphones aren’t in competition with the “other” category. Computer owners may argue over whether to get a Tablet or Notebook or a Desktop but almost no one will think of getting a Tablet or a Notebook or a Desktop in lieu of a phone.

Tablets, Notebooks and Desktops Acting Like One Another

In addition, as different as Tablets and Notebooks and Desktops are, one from the other, they are also very alike in most of their use cases.

Looking at IBM US commerce data. Pretty clear it’s wrong to think of ‘mobile’ as smartphones + tablet. ~ Benedict Evans on Twitter

tabascom

The Tablet form factor and input are completely different from the Notebook and the Desktop, but the Tablet’s use cases are far closer to the Notebook and the Desktop than they are to the phone.

The more I look at tablets the more I think of them as a continuation of the desktop to laptop transition, rather than part of ‘mobile’. Benedict Evans (@BenedictEvans) 12/9/14

Perhaps you came to a similar conclusion long ago. For me — and I suspect for many others — this is a whole new way of looking at Tablets, and at personal computers as a whole.

A New Definition Of Mobile

I think we need to redefine what we mean by “mobile”. For me at least, for a device to be categorized as “mobile”, it must be on one’s person or readily accessible at virtually all times and it must be connected to a cellular or WiFi network at virtually all times. Tablets should be removed from the mobile category and thought of, instead, as one of the three flavors of secondary computers available to those who can afford more than one computing device.

mobile-is-eating-the-world-7-1024

I, like many others, care about some computing categories because of what they were rather than because of what they are. Computing has re-aligned itself. It’s past time for my way of thinking about personal computing to do the same.

A Deeper Dive on Android and iPhone in China

I’ve received a number of questions from readers about why I don’t talk as much about the US market for smartphones. It’s primarily because the US doesn’t offer any new interesting questions or problems. It’s about a 50/50 split between Android and iOS and Apple controls over 60% (and growing) of the premium smartphone space. iOS is on track to gain share into Android’s each quarter of 2014 and it will likely be more of the same in the US in 2015. However, other markets like India and China pose much more interesting questions and problems to be solved. I’ll do a few deep dives on the US market with some of our updated data sets, but what we find will likely not contain major surprises. Now, onto the iPhone and China.

First, Android Context

A fascinating data point came from Baidu yesterday. Baidu, the largest browser in use with an over 80% share in China, reported to Tech In Asia that they count 386 million active, individual Android customers. This is Android AOSP, not Google-approved Android, and a few things are unclear about the numbers. First, it is uncertain if these are smartphone-only owners. The report simply states active Android devices. Given China runs both AOSP on smartphones and tablets sold there, either device connecting to the Internet and accessing Baidu’s search engine would be counted. Through my supply chain checks, I learned that, on average, about 20m low cost Android tablets are sold in China each year. As I have discussed before, most of those are used simply as portable media players and large percentages likely do not connect to the internet. Which means, while some of the 386m active Android devices are tablets, the majority are smartphones. ((Even if the report said they were all smartphones, I would still believe a small percentage were tablets since my research there found that even 7-inch tablets in China use smartphone components; therefore they show up in analytics as smartphones.))

Baidu similarly reported last year a total of 270m active Android users. So there is impressive growth for AOSP. For some time now, I have been building a model of AOSP’s growth in China and was pleased to see Baidu’s data for Q3 2014 matched very closely to my own model.

Screen Shot 2014-12-15 at 9.10.56 PM

You’ll note growth is slowing, as is the China smartphone market in general. There is certainly more growth to be had as more of rural China gets online, but these will mostly be with very low cost smartphones. Where things start to get interesting is when we look at the nearly 400m Android AOSP customers in light of the total smartphone user base. A number of Chinese research firms like iResearch China and analytics engines like Baidu/Umeng came out and said over 550m smartphones were in use in China by the end of June of 2014. My model would estimate that number to be around 575m as of today. Now we turn to the iPhone.

All local app analytics sources I have access to in China, and major network statistics I see, show Android and iOS as the two dominant smartphone platforms. So, if ~386m of them are on Android, then the iPhone fills most of the gap between 386m and ~575m. Based on my model, I had estimated iPhones were likely in the 130-150m range and I have believed for some time there were more iPhones in use in China than the US. It seems Baidu’s data is confirming much of what I thought my model was suggesting was true.

However, the bulk of that iPhone active installed base is on much later generation hardware sold through the grey market. This chart is the most updated data — now containing a a month and a half of iPhone 6/6 Plus availability. Keep in mind iPhone 6s starting showing up in September in this data because of grey market imports.

Screen Shot 2014-12-15 at 9.29.24 PM

As Apple offers more models for sale in China, we are seeing the continued rise of primary market sales of iPhones. There remains a large installed base of later generation phones but, as you can see, it is actually more of a mix than domination by a few models. This data comes from Baidu’s app distribution network so it does not cover the entire market but it does cover over 100m devices. I can’t imagine the picture is much different on other app distribution platforms.

What I’m left thinking about is what will happen with the large percentage of current iPhone owners who are using later generation iPhones they bought from the secondary market for prices around $300-$400. It is hard to believe every one of those owners can afford a $700 phone but will they stay in the Apple camp and get another later generation phone like the 5s? Or will they stay in their price range and go with Xiaomi? These will be interesting questions for most of 2015. However, once the current iPhone 6/6 Plus gets discounted in China when the iPhone 7 comes out, I think Apple’s offering in China will be very competitive.

Lastly, it is worth pointing out the China smartphone market is unlike anything out there at the moment. Much of it has to do with WeChat. WeChat is undeniably functioning as an alternate or “para” operating system that runs on iOS and Android. As I look at what lock-in Android AOSP, or Xiaomi’s Android skin, or Apple’s ecosystem has, I observe the true lock-in in China is WeChat. Apple has the benefit of playing as a luxury brand; status is a huge part of their lock-in in China. But as this financial analyst correctly points out, we are hoping to see Apple continue to create more services/cloud lock-in rather than just status. Services like UnionPay integration will help with this but Apple’s services stickiness in China is a story to watch.

With Chinese consumers’ loyalty to WeChat, it means Android vendors could come and go. Xiaomi is doing a decent job building some loyalty and all on-the-ground research I get from China indicates a growing pride of Chinese consumers for local Chinese tech brands. This will continue to pose challenges to Samsung. We are watching a number of Chinese brands closely, but Vivo (charted below) is one to keep an eye on as they are positioning a number of their products to the high end.

There are many story lines to watch and analyze throughout 2015 with regard to China and I’ll keep updating my narratives on all of them.

Screen Shot 2014-12-15 at 9.51.05 PM

First Rule Of Homebrew Drone Club Is There Are No Rules For Homebrew Drone Club

Drones are the next revolution, the next insanely great thing, the pirate, the multi-billion dollar business, the integration of the physical and the digital, the device that will fight our wars, provide web access to the poor, deliver our pizzas in way under 30 minutes, ensure the air is safe, expose dictators, and turn us all into Hollywood-style directors, even if just for some grand selfie.

I don’t make, I write. If I made, I would make drones.

If I was that guy in The Graduate, my one word would be: “Drones”.

If I were the next Steve Jobs, I would dream of drones. If I were the next Bill Gates, I would envision software empowering drones built on every kitchen table.

You know what’s going to power the DeLorean back to the future? Drones.

Not since the launch of the iPhone and possibly not since I first used Mosaic have I felt about a technology as I do about drones. The market for drones is expected to reach $91 billion by 2020. I think this radically understates their impact, even considering the current muddled legal environment.

Drones are the next ‘stack’ of the global internet, and will radically re-make our perception of location, privacy and commerce. They are as if the PC and the Internet launched together. In 1988.

Not surprisingly, everyone wants in on the action.

  • Mark Zuckerberg is funding efforts so drones can “beam internet to people from the sky.”  
  • The Defense Advanced Research Projects Agency (DARPA) wants to re-tool aircraft to serve as a “flying fortress” filled with drones able to carry out all manner of missions in any region of the planet.
  • Amazon is “doubling down” on drones for delivery.
  • Skycatch is already building a sort of Uber for drones, linking drone “pilots” and makers with those who need drone-based services.

Despite all this, it is hobbyists who are advancing drone development even more than government or business.

There is a thriving community of drone builders and enthusiasts at OpenPilot.org,which has created an open source platform for drones. The nonprofit OpenPilot hopes to make drone technology more affordable, more accessible — and optimized for improving humanity’s lot.

DIY Drones claims to be the world’s largest community for drone hobbyists. DIY Drones was also instrumental in the development of the Dronecode Project, which aims to “bring together existing open source drone projects and assets under a nonprofit structure governed by The Linux Foundation”. Drones just had their Tim Berners-Lee moment.

Yes, the rules for drone use in the US are in flux and clearly lagging the technology.

“After years of waiting, a Federal Aviation Administration (FAA) official said the agency was close to releasing a ruling that would give commercial entities greater access to fly small unmanned aerial system in the domestic airspace.”

It’s not just the FAA. The Office of Management and Budget is also involved. Then there’s the FCC and the Government Accountability Office. All are working to enact Congress’ 2012 “FAA Modernization and Reform Act,” which is meant to bring a clearer legal framework for the commercial operation of drones (unmanned vehicles weighing less than 55 pounds). In addition, several states and cities have enacted their own rules. Businesses don’t know what to do, other than do nothing or operate in secret.

For hobbyists, the rules are essentially that drones must remain within line of sight and away from airports and below 400 feet.

Don’t fear, I know a secret: This will all get taken care of — because, just as with PCs and the Internet, the spread of drones cannot be stopped.

It’s a drone world after all….and the best is yet to come.

The FAA expects more than 30,000 drones in commercial use by 2020. These will be used by law enforcement, military, logistics companies, businesses, and tech giants. The potential, however, is limitless. Witness: The nonprofit Drone Adventures sends drones to impoverished areas of the world, assessing air quality, agricultural impact, promoting conservation and archaeological efforts.

IMG_8066-Edit-wm

Conservation Drones uses drones to map sections of the planet and assess local environmental challenges. Matternet is using drones to deliver lifesaving medicines where they are needed most.

IMG_7817-wm

How is all this possible? Smartphones.

Smartphone-optimized technologies, including GPS, accelerometers, gyroscopes, mobile cameras, a litany of sensors, mobile battery power, lenses and more, have all become widely available, shockingly affordable — and are transferable to the drone industry.

Then there’s the rapid drop in price. The new Lumia 535 is available for $137 — inclusive. Only a few years ago, such a price for so much technology was unthinkable. A similar phenomenon is happening in the drone industry. Consider this is what you can get now for the price of an iPhone 6, off-contract: the Phantom can fly 22mph and reach an altitude of 1,000 feet. GoPro optional.

cover@2x-b6b40e090150ebe68c0b6fcd4532d49f

You were not part of the original Homebrew Computer Club. You’ve just been given a second chance. Nowhere to go but up.

There Are No Muggles. We Are All Wizards Now.

I read the first three Harry Potter novels to my son. It’s a fond memory strengthened by the fact the books were quite good. In each, the young Harry Potter straddles two very distinct worlds, the magical world of wizards and the familiar world of non-magical folk, Muggles. Us. Except, this is not true, not anymore.

There are no Muggles. We are all wizards.

I realized this while texting my son baseball playoff updates — as I was flying across the country, 30,000 feet above the ground.

Think of it. Nearly 2 billion of us carry wands. We call them smartphones. These semi-magical devices enable us to connect with nearly anyone at any time from any place. We can instantly access the world’s knowledge. Always in hand, always at the ready, we use these “wands” for work, for play, to protect us, to make our lives better. They know us, know where we’ve been, what we like, answer to our voice.

Point your smartphone at the sky and learn what planes are flying overhead, even what satellites are circling the globe.

Hear a sound and your smartphone will tell you the song — using the appropriately named Shazam app. Point your smartphone at a complex math equation and it supplies the answer. This is magical.

PhotoMath

Want to use your smartphone-wand to put out the lights, turn on the television, fill your surroundings with music? Done. This is magical.

Magic is now commonplace, like air, or water.

In the later Harry Potter books, we learn of “horcruxes,” small objects, like a medallion, that literally contain bits of a person’s soul. Horcruxes are obviously real. Think of the Apple Watch, loaded with sensors, embedded with an entire — and entirely swappable — computer on a chip. This tiny object, placed upon your skin, knows where you are, where you’ve been, your heart rate, maybe your blood pressure, your voice, your history. This deeply personal information may last forever, reflecting you to whomever possesses the object.

I cannot be the only person who feels wizard-like powerful when I literally pause live sporting events on my television.

Look. You will soon have your very own invisibility cloak.

1017_HS1

According to the scientist-wizards at University of Rochester, “this is the first cloaking device that provides three-dimensional, continuously multidirectional cloaking.” How? By using readily available technology that almost certainly will radically drop in price and availability:

“With four lenses arranged in exactly the right way, The Rochester cloak creates a space in which anything that exists in between these lenses are hidden from sight. Unlike most other invisibility cloaks currently being worked on, the object being hidden here is able to remain hidden even when looking at it from multiple angles.”

Catch that? Yes, there’s more than one invisibility cloak under development.

It’s time to acknowledge we are all wizards and possess the tools of wizards. It’s not through magic, but brainpower, ingenuity, relentless effort, access to knowledge and high risk capital that made this magical world possible.

  • 3D printing is transfiguration, transforming one object into another.
  • Algorithms are our sorting hat.
  • Google Now is a remembrall.
  • Neural networks, like Inception, are the branch of magic known as Occlumency. More about ourselves is known then we know about ourself.
  • Social media is the Pensieve, storing our memories forever. Or, perhaps, our very own Mirror of Erised, revealing the “deepest, most desperate desire of our hearts.”
  • Direct brain-to-brain interface is in development. This doesn’t even exist in Harry Potter’s world.
  • Ray Kurzweil is no doubt hard at work on a resurrection stone. 
  • That scar, there on Harry’s forehead? Haptics. Touch it, and it reveals what’s inside. 

Snitches are real.

snitch

Last week, Amazon announced the Echo. This small device sits in your home and answers to your voice. It will play music, tell you the weather, read the morning’s news to you. Oh, and it learns. What magic trick can do better?

As our magical tools learn still more about all of us, about the world around us, and as “virtual” reality continues to progress, we might, yes, literally, live in a world where ghosts are common. Friends, family members, colleagues — and the departed — all (virtually, visibly) available, wherever we are, whenever we need them. In fact, it seems to me this will be so by no later than 10-20 years from today. Ghosts before driverless cars.

Oh, the Marauder’s Map? That’s Waze. No big deal.

waze

Wizard Or Squib?

Now what? What do we do with all this magic swirling about us, accessible with the touch of a finger or the sound of our voice?

First, embrace our powers, but remember to use them always for good.

Second, and while I am not suggesting we send our children off to wizarding schools, certainly our 20th century Muggle school infrastructure must be demolished. Let’s not make squibs of our own children.

Third, embrace the magic. It is ours, it is who we are. For our sons and daughters, it is the world they are born into.

What magical devices do you use? What new magic awaits us all?

Understanding the Global Mobile Web

In the latest mobile focused podcast with Benedict Evans and myself, we touched on a theme that needs more fleshing out. That of a future only possible because of mobile computers/smartphones. When I detail the mobile first world in articles, presentations, and reports, what I highlight is not only the impact but the necessity of mobile to move computing forward. The PC in the shape of a notebook or desktop took computers as far as those shapes would allow. There are very few new users for PCs of that design. The PC in the shape of a tablet can take computing even farther, particularly in business environments, and that form factor gets a PC into the hands of more people. The PC in the shape of the smartphone, however, brings computing to everyone. Perhaps more importantly, the smartphone can bring the internet to everyone. More revolution will come from the PC in the shape of a smartphone than from any previous computing product in history. It is because of this, we will see countless opportunities emerge and it is a future only possible because of mobile.

The smartphone opens the door to new possibilities because it is the first time the technology industry is accessible to everyone. In fact, over the next decade or so, we will watch smartphones become a commodity. Estimates are, by 2020, quality, powerful smartphones could cost $10. The mobile web is already bigger than the desktop web and, in a few years, the mobile web will dwarf the desktop web. It is a cold hard fact, the future of the Internet is mobile. This reality brings out some interesting implications.

Global Mobile Web Browsing

There was a debate last year around the disparity between iOS web browsing and Android web browsing. It seemed a conundrum — Android had 2x the user base but much less of the global browsing share. As you see from this chart from NetMarketShare, only recently has Android overtaken iOS in global web browsing share, and it is still very close.

Screen Shot 2014-11-06 at 9.12.37 AM

When we include Android AOSP and Google’s Android, there are well more than double the active devices compared to iOS. But why did it take so long? There are many theories but there is one in particular I find insightful and adds a bit of needed clarity to the global mobile web discussion.

The bulk of Android’s growth and market share is in the lower tiers of smartphone price bands. My estimates put premium Android price tiers at roughly 15% of the global Android installed base. Meaning much of Android’s installed base globally consists of non-premium/lower price tier smartphone users. This explained quite a bit of the global web browsing paradox. Apple has a significant installed base of premium users, larger than Google’s premium users, and those customers spend more time browsing the web and consuming internet data. As I started researching the mobile web in emerging markets, it became clear one of the factors for this disparity was, because of Apple’s premium customer base, this audience could afford to liberally browse the web. Where much of Android’s installed base, having to deal with pricey and slow internet connection times, and no wi-fi at home, could not.

This insight becomes even more clear when we look at this chart from Jana.com showing the number of hours of minimum wage work required to pay for the average data plan.

Hours-of-minimum-wage-work-needed-to-pay-for-a-500-mb-mobile-data-plan-Hours_chartbuilder

Due to the infrastructure challenges in many of these markets, consumers are very aware of not only how much data they are using, but also the size of the application they are downloading. This is a fascinating quote from a post from LightSpeed Venture Partners, an investment firm focused on India.

So, what is an ideal app size, especially in markets like India with challenged infrastructure?

The ideal size is 10-15MB globally. Idea size for an app for tier 2/3 countries (like India) is below 5MB. 500MB+ is a non-starter. At 50MB+ the conversion rates fall off dramatically. On Android and iOS, conversion rates dip by 50% in tier 1 nations for non-game apps above 50MB. In tier 2 and tier 3 nations, conversion rates dip by 50% for games above 15MB.

It is becoming clear the high cost of data plans in many emerging markets are influencing how they use the mobile web and the apps they use and download.

The Light Web

Understanding this leads me to consider the role web apps may play in these markets. There is a web app called Zomato, which is sort of like Yelp for India. Zomato is a great example of a light application that is useful via a web app in those regions where light applications are necessary. It is true native apps are still dominant in these markets, however, we are still dealing with only the top 30-40% of the global mobile audience that has a smartphone and a data plan. As we extend that reach into the broader 60-70%, a healthy portion of those customers will be even more sensitive to the costs of data and size of applications they consume.

This is why the “light web” is a reality for the next billion users. Whether by lighter/more efficient native apps or, as I believe, web apps, the light web is better positioned for the next billion. Interestingly, even Uber has a robust web app. It is possible the powerful cloud and light, thin client computing paradigm is destined for emerging markets.

It is clear, thanks to PCs in the shape of a smartphone and the inevitable inclusion of robust sensors in these devices even at low prices, that we are heading to a fascinating future not only made possible because of mobile devices but empowered by them. This future will pose great challenges to many incumbents but even greater opportunities for the innovators.

Thoughts on Xiaomi

The Wall Street Journal had a big scoop this week: some numbers on Xiaomi’s business are apparently being shared with potential investors as it looks to raise money for acquisitions and/or expansion. Until now, I’ve held off on writing anything in-depth about Xiaomi precisely because its financial model and key facts such as its profitability were opaque, and I found it difficult to evaluate its likely impact going forward without that understanding. Now that we have at least a few tantalizing glimpses at Xiaomi’s finances, I feel like it’s finally time to share some of my thoughts.

One of the three most interesting companies in smartphones

Xiaomi is on my list of the three most interesting companies in the smartphone space right now, along with Lenovo and LG. Each of the three is very different and interesting for varying reasons. Lenovo is interesting because it’s transformed itself from a provincial player to a global force in PCs and now sits in the top five in smartphones, tablets and PCs, and rising. With the acquisition of Motorola, it promises to do what all the other Chinese OEMs have failed to do: break into the US in a big way. LG is interesting because it seems like the most viable alternative to Samsung for many carriers looking to diversify their Android vendor base, since it’s not as shaky as HTC or Sony and doesn’t come with the baggage of the Chinese vendors. With some really good phones in the last few months, its shipments have been steadily rising and its margins with them. But Xiaomi remains the most mysterious of the three and, in my opinion, actually the least likely to make headway in the US.

A unique model, different from Apple’s in important ways

Xiaomi’s model is unique, even though it’s often compared to Apple’s. Apple’s model relies on tightly integrated hardware and software it controls end to end and owns exclusively. Services are another crucial component of Apple’s value proposition, and exclusivity has often been a hallmark of those too, though Apple hasn’t been afraid to buy into data and services when it needs to, though allegiances have shifted over time (Google out, Microsoft and Yahoo in, for example). Xiaomi also differentiates itself through the software and services it brings to bear, but its model is different, in that the core of its software is Android, owned by Google and not Xiaomi. This gives the company less control over its own destiny, but obviously also significantly reduces the cost of going to market and maintaining its OS.

The services Xiaomi provides are a hodgepodge of pieces and parts cobbled together from a variety of sources. I loved this in-depth review of a Xiaomi device from July because it highlighted the patchwork nature of what Xiaomi provides (and what the user adds him or herself through the app store). Baidu’s maps and search are apparently defaults, but many of the other services are local equivalents to Google, whose services of course are famously not available in China. This means a major revenue source for Xiaomi is likely fees from the various partners it signs up to fill these slots. Xiaomi’s own software and services focus on the non-revenue-generating aspects such as the weather app and the voice recorder. Yes, Apple has relied on Google in the past for key features, but that was the past and that relationship quickly changed. Apple has always been strong enough to eventually develop its own global ecosystem to rival Google’s, but Xiaomi is far from having that sort of global clout.

A model that won’t work in the US

All this means a model that works well in China will work far less well in many other markets where the Google services are available and where they are the preferred options for users. To the extent Xiaomi thrives on the first- and third-party software and services it layers onto the operating system, that model breaks down quickly in markets where both users and Google will insist Google services are paramount. Xiaomi can get away with not providing the Google services package in China but, if it wants to be an official Android vendor outside of China, it will have to dial down those customizations.

The WSJ article is tantalizingly short on consistent details, providing a precise number here but only a vague allusion there, hinting at margins here but leaving out the comparable figure from a year earlier, and so on. But there’s enough to establish a few key facts: Xiaomi is profitable, the vast majority of its revenues come from handsets, and it spends very little on marketing. To top it all off, it’s doing all this, with higher margins than all but two other vendors, with an average selling price of somewhere around $200, which is unheard of. The services and software piece is likely critical to those margins, as the revenue from its licensing deals is likely mostly profit, but again that model will break down quickly outside of China and a handful of other markets where local services are prized above Google’s. It will certainly break down in the US.

The question of intellectual property

The other thing that’s been widely discussed with regard to Xiaomi is its liberal borrowing of both hardware and software design from other vendors, notably Apple. Some have suggested it won’t be able to expand into the US because of the intellectual property threat outside of China, but I think this may be overblown. Apple in particular has spent years fighting Samsung over patents and allegations of copying and I just can’t see it repeating this process with Xiaomi. It’s too expensive, too time-consuming and ultimately seems to do little good. By the time the court cases are resolved, the devices in question have long since had their day, and the legal wrangling has caused all sorts of private information to emerge. I suspect Xiaomi may be more careful outside of China with some of its design decisions, but I don’t think the threat of litigation is the biggest barrier to its entry into the US and other major Western markets.

Is there a future without a presence in the US?

The biggest question for me then, is not whether Xiaomi can succeed in the US, but whether it can succeed on a global basis without succeeding in the US. That’s generally been tough: the US remains by far one of the largest markets for premium smartphones, and that’s where the margins have been. Though Xiaomi’s model allows it to generate margin elsewhere, premium phones are critical to future success. But we’re seeing an increasing regionalization in smartphones, with major countries such as China and India fostering their own domestic brands and lending otherwise impossible scale to companies operating in a single market. Lenovo’s success in smartphones has come almost entirely from China itself and Chinese vendors are now able to build scale to match (or even exceed) that of global vendors even before they venture overseas. As a result, there’s no doubt in my mind Xiaomi can continue to grow in both size and influence as a smartphone vendor over the next few years. But I believe its success will come despite its failure to break into the US, not because of success here.

For further analysis of Xiaomi and the offerings they provide beyond hardware, see Ben Bajarin’s video analysis of the company.

Research: Who’s Buying What Tech around the Globe This Holiday Season

We have some research that gives us insight into what tech products are on the interest horizon for purchase over the next six months. While intent to purchase surveys don’t always lead to purchases, it does give us an indication of what products are top of mind and more importantly how that may differ from each region across the globe. This research comes from surveys across 32 different regions and over 30,000 people in total. With as much data as I have, I struggled with the best way to display it. Since percentages did not equal 100% and were also based on sample size from each region making the percentages vary, I decided to weight the values numerically by priority. 12 is the highest priority / interest to purchase over the next 6 months and one is the lowest.

Here is the chart from a global standpoint with all 32 regions included.

Screen Shot 2014-11-03 at 8.31.48 AM

As you can see, globally tablets, smartphones, and a PC (laptop) have the highest interest level/priority to purchase over the next six months. While mobile phone numbers shouldn’t be surprising, it is interesting that, in all regions, the tablet still remains the highest priority with the PC (laptop) third. As I look at what we see happening in the market, my gut tells me there is still a large number of global consumers struggling with whether to get a laptop or a tablet. I’ve been saying for some time that, when the consumer market moves and finally upgrades their PC, we will see how the tablet and PC conundrum plays out. Still, looking at the data, one has to believe companies like Microsoft and Intel look at this and believe the 2-1 value proposition is strong if a buyer is struggling between both products.

To look at the data more granularly, I’ve broken it out by some of the larger regions by population. The sample sizes were also quite a bit larger in these regions giving us better detail of who intends to buy what.

Screen Shot 2014-11-03 at 8.43.14 AM

As you see, most regions are prioritizing the tablet from a purchase intention standpoint. A few markets like China and the US are prioritizing mobile, thanks to these two regions being extremely seasonal with mobile purchases. When it comes to the PC, it still ranks high, but only Brazil consumers have it as their top priority over the next six months. What is interesting to me is other categories on this list which can also be served by a tablet should the consumer desire. Take the e-reader for example. While lower on the priority list, a tablet can also be an e-reader. Perhaps, as a consumer gets savvy to this, it sways their decision more toward a tablet or a 2-1 rather than a desktop or clamshell? The tablet or 2-1 could also conceivably fill the role of a game console or even a DVD player where access to digital movies exists. What this highlights is my point about the tablet as a much more diverse device due to its form factor than previous heavy computing devices like notebooks and desktops. The tablet form factor can simply “morph” into so many things thanks to the software and services. As consumers become more knowledgeable, I believe the value of the tablet increases.

One point that stands out and is worth highlighting is India’s intent to buy a mobile phone. Look at the data point and you would think buying a mobile is simply not a high priority for Indian consumers. When in reality it is the highest priority among the masses from a tech purchase standpoint. Keep in mind, to take this survey, you have to be online already in some capacity with a smartphone, PC, or tablet. The online population in India is still very small in contrast to India’s population (somewhere over 200m people are actively online). So people who are answering these questions from every region are already online in some way, shape or form. Google’s head of India estimated 5 million new Indian consumers are coming online every month. Most of those are coming from mobile devices. For the unconnected, the mobile phone is the highest purchase priority since it is most people’s first computer. Looking at the data, we are focusing a bit more on what the purchase intent of the already connected is for the next few months.

Where that reality stands out is when we look at what tech was purchased over the past six months. This is a question I like because it brings a bit more clarity to the picture since consumers are stating what they have actually purchased rather than what they intend to purchase. Similar to the above chart, I weighted the percentages numerically. The most purchased product over the past six months is a 12 while the least purchased product is a one.

Screen Shot 2014-11-03 at 8.59.54 AM

Here we see the clarity of the mobile priority. As expected the mobile phone has dominated purchases over the past six months. We also see the strength of the notebook and desktop rebound we are seeing as it shows up in this data. The desktop in particular was a frequently purchased product globally over the past six months. We had a hunch early last year the PC would do well this year and we were right. Partly based on similar intent to purchase data we got this time last year. In fact, the above chart showing who purchased what was very similar to the same intent to purchase data from a Q3 2013 survey.

We know about the centrality of mobile, but what intrigues me about this data is the continued interplay between tablets and PCs. As a part of my overall industry analysis of both categories, this remains a story line and one that does not have as crystal clear of an ending as other categories. I get this data every few quarters so we will check back early in 2015 and see how the story is playing out. My guess is that Mobile is still high, but where PCs and tablets fall is the key question.

Phone, Tablet, Desktop Usage

Usage

I’ve been staring at the above chart and I think there’s a lot we can learn from it.

1) Facts

1.1) Desktops are used most during working hours and their usage tails off at night.

1.2) Tablets are used least during working hours but their usage rises sharply at night, eclipsing even the usage of phones.

1.3) Phone usage remains almost constant both during working hours and after hours and pretty much throughout the time that we remain awake.

2) Speculation

2.1) Desktops are work machines, yes, but more and more they are becoming work only machines. As time goes on, I expect the pattern shown in the above chart to remain about the same but I expect the usage line to slowly sink lower and lower as desktops are overwhelmed by both tablets and especially by phones.

I wrote about this last week, but I don’t think many people realize how rapidly desktops are being eclipsed by tablets and and phones. This is because the raw number of desktops is remaining about the same but, as a percentage, the desktop’s share of the overall computer pie is rapidly shrinking.

mobile-is-eating-the-world-24-1024

mobile-is-eating-the-world-20-1024

Those of us who own desktops just don’t realize just how many new computer users never have — and never will – use a desktop computer in their lifetimes.

2.2) Tablet usage is lowest during working hours and highest during the evenings. I expect this pattern to remain about the same too but I expect the usage line to gradually rise as the desktop line gradually sinks. It’s not that tablet are replacing desktops. Tablets may take over the tasks of some very low-level desktop machines, but for the most part tablets are creating new computing jobs, not replacing the old computing tasks.

For example, Ben Bajarin wrote an article in which he talked about tablets taking over all the tasks that used to be done by clipboards. Think about that for a second. There are so many tasks that simply cannot be done by a desktop or notebook computer but can be easily accomplished by a tablet. Any task that should be done while standing favors the tablet over the desk bound desktop and notebook. As time goes on, we will continue to expand computing into areas where the desktop form factor previously made their use impractical.

2.3) Finally, the phone. The phone revolution began only seven years ago when the iPhone was introduced in 2007. Its a supercomputer in our pockets that we have access to all day long. And, according to the usage statistics, that’s exactly how we use it — all day long.

I expect the usage line for phones to continue to rise but only slowly. We are already using our phones in short bursts throughout the day. At some point, we’re going to max out. But that day hasn’t arrived yet.

More importantly, as Benedict Evans likes to point out, pretty soon almost every man, woman and child across the globe is going to have a supercomputer in their pocket. We need to think about this more if we want to comprehend the future of computing. What will it mean for everyone to be connected everywhere at any time? I think the ramifications are huge although my limited imagination cannot yet see what those ramifications will be.

Conclusion

The rules of computing are changing right before our eyes. It’s like playing chess but the pieces no longer move and act the way they did before.

The role of the desktop computer will continue to baffle many. It will remain the King of the computer chessboard but now the King is no longer the most important piece. To those who need power, the desktop will remain powerful. To those who don’t need the power of the desktop, the desktop will remain irrelevant. It’s a paradox that many can not — or will not — comprehend.

The tablet will be the Knight on the computer chessboard. Not as powerful as the desktop, but able to do things and go places that the desktop can not.

And the smartphone will be both the Pawn and the Queen of the computer chessboard. Simultaneously ubiquitous and powerful. Imagine playing chess with eight Queens. Now imagine a world where everyone has the power of computing with them at all times.

The pieces on the computing game board have changed. The way we play the game will be changing too.

My Apple vs. Samsung Conspiracy Theory

The Samsung issues we are seeing has me thinking about something. It’s a conspiracy theory with zero evidence but something that strategically intrigues me. Tim Cook said in a recent interview with Charlie Rose that Apple could have made a bigger iPhone years ago. So the question is, why didn’t they? The writing was on the wall that larger screens were trending upwards. The pundits read this as Apple’s inability to see market demands and hailed Samsung as the rising star who will dominate forever and ever. Apple must have known that all they needed to do to shut everyone up and crush Samsung in the high end Android camp, where it would really hurt them and Google combined, was to release a larger iPhone. Well, my theory is they did know this and they let Samsung and perhaps even Google have their time in the sun intentionally. In the art of war, this tactic is referred to as a feigned retreat.

A feigned retreat is a military tactic whereby an army will pretend to withdraw or that they have been routed in order to lure an enemy into a position of vulnerability. Feigned retreats are one of the more difficult tactics for an army to undertake, and require well-disciplined soldiers. This is because if the enemy presses into it, undisciplined troops will lose coherence and the rout will become genuine.

Samsung knew the large screen iPhone poised the greatest threat. Yet Apple had no sense of urgency. I recall many conversations with Samsung execs who asked with genuine surprise, “What are they waiting for?” Over time, I heard them convince themselves Apple just must not be interested in larger phones. That the one handed operation conviction will trump where the market is going. All the while Apple was sitting back patiently waiting to employ their thermonuclear war that had less to do with the battlefield of the courts and more to do with the battlefield of the market. Knowing that, once they released larger phones, they would gain share in the premium smartphone segment mostly at the expense of Samsung. From every data point I see globally that is exactly what is happening. In fact, I just read a report from Baidu today in China that highlighted data from a survey they did. Over 40% of current high end Android buyers are planning on switching or strongly considering switching to the iPhone 6 Plus. 21% said they would absolutely plan on buying it and 21% said they would strongly consider buying it. All primarily because of the larger screen.

Obviously this is just a theory. I could poke many holes in it with counterpoints. Perhaps I’m giving Apple too much strategic credit. Nonetheless, I thought I would put it out there to spur some fun conversation.

Video Analysis: Xiaomi in Focus

I have the ability to record and broadcast presentations I give through my primary presentation tool Perspective. So I thought it would be interesting to try something different and create a quick analysis of some of my data and add make some points around a particular focused topic. To start, I thought I would focus on Xiaomi. I’d love any thoughts or feedback on this as it is something I’d like to do more of, specifically for our subscribers, but wanted to test it out broadly first.

If you have the Perspective app (it’s free) you can use this link and watch this in the app which is a higher quality experience than the video. As I do more of these, it may be a good idea to get the Perspective app (available on iOS for iPhone or iPad) since I may do more of these live and be able to take questions. All of that can only be done in the app. If you use the app, you can also pause these stories and interact with my charts yourself. If you have iOS I encourage you to try it.

The one is 11m long. I’d like to keep them shorter in the future.

[fluidvideo url=”//player.vimeo.com/video/108588142″]

I Want It Later! Building The Inconvenience Economy.

As I stood in line with a giddy gaggle of high pants hipsters, each eagerly anticipating the drip, drip of their very own drip coffee from the sainted Blue Bottle, conversations were many and temporary friendships took brief flight.

I looked up from my phone and realized: we are doing it all wrong.

In nearly every aspect of our lives, from work to parenting to play to eating, we are demanding quicker, faster, now. Worse, our technologies — the very products and services we build for our own good — are forcing this upon us. Even worse: We seem to have no idea, no plan, no counter to this offensive.

Understand, I am no Luddite. I am not suggesting we limit the advance of technology (or progress). Rather, I am suggesting we figure out a way to build technologies and services that nurture our very human need to take our time, to hone our craft, to focus on our work, to block out the noise. Almost nothing we have created allows this. Almost no one in Silicon Valley even considers this. I am considered a gadfly whenever I merely suggest it.

Why have we allowed our technology to be so limiting?

Convenience and productivity are just two of the many human desires we hold dear. So where are the devices, the apps, the advances that satisfy our longing for peace, calm, reflection?

No. Turning something off is not a solution. Partly, because that’s so hard — like eating only a “single serving” of cookies. Secondly, because this requires everyone else do the same. Unplug, walk outside, stare at the stars and then count the seconds before a jet flies by, a leaf blower punctures your ears or a bright light pierces your vision.

We are demanding convenience above all else, when in fact we crave the messiness of taking our time. Yet, none of our richest corporations and none of our very best minds appear to have any solution. I doubt they are even considering this. Twitter co-founder, Ev Williams, made this clear last year when he described the Internet as “a giant machine designed to give people what they want.” 

“The internet makes human desires more easily attainable. In other words, it offers convenience. Convenience on the internet is basically achieved by two things: speed, and cognitive ease.”

I got 99 problems but convenience ain’t one.

Fat And Fast

Our very best minds — and we have encouraged this — view the next big thing as whatever it is that satisfies our present, reflexive, fleeting demand for: Now. Want. Now. Want. Now. Again, from Williams:

“Here’s the formula if you want to build a billion-dollar internet company. Take a human desire, preferably one that has been around for a really long time…identify that desire and use modern technology to take out steps.”

Then what? Race ya till you die! There are many human desires where taking out a step does not make life better.

To be fair, Williams does make the obvious connection between our burgeoning abundance of convenience with last century’s abundance of fast, cheap calories:

“Look at the technology of agriculture taken to an extreme — where we have industrialised farms that are not good for the environment or animals or nourishment. Look at a country full of people who have had such convenient access to calories that they’re addicted, obese, and sick.”  

Despite this awareness, however, Williams doesn’t really offer a route around this. Nor does Silicon Valley. Most infuriating of all, neither do I. I keep wracking my brain to come up with a way out, to imagine technology truly supportive of all our human longings. I got nothing.

The newly heralded convenience economy is enabled by smartphones, apps, the location-based web, the cloud, and pretty much every device in our possession. It’s lighting every moment of our lives, altering our work, deconstructing our expectations, yet I am not sure it’s as liberating as we believe.

Immediate access to messaging, e-mail, media, and other online functionality through smartphones has generated a sense of entitlement to fast, simple, and efficient experiences.

Aren’t we also entitled to contemplation, craftsmanship and effort? Is pining for a thing no longer a viable thing in this new millennium? What else might we lose? Taking our time, honing our craft, embracing the goal, the journey, these are vitally important pillars of life — I presume — yet our own creations constantly work against them. Imagine pitching to a VC your idea for a service that makes people wait, that never interrupts, that takes forever to master. Are such technologies or services even imaginable by our collective, connected 21st century brains? With access to everything, at low prices, instantly, how do we deny ourselves? Should we?

The Marshmallow Test

In the 1960s, the marshmallow test validated the idea children who could push aside a minor reward — a marshmallow now — for a greater reward — many marshmallows in the near future — enjoyed greater success in life. Why then, are the products of our best companies designed to reward us all instantly?

According to the Harvard Business Review, “as adults we face a version of the marshmallow test nearly every waking minute of every day. We’re not tempted by sugary treats, but by our browser tabs, phones, tablets, and (soon) our watches—all the devices that connect us to the global delivery system for those blips of information that do to us what marshmallows do to preschoolers.”

Will we grow fat on convenience? How might that look? Explosions of uncontrollable anger when the young man at the drive thru counter takes seconds longer than the lighted sign has promised us?

When the great minds of the early 1900s constructed methods to ensure we would all never go hungry again, it’s unlikely they envisioned a world where hundreds of millions become morbidly obese. Again, from the Harvard Business Review:

“As we’ve reshaped the world around us, radically diminishing the cost and effort involved in obtaining calories, we still have the same brains we evolved thousands of years ago, and this mismatch is at the heart of why so many of us struggle to resist tempting foods that we know we shouldn’t eat.  

A similar process is at work in our response to information.

Just as with food, the problem will almost certainly not be solved by self control, which was always a lie, an easy way to blame others and ignore reality. 

Is there some Paleo diet for the mind, an Ornish diet for the spirit?

Goethe wrote, “talent is nurtured in solitude.” Can solitude exist in our world? If not, will talent vanish, killed off by the creations of our smartest humans and our mutual lust for immediacy?

I wish I could offer you some guidance but I just thought of the cleverest tweet.

Are Dogs Even Necessary In An iPhone World?

Does the iPhone hate dogs?

I know, that’s not a fair question. Still, I can’t help but wonder if the iPhone, if all smartphones, will fundamentally alter our relationship with our most trusted, faithful, ready-to-die-for-us-but-until-then-let’s-go-for-a-walk companions.

The arrival of the iPhone has, for better and for worse, diverted significant chunks of our attention away from both people and places. That much we know. But what about our dogs? Do we no longer require their fellowship? If not, what happens to them?

I do not know. The possibility of this scenario is without precedent. In such cases, I turn to fiction.

In the beloved film classic, Conquest of the Planet of the Apes, all the dogs and cats are dead. Briefly, it’s because apes from the future come back to the present (1983) and, well, a disease subsequently wipes out all our little friends. Not a problem. Humans, being a resilient lot, decide apes will make effective pet replacements. They also quickly realize apes can do all sorts of things, more, even, than dogs and cats.

Smartphones are our apes is what I’m saying.

Let’s set aside for the moment how the apes launch a rebellion and wipe out most of humanity. For now, smartphones provide immediacy, interaction, diversion from our stresses. They tell us when to exercise, remind us if we are spending too much time at work, offer comfort when we are upset. They play music, show videos, hold our entire library, manage our schedule. They learn our habits, know our routines, and make us better than we are. 

So why even have a dog?

These are the primary reasons for having a dog:

  • Dogs alert us to dangers. They can even alert us to changes in our body.
  • Dogs remind us to go out for a walk. They help us lose weight and get fit.
  • Dogs are always there, always ready to interact with us at a moment’s notice.
  • With dogs, we feel more connected, happier.
  • If you have OCD, depression, or suffer from PTSD, dogs can help.
  • Is your child safe? A dog can warn you.
  • If you feel lonely, your beloved dog offers comfort.
  • Need someone to just listen, empathize? Dogs are especially good at this.

Thing is, smartphones already do all of these. Some they do even better than dogs. And should you need to track a loved one, if they have a smartphone that’s much better than if you have a dog.

Smartphones also cost a great deal less than pets.

My oldest dog just required surgery. This set me back $5,000. That alone pays for two shiny new iPhones, an Apple Watch and at least two years of cellular service.

sparkycast

It’s not the cost, however, that prompted my speculation on the necessity of dogs. It was a trip to the vet. The old dog was in his normal jovial mood when I drove him in for surgery, despite having to go without eating for more than 12 hours. But he quickly got scared, intuiting the clinical surroundings could only mean something was amiss. He kept nudging up against me, kept seeking reassurances. I happily obliged. Every time.

Until one time when I did not. I was busy tweeting some brilliant insight, as I do, when I suddenly realized he was trying especially hard to grab my attention. A scared dog will do that. I stuck my iPhone in my pocket and left it there for the remainder of the appointment.

It is extremely difficult to put away that beckoning screen. Not just for me but for hundreds of millions of others. This is fact and offered without judgment.

Where does this lead us? Again, I do not know. I do know that smartphones will alter us because they will alter our relationships, disrupt our time, rearrange our priorities, and deconstruct traditional links with our surroundings.

I wish I could say always for the better, but that would be a lie.

The old dog’s fine. In fact, the vet says he probably has four good years remaining. What our screens will do for us by then, I can only imagine. I do know they are replacing much more than just other gadgets.

I Was Wrong And The iPhone 5c Is Still A Failure

The best way to defeat the iPhone is to create a superior alternative to the app ecosystem. With widgets, notifications, continuity and inter-app processes in iOS 8, Apple did just that. Woe to Android, Windows Phone and anyone who hopes to see Apple falter this decade.

Unless, of course, I’m completely wrong.

Perhaps there’s some amazing technology out there waiting to leapfrog iPhone. Perhaps the new iWatch and iPhablet and all the various Kits and Plays fail to entice. Maybe Tim Cook and Angela Ahrendts succeed in transforming Apple into a luxury brand, turning the iPhone into a “Veblen good” and moving the company from high margin computing to higher margin fashion.

This seems unlikely. Nonetheless, on the cusp of the big Apple launch event, I am thinking not of new products, but of past ones, and not only of successes, but failures. When I labeled the iPhone 5c a “failure,” readers did not hesitate to emphatically declare I was wrong.

Wrong.

The iPhone 5c was a failure both in terms of sales and for how it diminished Apple’s image as an innovator. I may never have been so right as when I declared the 5c a failure. Expect it to be erased from Apple Stores before this year is out.

The 5c will not be the last Apple flop. I suspect the primary value of any iWatch, at least in the first few years, will be to show people you have an iWatch.

Carry That Weight

I understand if you vehemently disagree with my assertions. Tomorrow brings us new products but will not necessarily end any long standing debates. For example, despite the adoption of Chromebooks and the gutting of the great LA Public Schools iPad experiment, I steadfastly believe in the merits of my plan to give an iPad to every child in America. Similarly, regardless of what every other tech writer is saying, and no matter what Apple introduces tomorrow, I still think NFC is a waste of Apple’s talent and our time.

Going on public record can be daunting. Certainly, it is filled with missteps. Here are two minor predictions I have for tomorrow’s event: 

  1. Apple will offer universal content search and a single log-in across apps for its Apple TV
  2. The company will launch consumer-grade, home-optimized iBeacons

Now a big one:

The weeks-long stream of “leaks” is well orchestrated and not at all coincidental. Apple plans to reveal a great many products tomorrow but few will ‘wow’ and several are almost fully dependent upon multiple partners. CarPlay and iPhone payments may be great — but these will take time and usage and third party vendors to make successful. As the ecosystem expands, Apple has less control. This forces them to talk up the product whereas in the past, the product spoke for itself.

We will know shortly if I am right.

Some predictions take longer, however, and are not as clear-cut. My very first Techpinions column, from February 18, 2013, focused on — believe it or not — the Apple iWatch. I wrote:

Very soon, sensors throughout our homes, on our pets and possibly inside our bodies, all monitored or even controlled by our smartphone, will be the norm. Imagine now if these were ad-subsidized devices, like Android or Kindle, offering no escape from the latest marketing pitch or sponsored social media update. Is this a tolerable future?

I know. Brilliant.

But a paragraph later I followed up with:

The next design battle will almost certainly not be about “skeuomorphism” versus “flat design”. Rather, monetizing hardware, the Apple way, versus monetizing data and advertising, the Google way, will set the stage for this next great battle.

Incorrect.

Nearly 2 years later, this was a battle that never happened. The market has embraced both models, not chosen one over the other. Perhaps, as wearables and smart homes become more common place over the next many years, this will change. That’s a rather weak prediction, however.

Here’s a bold one. From March 18, 2013:

As the blogosphere pronounces ‘Apple is Doomed’ at every turn, I can’t help but thinking we have it wrong. Apple will have its ups and downs, no doubt. It’s just, the more I follow Apple, the more I study Steve Jobs, the more I suspect that, while he could not live forever, Jobs absolutely believed his creation, Apple, could. Literally. 

Am I right or wrong?

Fixing A Hole

Confession: sometimes I secretly blame you for when I am wrong. In “iOS 7 Game Changers,” I spoke glowingly of AirDrop:

I predict AirDrop will have a paradigm-shifting impact on content sharing – which means it should have a paradigm-shifting impact on social sharing sites, particularly Instagram, Facebook, YouTube and LinkedIn. 

Hundreds of millions of iPhones with simple, real time, on-the-spot sharing, all thanks to AirDrop. Big transformative things were supposed to happen. I really believed what I said. So why do almost none of you use this “paradigm-shifting” feature? (Because it’s not necessary, that’s why. I did not think it through at the time.)

Of course, some outrageous ideas may yet come true. Just over a year ago I recommended Apple:

Integrate iCloud, fingerprint technology, and an open API. Touch any connected screen and it instantly re-calibrates itself to our preferred, personalized settings, ST:TNG-like. In this way, Apple becomes the company that manages every screen in our life, everywhere, all the time.

I think this is a near certainty within the next 10 years.

Oddly enough, it’s the stuff that seems patently obvious where I get the most pushback. Following last year’s big Apple iPhone launch event, I stated:

Asking Apple to go down market is like asking Microsoft to no longer charge for software. It runs counter to their history, their strategy, their culture and skill set, their strengths, their leadership and how they recruit, reward and incentivize their staff.

…and took a great deal of flak for that.

I contend it was true then and more so now. That even the most expert Apple analysts refuse to accept this makes it no less correct. The 5c was a mildly painful reminder the company cannot go down market. That Apple is moving further up market is no surprise to me.

Getting Better All The Time

I think I have maintained a reasonably high average for prognostication. For example, fully nine months before the actual Amazon Fire Phone was released, I explicitly stated here that:

  • An Amazon smartphone would be focused on getting us to shop more — from Amazon
  • The widely reported “3D” screen technology would be a bust
  • No Amazon Phone could possibly hope to compete with other devices unless it was completely free, which I seriously doubted would happen

You’re welcome.

Unfortunately, there are those predictions that are quickly proven wrong. Just two months ago I wrote:

Given Android’s headstart in wearables, it’s hard to see Apple winning any wearable app wars. Given the limitations of its market reach, it’s similarly difficult to see Apple winning the “smart home” market without buying its way in. 

What was I possibly thinking? With Mac, iOS and HomeKit — and a premium user base — there may be no company with a bigger head start here than Apple.

Apple will reveal much tomorrow. I predict this will be a once-a-decade event, with a stunning array of new products, services and partnerships. However, despite all the talk, all the tweets, all the analysis, we will not know the full impact of the company’s efforts for years to come.

Unprecedented iPhone Demand

As we lead up to this years “main event,” I wanted to share some initial points underscoring my read that there is unprecedented demand for Apple’s iPhone this holiday quarter and beyond.

Major Upgrade Cycle: This has been the source of many analysts’ upside, but I think it may even be larger than many realize. From data points I have from the US, China, and even parts of Europe, it appears there is an unusually large number of legacy devices (smartphones more than two years old) still in use in the world. This includes devices like the iPhone 4, and Galaxy SIII. Our own research revealed the average life cycle of an iPhone in the US is 2.8 years. That number is even higher when only multi-person families are included. Apple’s quality curse is they build such good devices they can and do remain in use for longer than the traditional 24 months.

Gaining Share with the Phablet: One of the more compelling theories for the existence of the 5.5 inch iPhone is it could steal customers away from Samsung who were previously fans of the Galaxy Note line, on the simple premise of screen size alone being the most premium smartphone on the market.

Emerging Market Growth: Perhaps one of the most interesting things Apple can do is use previous years’ models, as they typically do, but be even more aggressive at their price points and target them in emerging regions. Keeping the 5s, for example, at a 5c price would go over very well in China for the middle tier market. Keeping the 4s and pricing it even lower could do extremely well in markets like India and other parts of South East Asia.

All of this gives me the sense this could be more than just a typical growth holiday quarter for Apple but that they blow past most consensus estimates for the holiday quarter with ability to meet the demand their only limiter. While my job does not depend on making estimate predictions for shipments, I would not be surprised, assuming they can make sufficient quantities, that Apple sell mid-60’s of iPhones in the holiday quarter.

The other thing that will be interesting to watch is what happens with Samsung’s sales. Last quarter, Samsung shipped 78m smartphones and they stuffed the channel prematurely to mask some of their challenges. I think it is extremely possible, given the sense I get on both Apple and Samsung trend lines, that Apple and Samsung sales in the holiday quarter could be closer than people think.

As some recent comScore data suggests, iOS and Android are neck in neck as far as users go in the US. I have a sense Apple takes the majority share in the US by end of the year.

How to Turn Around Samsung

In my continual analysis of Samsung for many in the industry, I have frequently pointed out the fundamental issues that have led to their current struggles. I had a friend remind me that, over two years ago, I gave a presentation to his VC firm where I pointed out Samsung would face struggles. He reminded me that, at the time, it sounded crazy but in the end I was right. Through our discussion, the topic came up on how to turn Samsung around. I decided I would write up my thoughts.

The Heart of the Matter

Ultimately, Samsung’s fall was fully predictable. In modular ecosystems (ones where you ship a core part of your product or experience which belongs to someone else) will always be susceptible to text book disruption. Samsung wanted to compete with Apple, and they did for a brief time, but ultimately Apple was never really their competition. Other players in the Android ecosystem were, and unfortunately for them, other vendors created good enough hardware that is continuing to eat into their market share.

I highlight this reality in my post on the regionalization of the smartphone market. If you recall that post and the charts that accompany it, you recall in every market but their own in South Korea, Samsung is losing share to the local player who has home field advantage. In China, it is Xiaomi and a host of other Chinese vendors. In India, it is Micromax, XOLO, Lava, and a few others. In the US, they have never led in quarterly sales.

The culprit is the Shenzen ecosystem. This is a radically efficient and rapidly scaling ecosystem of groups of manufacturers who can take a product from nothing to time to market in less than a month. A leading SoC provider from China told me they can get a new customer up and running and in the market with new smartphones and tablets in less than two weeks. Any company can enter this ecosystem, and build “good enough” products to be extremely disruptive.

As an aside, I had a colleague mention, as we spoke about the Shenzen ecosystem, that all this ecosystem needed was a good idea. Now they have Kickstarter for ideas. The key point is product coming out of this region is getting really good.

The Shenzen ecosystem is enabling local manufacturers to build high quality, good enough products and challenge the foreign brands. We are hearing about new smartphone companies coming out of China, Brazil, Vietnam, Europe and more. Local vendors’ home field advantage fueled by a Shenzen ecosystem is starting to rival Samsung with scale and is the thorn in their side.

So what can Samsung do? The obvious answer is chase the low end. However, I think a more interesting alternative may exist.

Procter and Gamble

Why am I bringing up Procter and Gamble in a tech article about Samsung? It is because, as we connect the planet with consumer electronics at extremely affordable prices, I believe we will see similar dynamics to consumer packaged goods come to the consumer electronics industry.

What makes Procter and Gamble successful in global markets is how they regionalize their products and brands. P&G spends a great deal of time researching local markets, understanding consumers needs in those markets, and then creating solutions that meet the unique needs of a region. Often, they use a brand unique to those regions and they market these products differently everywhere. Consumer packaged goods is both commodity but also a continual fight for differentiation. As smartphones reach $10, and as tablets reach $25 it seems inevitable nearly all the dynamics of regionally focused brands, products, and solutions found in consumer packaged goods will come to the tech landscape.

For Samsung, it is essential they get scale. They are oriented in a way many of their core business components depends on the product groups to move significant volume. For the last decade or so, Samsung has achieved their scale by employing a fast follower strategy and executing that strategy at scale. I’m not sure any tech company on the planet is capable of doing this the way Samsung can. This is why they are the most interesting to follow a model like Procter and Gamble’s.

Samsung can ultimately combat the regional brands, who are eating their lunch, by creating regionally focused brands, product, services, and marketing of their own. This would require some significantly different ways of thinking within Samsung to actually do what I suggest. Yet other than just chasing the low end, I’m not sure how else they can recover their former scale. Following Apple is no longer a viable option for growth.

Ultimately, it can be argued the best thing that could happen to Samsung is for Apple to do something truly innovative. The problem is, by being modular, anything they do will be copied and at much more aggressive prices. Apple’s monopoly on iOS allows them to sustain a premium strategy. Samsung doesn’t have such a luxury.

If the World Was a Village – Tech Edition

Bob’s column yesterday brought back into attention some of the things I discussed in this article called Computing’s S-Curve. We are on the path to connect the planet via a pocket computer. This is so incredibly significant it is difficult to overstate.

In many of the presentations we give at Creative Strategies, we emphasize we are still early in the technology age. We point out that the first 25 years of computing was focused on bringing computers to business. The next 25 plus years will be focused on bringing computers to every person on the planet. Much of this is driven by Moore’s Law. When presenting to the more PC focused audiences, this is a favorite slide to emphasize Moore’s Law in bringing computing to the masses.

Screen Shot 2014-09-02 at 4.58.22 PM

We still have a long way to go but as Benedict Evan’s points out, this opportunity to connect the planet is hugely beneficial from a humanity standpoint.

So where are we in connecting the planet today? Using a range of statistics I gathered, I made a chart showing a few of my favorite data points from the point of view, “If the world was a village of 100 people, how many would be using what technology?”

world_village_1

What strikes me about these statistics is only one of them is over 50%. The mobile phone (not smartphone) is in use by 63% of the global population. Many of those mobile phone users have multiple subscriptions which is why the latest data from the ITU pegs total mobile subscriptions at nearly 7 billion.

What makes the mobile phones, with 63% percent of the global population owning one, interesting is by 2020 those will all be smartphones. To help drive that transition, we now have smartphones that cost $33 dollars and we will have $10 smartphones by 2020.

Yet, we still have a long way to go. I made this chart from some new data from the TNS Connected Life survey

Screen Shot 2014-09-03 at 5.06.16 PM

This chart shows the percentage of smartphone users and non-smartphone users in each of these large global markets. I’ve added their respective population as well in order to see the opportunity for growth and scale.

As we embrace this shift, we realize how valuable these mobile phones are, particularly to those in emerging markets. Mobile phones connected to the internet have given rise to the WeChat business, Instagram businesses, Facebook businesses, and more. People like to argue you need a PC to do work. Tens of millions of consumers, and growing, in emerging markets prove this wrong every day.

As we empower billions of new consumers with pocket computers ubiquitously connected to the Internet, it is bound to have an impact on the economies of these emerging markets. Economists’ estimate bringing connectivity to a market can increase the GDP of that region anywhere from 1-3%.

The Internet has been one of the most critical and disruptive inventions of our era. Bringing the Internet to nearly everyone on the planet may be even more disruptive when all is said and done.

Connecting the Planet, Reshaping Industries

Mobile’s impact will be widespread. Note this chart from Chetan Sharma Consulting.

Screen Shot 2014-09-02 at 6.01.49 PM

There are 14 global trillion dollar industries and mobile has the potential to invade, change, and impact them all. Chetan lays out in this white paper that we are entering a new era of connected intelligence. He is correct and it will be driven by two fundamentals: the connecting of the planet via mobile devices, and the connecting of nearly everything else to the Internet.

When we state that the technology industry’s best days are ahead, it is for the reasons I touch on above and more. While we explain the next 25+ years will be focused on bringing computing to the masses, the next 50+ years will be bringing computing to nearly everything.

The 5.5 Inch iRemote For The Apple Home

You want to talk about Apple. I understand. They are the biggest tech company in the world. Their products are used by hundreds of millions. Oh, and next week there’s — OMG! — a major Apple event, not at Moscone Center in San Francisco but at Flint Center in Cupertino, the very same location where the original Mac was introduced and where the phoenix-like (i)Mac was introduced, and this can only mean…

A new Mac?

How can that be?

We are all expecting an iWatch.

And a large, new iPhone.

Two!

Some of us are even expecting an iPad XL, complete with badly needed split-screen, multitasking function. Tim Cook has repeatedly promised us new products, after all. We are 14 years beyond Y2K. Macs are borderline inconsequential in our glorious new world. Apple can’t possibly be putting the Mac at center stage, can they?

Unlikely, but kudos for cleverly diverting our attention.

Oh, glorious Apple. Stoking the rumors, week after week. Divvying out the “leaks” bit by bit. Building our excitement. Inciting our lust until…shazam!

Something totally unexpected.

Fine. Two can play at that. Here’s my totally unexpected prediction: a 5.5-inch iRemote for the home.

Price? $299, including an Apple TV.

The $299 iRemote

Ben Bajarin says there will be no 5.5-inch iPhone “phablet.” I agree. Jony Ive resisted increasing the size of the original iPhone for years. Market demand forced his hand. The market now wants an even larger iPhone. Ive will once again be forced to capitulate.

A 4.7-inch iPhone should suffice.

An iPhone that size can retain most of Ive’s iconic design, support one handed use, at least for some, and have the additional benefit of offering a larger, longer lasting battery, which is sorely needed.

A 5.5-inch iPhone is nothing more than a twisted abomination of Ive’s design. I can’t believe this will happen. Unless the rumors of a 5.5-inch iPhone point instead to an entirely new device.

The Future Of The iPod

A remote control for the Apple-optimized home does not require one handed use. It needs only be light, mobile, affordable, possibly even unapologetically plastic.

Such a device can control your HomeKit-enabled appliances. 

It replaces that wretched plastic Apple TV remote which has grown so useless even as Apple TV offers up so many more new content possibilities.

It’s the perfect size for tweeting while watching television. It encourages FaceTime calls.

Possibly, this device even supports multiple user accounts. 

That Apple will finally offer “widgets,” which are optimized for both the small iWatch screen and glanceable CarPlay screens, may possibly work better on this new device as well.

The device also does not diminish iPhone sales, where Apple gets the bulk of its money from. Think of this as the future of the iPod, if that helps. Not quite an iPad, which is more personal, this new “iPod” belongs not to a person but to a home. It collects data, controls applications and commands other devices. Yes, even an Apple Television in time.

Instead of storing and presenting your music collection, this new iPod stores, presents and manipulates the collection of data from the family’s wearables, appliances, the Internet-connected thermostats, door cams, and lights. The iPod becomes the universal remote for the Apple optimized household.

Siri will be front-and center with this new iPod, encouraging you to tell her when to turn off the air conditioner, or for how long the oven temperature should be set. Plus, with iCloud, Apple suddenly becomes a leader not just in “machine learning” but more importantly, possesses a knowledge of people inside their homes that is truly unique.

Everywhere A Screen

I accept I may be completely wrong. Where a large iPhone ends, a small iPad begins, or how iPod evolves in a world with all of these is not as clear-cut as even Apple marketing would have us believe. My strength lies not in predicting new technologies but in understanding how existing technologies will re-make the world, the economy, learning, work, power, joy. 

Yet, as computing spreads into all areas of our lives, and burrows its way into all of our things, we need new and better devices to help take full advantage of their combined potential.  

This is a unique Apple strength.

Time and again, Apple shows us how all our many technologies are supposed to work — for people, not for corporations or things or business models or the established order.

steve-jobs-pre-iphone-slide

This is why I am reasonably confident that, whether Apple reveals an entirely new device, a deconstruction of an old one, or something in between or far beyond, it will matter. If not right away, soon.  

Next week, the very moment Apple releases a larger iPhone of any size, tech bloggers will giddily point their finger and exclaim: “J’accuse! Apple copied! The iPhone phablet is copying the Samsung Note!”

This is willfully missing the point. 

Lousy artists copy. Tech bloggers squeal. Sound and fury signifying nothing.

Mobile computing is barely into the Model T phase. Apple is helping to push us forward, mostly in positive ways — even when we think their latest product is just one more device in an already crowded market. We can’t know what we need till we have it, be it an iWatch, a phablet, an all new Mac, or, yes, a universal home remote. 

We live in interesting times. They are about to get even more interesting.

My Phablet Skepticism Thesis

I have been publicly doubting the existence of the 5.5 inch iPhone for some time. I promised many on Twitter I would share my overall thesis on the category so here it is.

Starting from the data points, we know several things. In the USA, phablet sales are quite small. Our estimates have the active installed base of all Galaxy Notes in the US at under 10m units. Phablets, or smartphones with screen sizes above 5.3″, have tended to not sell well at any price point in the US market. However, the US market is not the only one that matters.

Phablets are successful in some parts of Europe but much more so in Asia, so we will focus there. You could argue Apple needs to make a 5.5″ phone primarily to serve the Asian market and you may be right. But let’s focus on the data at hand.

Here is a chart Guardian journalist Charles Arthur made of active screen size of Android device according to Google’s data.

cafb3f72-7841-4bc0-9af1-e25857ac76ad-460x276

As you can see, the vast majority of Android devices in use are not phablets. Now, it is entirely possible Google is not tracking or including China’s AOSP Android ecosystem in this chart. If they did, it could certainly bump the active use of phablets a bit higher but it would not be by much.

Another data point is IDC’s own projection of the phablet market which is, somewhat conveniently for my thesis, hot off the presses. This statement can be found in their latest press release.

The other widely discussed trend has been the shift towards large screen smartphones. IDC expects “phablets” (smartphones with 5.5″—7″ screens) to grow from 14.0% of the market in 2014 to 32.2% of the market in 2018. With the expected entry of Apple into this market segment, and the pent-up demand for a larger screen iPhone, Apple has the ability to drive replacement cycles in mature markets despite the slower growth seen in recent quarters.

IDC is stating 14% of smartphone shipments this year will be phablets, growing to 32% in 2018. In raw numbers, based on consensus of smartphone forecasts, that equates to approximately 165m phablets in 2014 and approximately 576m in 2018. In neither case are those small volumes. However, of the vast majority of phablets being sold in Asia, more than 80% cost less than $350. An interesting question is, where do premium phablets, like the Galaxy Note series, sell in volume in high prices points? The answer is South Korea. Good estimates of the Galaxy Note installed base in total is around 60 million. Nearly half of those can be found in South Korea. ((This estimate comes from network data I have on the region as well as some publicly stated numbers of Notes by Samsung. Notes appear to have the greatest concentration in South Korea. However, since Samsung uses shipment numbers not sell through numbers, it is entirely possible millions of Notes are sitting in a warehouse somewhere collecting dust. Perhaps if this is true it helps my thesis even more.))

What we know today is:

  1. Phablets are not the majority of form factor sales.
  2. The price points they do move at in volume are not price points Apple seemingly would want to play at with an iPhone.
  3. Where phablets do sell at high price points, and where Apple would seemingly play, are in Samsung and LG’s home country of South Korea. A market Apple has very little share in today.

When I share my skepticism, it is due to the nature of what we see regarding phablets today. However, there are always other ways to look at this data.

Firstly, perhaps the large screen phones have not sold well in the US because Apple does not offer one? Possibly yes. However, if I had to place a bet on which of the two larger screen models Apple offered would do better in the US, I would bet the 4.7″ would be the better seller.

The real question to dig into around the necessity of an Apple 5.5″ iPhone is to address a market that may be choosing Android instead of the iPhone specifically due to that sized phone. Apple will address many people’s desire for a larger phone with the 4.7″ and, in many markets, particularly the US market, it will likely bring users back to the iPhone who may have left and bought a Samsung Galaxy S series because it had a larger screen. But ultimately, Apple already dominates the US market and has an extremely loyal customer base. I don’t believe the argument for a 5.5″ has anything to do with the US.

So — back to Asia. The affluent audience who purchases iPhones in that market due so because of the status that accompanies buying an iPhone. It is entirely possible there are more iPhones in active use in Asia than in the US thanks largely to the secondary market. A 4.7″ iPhone alone will be a huge hit in Asia and break sales records at whatever price. So why offer a 5.5″ also? Is there evidence that those in Asia who can afford a $650 iPhone (not the majority) are choosing to buy an Android phablet for $350 just because Apple doesn’t offer one in that screen size? I see no evidence of this and it is the primary source of my skepticism. The decision to release two new flagship models, at the same time, and possibly causing some difficulty deciding between the two by Apple’s core customers, has to be to appeal to new customers who don’t just want a bigger iPhone (the 4.7″ will do this already) but want one specifically at the increased size of 5.5.”

Bottom line, phablets move in volume at lower ASPs than iPhones in Asia. Those who can afford iPhones in Asia will buy whatever Apple makes due to status. I’m not convinced Apple is or would lose customers in Asia if they did not make a phablet. That being said, and looking at the data I have, there are always times to forget data and go with your gut. It will be exciting to see what Apple’s gut has told them to do.

The Unbearable Loneliness Of The Sharing Economy

The sharing economy promises the potential for riches, personal empowerment, new modes of work, and fear, the kind of fear that swells from a livelihood dependent upon algorithms, star ratings, and the feedback of strangers. 

When we imagined the future, certainly starting from the point when the smartphone was born, few of us expected a world where in-kind tips and real time number crunching might determine where we live, how well we ate, the size of our home, the composition of our dearest friends.

Of course, in a world where billions are virtually connected, all fighting over the same job, the same task, the same dollars to be made by sharing our rooms, our cars, our talents, can we have any real friends? Or does everyone morph into some 21st century amalgamation of customer-competitor?

The billions of dollars fueling Uber, Airbnb and the sharing economy appears to generate as much fear as it does potential, and rightly or no, the great minds and deep pockets of Silicon Valley are failing to address these fears.

There is, in particular, a persistent fear which suggests for all save a fortunate, wiley few, the sharing economy will transform us into the modern day equivalent of chimney sweeps, smartphones replacing brooms, our independent (contractor) status leading us toward digital subjugation rather than technological emancipation: Alert! You have been selected to compete! Right now, for X dollars an actual human being will pay you to drive them some place. Go!

The Future Has Arrived Only It’s Evenly Distributed

The most popular, most repeated quote about our highly technological present comes to us from dystopian novelist William Gibson: “the future has already arrived — it’s just not evenly distributed yet.”

Except, what if Gibson is not just wrong but profoundly wrong? What if the future, the now, is in fact evenly distributed, and we are all equally victimized by it? What if technologies, algorithms, and Big Data do not liberate us but instead place us all at the mercy of a system where periodic demands — a room, a ride — meet endless supply?

A transformative element of Uber is its “dynamic pricing” feature, which can measure real time demand and shift prices accordingly. Can it also measure real time desperation?

I travel regularly between San Francisco, which is leading the current global technological economic transformation, and Detroit, which led the last. I sense at least as much fear as embrace for the new, sharing-based economy.

Confession: I believe these fears are generally overstated.

Over the long arc of time, the benefits of technology spread to the many. This spread appears to be quickening its pace. An iPhone may for now be available only to the world’s 10%, an iWatch to the world’s 5%, and the direct medical benefits from the individualized analysis of their combined HealthKit data available only to the world’s 1%. I believe this will change, fast. As we’ve seen from the rapid evolution of the Android platform, copying, learning and the endless tearing down of barriers is in our DNA, whether motivated by concerns for humanity or desires for riches. Technology’s benefits spread from the few to the many.

The problem, of course, is this spread can take years, and for some, decades before the technology’s benefit bears them fruit. What till then?

The answer: Government.

It is through government we mitigate the ill effects of technological disruption. Yes, this gets nasty. It always does. Already, petitioning the government for redress — and for preferential treatment — from the sharing economy has begun in earnest. Just as the disruptive impact of the sharing economy is eradicating many existing rules and regulations, have no doubt it will lead to many new ones.

There is one area, vital to our person, yet where government cannot protect us and which Silicon Valley has failed to even acknowledge: loneliness.

Message In A Bottle

A great unspoken fear of the sharing economy is loneliness.

Consider that should the sharing economy work as envisioned, all of us, with our cars, our homes, our tools, time, talents, eager to rent or sell each of these the moment a potential opportunity pops up on our smartphone screen, have been reduced to waiting.

Waiting where? Waiting for how long? With whom?

With the sharing economy, there may be no need for offices, no demand for meeting spaces. Sit alone, phone in hand, and wait to be summoned. As the world grows more virtually connected, physical connections diminish.

This is not how it’s supposed to be.

Even in the 21st century, we stand in lines, bemoan our commutes, tolerate annoying coworkers in large part because we all crave regular physical connection with others. The tools and technologies which fully enable telecommuting have existed for many years now, yet most people reject their use. This is not a failure of the tools nor of management. Plainly stated, we desire to be near others.

The leading platforms of the sharing economy may disrupt the need for us to interact with our fellow humans in physical space. That is scary.

Perhaps that’s why more and more we read these joyful tales of customers at coffee shops ‘paying it forward’. Standing in line, paying for the person behind us, we are reminding them and ourselves in even this small way that each of us matter, and that none of us should ever be reduced to a score. We are alike and we are together.

Which makes me wonder if those investors relentlessly pushing the sharing economy forward have it all wrong. Clearly, there’s an opportunity to connect us not to a platform but to one another. Who will build this?

Apple and mobile payments

In last week’s column, I talked about the current state of smartwatches. I described weak demand met by weak supply, and the resulting poor sales of the offerings in the market today. I also talked about what it might take for a new product in this category to stimulate demand. One of the potential use cases for a smartwatch or other wearable is payments, and I’ve been asked by several reporters over the last few weeks whether the iPhone 6 will have an NFC chip, potentially for payments. Today I want to explore that particular opportunity a little more.

The current state of mobile payments in mature markets in the West

It’s important to be clear what we’re talking about. Firstly, I’m not talking about m-commerce – i.e. buying things from e-commerce providers through a web browser or even an app. What I am talking about is using a mobile phone to buy real world items in a retail location. It’s also important to note the current state and uptake of mobile payments is radically different between certain emerging markets (e.g. Kenya) and different mature markets, such as the US and Europe, which behave fairly similarly, and Asian markets such as Japan, where mobile payments are more established. I’m going to focus mostly on mature markets such as Europe and the US, where mobile payments have still not taken off to any great extent.

Let’s quantify current uptake for mobile payments in  these markets. Here’s some data from a recent survey among US adults I conducted as part of my smartwatch report:

Mobile Payments Survey responses

As you can see, take-up is very limited so far, with around two thirds of US adults never having used any form of mobile payments. Even if you exclude those and focus on those who’ve tried mobile payments at least once, only about a quarter use it regularly, half use it occasionally and another quarter gave up after their first experience.

The mobile payments vicious circle

So why is this? The reasons are fairly obvious:

  • Current offerings typically depend on NFC chips in phones combined with an app or service that can make use of it. Only around half of smartphones in the US have NFC embedded (the iPhone, notably, doesn’t have NFC)
  • Google Wallet, the pioneer in this space, has become harder and harder to use on smartphones, as certain carriers have blocked it and Google has restricted use to phones running relatively new versions of Android (about 21% of Android devices globally)
  • Isis, the effort from several of the big US carriers (soon to be rebranded), has only been in trials in certain markets for much of its history, and is only now beginning to roll out more broadly.

But the biggest reason of all is there is a chicken-and-egg problem with terminals and devices, as shown in the diagram below:

The mobile payments vicious circle

As long as few people have devices capable of making payments, there will be little reason for store owners to install terminals to work with them. And as long as there are few places where mobile payments can be made, users will see little reason to either buy devices that can make them or set up an account to make use of them. Whether the underlying technology is NFC, a barcode scanner, Bluetooth LE or something else, store terminals need to be able to communicate with the smartphone to create a secure transaction. I live in one of the test markets for Isis, but even here there are relatively few locations where Isis payments are accepted, and the availability in much of the rest of the country is far lower.

Breaking the vicious circle

There are two possible ways to break this vicious circle, as shown in this diagram:

Breaking the mobile payments vicious circle

You have to break the cycle either on the terminal side or the end user side. Breaking it on the terminal side would mean subsidizing the terminals on behalf of retailers, which wouldn’t be cheap. As Tim Bajarin wrote in his great piece on the Disney MagicBand, Disney spent $1 billion just to install the MagicBand infrastructure in its theme parks. Now extrapolate that cost to all the retail locations in the United States and you have a good sense of the size of the investment needed. Any player willing to subsidize that would have to have very deep pockets indeed.

The other way to break the cycle is to create massive end user demand, something the mobile payments products in the market today haven’t been able to do. For Google Wallet, the challenge has been the split between three parties that need to come together to make it work but haven’t: Google, Android OEMs and carriers. For Isis, the problem is somewhat different: consumers don’t necessarily look to the carriers as payment providers, and Isis has been poorly marketed, leading to low awareness and demand. What would happen if Apple were to enter the market by introducing some kind of payments technology as a built-in feature of the next iPhone or a wearable device? Millions of consumers in the US would suddenly have a tightly-integrated solution built into their devices. One that carriers couldn’t block and which would no doubt receive heavy promotion from Apple and the tech press.

Were Apple to introduce such a device or devices though, it would still suffer – at least at first – from the same problem of a lack of terminals which could accept payments. Wide availability of a mass market payments solution could potentially boost sales, but it would take time. As such, this would arguably be the first time Apple would introduce a major feature which wasn’t that useful at launch. Poor initial experiences for would-be users of its payments products could sour them on the product, which would be bad for ongoing interest. Yet this is the sort of thing which would be impossible for Apple to solve ahead of a launch announcement without a massive risk of leaks. I’ve written separately about how Apple might break its usual launch pattern for wearables, but this is one factor working in the opposite direction: Apple might need to give retailers, not developers, a head start.

Technology choices – to NFC or not to NFC?

I think it’s far from guaranteed Apple will launch a payments service, even though it has many of the pieces in place to do so at this point, and it could be an interesting new angle on the wearables space. But if it does, the question remains how it might be implemented from a technology perspective. The path trodden by the two major existing US providers is NFC, a technology Apple has stubbornly resisted adopting so far. It’s an established technology and, as such, would be relatively straightforward for Apple to add to its devices. So it’s a good option in some respects.

But even as Apple has resisted embracing NFC, it has more wholeheartedly adopted other technologies which could form the basis of a payments service, notably Bluetooth LE. Where other services have used NFC for pairing, Apple has used Bluetooth LE. Where other services have used NFC for quick data exchange between devices, Apple has used Bluetooth and WiFi. With the launch of iBeacon functionality, Apple has also sparked extensive interest among retailers in installing Bluetooth LE hardware in stores to track users and push promotions. So Bluetooth LE, which is also capable of very accurate proximity sensing, could become the technological basis for a payments service, especially given the existing investment by retailers in iBeacons.

For these reasons, and despite the obvious appeal of NFC, I’m still not convinced Apple will use it in any payments service it offers. At the same time, I think it’s interesting to think about the role of Touch ID on either an iPhone or a wearable device as a form of authentication, which would dramatically reduce the friction compared with opening an app and keying in a PIN. That could potentially work with either Bluetooth LE or NFC.

Huge barriers remain

For all the potential associated with an Apple entry into the payments space, the vicious circle described in this post remains a formidable obstacle to any player in the mobile payments market, including Apple. Unless Apple is willing to make a major investment in subsidizing terminals, it risks launching a payments product which will have limited appeal at first. The one solution is to give retailers a head start by pre-announcing a product which won’t be available for several months, to provide the infrastructure ahead of time. But even that might have a limited impact before devices are in consumers’ hands. In this arena, as with smartwatches, there is potential for Apple to come in with a disruptive offering, but so much will come down to the execution.

Steve Jobs Reveals The Only Way Forward For Windows Phone

The only way forward for Windows Phone — that is not death — is work. Real work. In the 21st century, real work is inherently collaborative.

Collaboration is the Achilles Heel of all things iPhone, iOS, and Apple.

Steve Jobs, for all his greatness, for all he achieved, did not play well with others. Evidence is legion. Jobs forced the future upon us, refusing to budge to present day concerns. His iconoclast’s vision is reflected in every Apple product and has been since the beginning.

Jobs exalted the individual, from the singular 1984 rebel through to the lone, joyful iPod listener to now, where budding creatives obsessively focus their gaze upon the shimmering, inviting iPhone screen and not upon the people, life and physical flotsam whirring about.

1984_woman_with_hammer_5

ipod-advertising1-1

article-2525875-1A2E94C600000578-599_634x330

Apple marketing dutifully reflects both Apple products and Apple culture, a culture which reveres solitary pursuits and nourishes individual genius.

iphone 5s dreams

This leaves a strategic opening for Microsoft and Windows Phone. Not by creating a disingenuous demarcation between “work” (Microsoft) and “play” (Apple), but by optimizing its platform, its cloud, its tools, its services — and especially its mobile devices — for collaboration.

Steve Jobs empowered us, liberated us, heightened our creative abilities. He transformed us into digital cowboys, technological gunslingers, mad genius loners. Not collaborators. His heroes do not need others nor do they require consensus.

crazy ones

To quote Jobs:

Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules…

Such people are the opposite of collaborative. Yet, for all but a few crazy ones, greatness may only be accomplished via continuous collaboration and teamwork, not by being that round peg in the square hole.

Out Of Many One

Make no mistake. This is not about an Apple failure. Apple products, spanning the iPhone, the iPad and the Mac, are exemplary. But, their design and intent, empowering the individual, offers a clearing for whichever company develops computing and communication hardware and services which exalt the group.

Enabling new forms of work and new forms of creativity, facilitating time-shifting, globe-spanning, multi-modal collaboration from men and women, girls and boys whose full potential is untapped when pursuing their visions in isolation is the only way forward for Windows Phone.

The pieces to make this happen may already exist:

  • multi-screen function (desktop, mobile)
  • cloud support
  • Yammer
  • Skype
  • Exchange
  • Office 365
  • Office Lens
  • OneDrive
  • OneNote

Each of these are capable of providing highly functioning services, synchronized sharing, and any time, any place collaboration. The problem, of course, is none of these are yet fully optimized for mobile in general, or for Windows Phone in particular.

Jobs Informs Nadella

The recent revisionist history (such as herehere and here) proclaiming Steve Jobs as a world class “collaborator” is simply unfounded. Recall the single biggest change at Apple since the passing of Jobs: Tim Cook’s executive management shakeup, which the company itself positioned thusly:

Apple Announces Changes to Increase Collaboration Across Hardware, Software & Services (emphasis added)

Apple’s pro-individual, non-collaborative, go-it-alone DNA runs deep. This has created an opening for giant Microsoft’s tiny Windows Phone: collaborative creativity, collaborative work.

It bears repeating: by “work” I do not mean those activities presently optimized for PCs inside the enterprise. Microsoft’s fading retort that Windows is the platform for “work” badly underestimates how capable, valued and productive users of Apple devices are. But Apple hardware and supporting services are purposefully created for the individual. The future demands devices — hardware — for the group, not the one.

It also bears repeating: time is quickly running out for Windows Phone.

In his “bold ambition” statement, Nadella mentioned Microsoft’s commitment to “first party hardware” four times. Yet, within his 3,500-word manifesto, he mentioned “Windows Phone” only twice, and even then withholding clear affirmation:

(1) Today the Cortana app on my Windows Phone merges data from highway sensors and my own calendar and simply reminds me to leave work to make it to my daughter’s recital on time.

(2) We will responsibly make the market for Windows Phone.

This and other Nadella statements led me to state several weeks ago that:

Prediction: Microsoft will focus its mobile hardware efforts not on Windows Phone but on Surface, on new mobile gaming devices, and new mobile “productivity” devices; anything and everything that might help them uncover that next great mobile computing inflection point. Smartphones are lost to them.

I now wish to amend that prediction. Microsoft lost the smartphone wars — that much is clear. But smartphones are lost to Microsoft only in how we define such devices at the present. An entirely new or repurposed mobile device which advances creative and productive collaboration as easily as iPhone advances personalized empowerment is still within Microsoft’s reach.

Margins: Apple, Samsung, and Consumer Electronics

Some recent media has come out stating we need to acknowledge Apple knows what it’s doing as a company and with their strategy. I don’t know any analysts worth their reputation, either on the financial or industry side, who ever doubted Apple knew what it was doing. Part of the quibble with Apple from said media is the belief Apple was leaving money on the table by not changing their established and successful business model of focusing on the high end, more profitable segment of the market. Many called for Apple to make a lower cost iPhone in order to capture more “hardware” sales. But what many of us knew is just selling a lower cost phone doesn’t necessarily mean more money. And, in fact, it could have consequences on the higher margin products. Luckily, Benedict Evans shared a post recently that broke down exactly what I and many others have been saying around the implications of a lower cost iPhone.

What Benedict wrote is something he and I have spoken about on past episodes of our podcast. The thesis was always that a lower cost iPhone would certainly help raise sales of iPhones but would not raise revenues. Selling a lower cost and lower margin product means you need to sell substantially more product to equal similar revenues to selling less of a higher margin good. But as Benedict points out, this does not necessarily mean Apple should not release a lower cost phone — only that it would not necessarily be for the hardware revenue but for the potential value to the ecosystem, in terms of revenue capture beyond hardware, like apps, subscription services, etc. Benedict rightly points out Apple has more options than ever and I would add few companies are in full control of their destiny than Apple.

Back to Apple knowing what it’s doing. This relates entirely to a margins discussion. Several days ago Jan Dawson posted on his blog some thoughts on Samsung. I asked Jan to add Apple and Samsung to a particular chart on margins and it is below.

Screenshot 2014-08-07 09.46.57

If any chart shows Apple knows exactly what it is doing, it should be the chart above. Apple remains the anomaly of all consumer electronics companies when it comes to operating margins. Apple has not and does not have to chase the lower margin commodity products thanks to their vertically integrated advantage. Granted, no one is arguing Apple chase the uber-low end. That’s unwise for any branded OEM. But rather, there is a healthy and growing middle of the market. What we are discovering in many markets like China and even pockets of India and Brazil, are more mature customers who started off buying lower cost entry level smartphones are moving upstream and being willing to spend more on their next smartphone. I believe this trend will continue as a large percentage of smartphone users move off basic devices and become willing to spend more on devices in mid-range price tiers.

Whatever strategy Apple decides, given their approach, they have a limit on their total potential customer base. We simply have no idea what the size of that number is. Employing this strategy means Apple will need to foster opportunities for their customer base to spend more in their ecosystem thus incrusting their average revenue per customer beyond the hardware. The point remains — Apple is in control of their destiny.

Samsung, on the other hand, is a giant question mark. What does Samsung do? They have built a business that requires scale. Their strategy has been to fast follow companies and products which have scale then leverage their vertical components businesses to sell products to each other as they scale. Each group benefits, revenues rise, and they are able to slightly buck the low margin fate that faces so many companies. Samsung has always been Samsung’s best customer in components. But the main point is their business requires scale. So what does Samsung do to maintain scale? They are losing in premium to Apple, and they are losing in the lower and mid-tiers regional players in the regionalization of the smartphone market.

What is even more interesting about Samsung’s struggles is they are actually price competitive with some products in many of these markets with the same vendors they are losing out to. So the question is why? Why not Samsung in these markets where they are price competitive? I do believe it has something to do with the fact they are a foreign brand in markets increasingly favoring brands from their home country. Therefore, to assume Samsung should just compete on the low end to get scale back does not necessarily solve the problem. Nor does doing so help their margins, or the inter-departmental sales approach their components business sell within the country. Samsung, like Jan’s chart shows, is stuck in the middle. Their margin line is unlikely to go up toward Apple’s and unfortunately if it is to go down toward the others, it’s a huge, company wide issue for a vertical component company who requires scale.

What I keep landing on is increasingly hardware, for all vendors including Apple and Samsung, is going to have to play a role as a mechanism to other revenue. Xiaomi is a great example of this, using hardware as an entry point to increased revenue of proprietary services. Amazon also, to a degree, employs this model. However, it is foolish for many to believe Apple can’t do this and that their future depends only on hardware sales. The challenge for others, like Samsung, will be to differentiate on more than hardware. The role of the OEM is changing, and will continue to change.

The Regionalization of the Smartphone Market

One of the more interesting things I have been observing for a few years is how the smartphone market has increasingly become extremely regionalized. It is fascinating to analyze the dynamics that have allowed the smartphone market to go global but, in doing so, open the door for local brands and local companies to be the prime beneficiaries.

This is somewhat contrary to what happened in past consumer tech segments. Usually markets were mostly made up of global brands and those same global brands dominated many markets even where they were foreign owned. The tide is now shifting with smartphones and increasingly it seems domestic brands are gaining the edge over foreign ones. I’ve been anticipating several domestic brands to pass the regional leader (Samsung) for a few quarters now and in some markets it has happened already.

One of the primary catalysts for this shift is an increase in quality combined with a decrease in cost associated with smartphones. Smartphones annually are getting faster, better, and cheaper. Local brands are able to seize opportunity with this wave. Companies will be challenged to be both global and regional simultaneously. But local vendors only need to focus on their market and adapt to the rapid changes in their local domain. By integrating more tightly with regionally specific services than foreign brands are, as well as doing more to uniquely address the needs of their market, local vendors are positioned well going forward.

Xaomi Owns China, For Now

Xiaomi has been on a tear gaining significant quarterly market share in China. Their own company reports and several analyst firms have confirmed Xiaomi is not only in the top five vendors by volume in Q2 2014 but they have also passed Samsung as the leading smartphone vendor by quarterly volume in China.

Screen Shot 2014-08-12 at 9.43.46 PM

China is still the wild wild west when it comes to the smartphone market. The order can easily change, and change quickly, but one thing I believe will remain is it will be local vendors from China who will own the region.

India is Wide Open

India is about to ramp up in smartphone volume. India will be the second largest smartphone market before too long — 2016 by most estimates. The estimates for smartphone shipments in India in 2013 are about 44m. Estimates for 2014 are about 70m. Not bad annual numbers but considering China shipped 100m smartphones for the first time in Q2 2014, the potential ramp for India is massive and is just getting started. India still ships quite a large number of featurephones. That is why a data point from Counterpoint Research’s latest market monitor stands out. Counterpoint states Micromax, a local Indian branded handset maker, has passed Samsung to be the leading handset vendor in Q2 2014. Note this includes total volume of both featurephones and smartphones. But since India is still a large featurephone market, this data point is significant. As you can see from the chart below, Samsung is still the leader in smartphones in India, but the trends suggest soon Micromax will pass Samsung in smartphones as well.

Screen Shot 2014-08-12 at 9.42.44 PM

It is worth pointing out again that relative volumes are key to remember. Where China has typically averaged in the 85-90m range of quarterly smartphone shipments, India averages 13m approximately per quarter. I make this point to show how large the ramp in India still has to go and how that ramp, and the opportunities enclosed within it, could alter the OEM landscape in India dramatically over the next few years.

Apple Owns the USA

It should come as no surprise Apple is the dominant OEM in the US. But it fits our theme of domestic OEMs ruling their region.

Screen Shot 2014-08-05 at 10.51.46 PM

Here comScore gives us insight into US OEM marketshare. I don’t need to say much on this chart, except that watch how much it will change when the new iPhones come out.

A Big Markets

A potential implication of this is that a vendor strategy could be to control the big markets. It is unclear how Xiaomi can succeed outside of China and if they can ultimately compete with regional brands like Micromax in India. However, Xiaomi could have a healthy and sustainable business just within its home market. The same is true of Micromax. Perhaps the same is true of Apple. But there are local brands in Russia, Philippines, Brazil, and even Africa. Could the smartphone world be made up of many different regional players, each competing uniquely in their region and holding off foreign brands from expanding into their territories? This is something I’m very interested to watch.

Thoughts On iPhone Inc

The iPhone is bigger than McDonald’s. That seems a useful demarcation for how we should view the iPhone in particular and Apple in general.

The iPhone is that once-in-a-generation product that alters daily reality for at least a century. The Model T production line, overnight shipping, indoor plumbing and the credit card are other such examples. I fully expect the iPhone will enable Apple to become the world’s first trillion dollar company.

iphone.png.CROP.promovar-mediumlarge

There is a cost however, at least for we users. Almost certainly, iPhone will diminish Apple’s ability to create new game changing products.

Why? Because being irrational is hard, really hard. It’s rational to do everything in your power to maximize a product that has the legitimate potential to help you become a trillion dollar company. To do anything — anything at all — that might alter that path is irrational. Steve Jobs could be irrational at times. Tim Cook cannot. At least, I have witnessed no evidence of this. Apple is now iPhone. iPhone is now Apple. Just like Windows is Microsoft.

The Long March

No one ever got fired for buying Apple computers from IBM.

An iOS-based, touchscreen-enabled laptop, priced around $799, and sold by IBM to the enterprise seems an obvious product Apple should offer. It also seems like the kind of product that could destroy numerous existing giants.

For too long, iPhone users have not had their much desired iPhone “phablet.” A reason for this is because an iPhone phablet would gut iPad sales. Considering the iPad sales numbers for the past year, this is a fear Apple no longer possesses.

You will not give up your iPhone. You will not give up your Mac. You may give up your iPad. At this juncture, iPads are simply not must-have devices for nearly anyone. That’s the primary reason for the diminishing sales gains.

Easy prediction: We will almost certainly get an iPhone phablet this year and, likely by next year, a larger iPad.

I am regularly surprised at how bad Apple is at app discovery. That Facebook app ads are my current best source for app recommendations is a clear market failure. I hope the purchase of Beats, Swell and BookLamp signal that Apple is finally willing to get serious about content curation and recommendation.

I have no idea if Swift is a superior language. I am not a developer. I do know however, Apple is big enough to demand its use.

Despite the iPhone’s incredible array of features and functions, we mere mortals no doubt spend far too much time obsessing over which apps belong on the home screen.

Bugs And Features

The smartphone is the computer. Your app is your business model. Every business is impacted by iPhone. Know this or perish.

That Touch ID can’t read my thumbprint if there’s just a tiny bit of water on it seems more bug than feature.

It’s 2014, fourteen years since Y2K. Still, iPhone users can’t have their preferred calendar app list the date on the app icon. This is the equivalent of how the DOOR CLOSE button on any elevator never seems to work.

Samsung ads mocking iPhone users have been brutal and highly effective. Yes, I have had Android users (justly) mock me for having to scour an airport in search of an available outlet. The iPhone battery deserves its poor reputation. However, Samsung’s latest ad where they mock Apple users for not yet having a large display iPhone strikes me as desperation. Almost certainly, there will be a large display iPhone. What then, Samsung?

Amazing iPhone games are available for $5.99 yet millions refuse to pay such ‘outrageously high’ prices. There is much to celebrate and decry with this.

Using the same OS for the iPhone as for the iPad has some obvious limitations. On the small smartphone screen, getting into an app, grabbing the data, then exiting, a singular app occupying the entire screen makes obvious sense. Not so with the iPad. I want at least two windows open on my iPad almost always. Kindle and Twitter are the most common examples. Email and web browser are another. Even while gaming, I prefer two windows open. I can’t imagine buying an iPad until Apple offers this feature.

The Sincerest Forms Of Flattery

The almost laughable copying by Xiaomi of the iPhone and iOS 7 is all the evidence you need as to why Tim Cook must expend significant resources on building the luxury appeal and premium status of the iPhone; all those hard-to-define elements beyond actual quality, reliability and usability.

There are few people better at this, if any, than Angela Ahrendts.

_76433426_a45d6c19-0a4f-4358-bab5-0b23eb18d4dc

Confession: it’s hard for me to watch the original Willy Wonka and the Chocolate Factory movie and not think of Steve Jobs and Apple.

Rumors Jony Ive was in a Flock of Seagulls cover band are completely unfounded.

check-out-a-young-jony-ive-rocking-a-big-mullet

Input method is now a more important consideration than processor, OS and software. No one seems to understand this more than Apple.

More Is Less

Lost in the bubbly talk of an Apple iWatch is the fact everything about it seems wrong. We do not need yet another thing. I want my iPhone — or any smartphone — to serve as my ID, car keys, credit cards, TV remote, glucose reader, everything. Apple should focus its genius on making the iPhone devour more of those things, not create new ones.

The newest version of PayPal appears to equal, possibly usurp, Apple’s Passbook vision: Payments, money transfers, loyalty cards, information on nearby shops, it’s all there. Apple certainly wants the iPhone to be used for payments, though maybe they have finally decided enabling payments and not powering them is the way forward. This may also explain the company’s recent decision to once again allow Bitcoin apps in the App Store.

I actually read app update notes. This recent update from Yelp made me laugh.

BspMbi_CMAAOHBN.png-large

Jan Dawson made a strong case for why Apple should stagger launches of its major products. Commenters offered additional insights as to why Apple does not (or should not) heed his advice. Not stated, however, but which I think is at least worth considering, are the possible impacts of corruption. Nearly all assembly of nearly all Apple products takes place in China, where there is a less-than-transparent relationship between the government and business. It seems the implications of this should at least be examined.

I am surprised by how few iPhone users seem to ever use AirDrop to transfer files or data to one another. Perhaps personal iPhone-to-Mac AirDrop sharing is the superior use case.

I am unaware of the age, gender, race or LGBQT numbers at Apple Inc., Apple in Cupertino, or of those who work solely on the iPhone. But together, these people have created something positively impacting lives. And they keep making it better. I tip my hat to them all and hope in some way, my words can ever do the same.