VisionMobile10+1 myths on the Mobile App Economy
Knowledge. Passion. Innovation.Extracts from Mobile Innovation Economics      January 2012               10+1 Myths on the...
VisionMobileDistilling market noise into market senseResearch                                 Workshops                   ...
VisionMobile - Trusted by industry brandsClients              selected   VisionMobile clients           2009-2011         ...
Myth: Apps are making profits     for Apple & Google
Reality: Apps drive the platform’score business - not content profitsfor Apple this is device sales; for Google this is on...
Industry focuses on app revenuesbut misses the point                              Copyright VisionMobile 2011
The mobile platform landscapeplatforms are winning and losing by ecosystem strength                               iOS     ...
Apps and content create new empiresApple Q2’2011: 4.2% of volume, 52% of profits                                          ...
Apple core business is consumer electronics    Apple’s app revenues are small compared to the core business               ...
Apple core business is consumer electronics    Apple’s app revenues are small compared to the core business          “    ...
Apple iOS platform and ecosystemapps drive hardware sales for Apple                                                    $$$...
Network effects drive external investmentNetwork effects attract developer investment and innovation                      ...
Myth: It’s all about smartphones
Reality: Ecosystem players battle         across four screens
Leading ecosystems battle across 4 screensExperience roaming becomes the key to future platform competition               ...
Myth: HTML5 is a platformthat can replace native apps
Reality: HTML5 is a  complementary technology     needs a leader to deliver a solution formonetisation, distribution and r...
HTML5 has many benefactors, but no clear leaderall pushing HTML5 and web apps for their own unrelated reasons             ...
HTML5 cannot compete with platformsHTML5 is a complementary technology, not yet a full-fledged platformApp platform ingred...
Platforms differ in level of HTML5 support                                           HTML5 Test Score                     ...
Myth: Android’s success ismostly to do with its openness
Reality: Android is the most closed    open source project in mobile              software          ..and we have proved it.
Source: Google-internal presentation disclosed as a result of Oracles patent and copyright infringement lawsuit against   ...
How Google runs the show:      Six control points:      - Private codelines (6+ months ahead) available to 2 OEM partners ...
Closed governance is used to controlclever use of governance models can be used to control products based on OSS          ...
Myth: Apple directly competes with Google and Microsoft
Reality: Apple, Google and Microsoft  have very different core businesses   They just establish the same complementary ass...
Key players have very different core businessesPlayers old and new expand across value-chain to capture more profits      ...
Myth: All developers want      is to sell apps
Reality: Distribution is overall  more important than moneyfor most developer segments and consumer brands
Copyright VisionMobile 2011
VisionMobileDeveloper segments and their motivationsBuilds on jobs-based approach, i.e. what developers are trying to get ...
Myth: All you need to attract    developers is APIs
Reality: The bar for developer      offerings is very high   You need simple, zero-entry-cost offerings Programs need to c...
Developers need zero barriers-   Developer pays      +                2    developer                                      ...
Supply vs demand mismatch in developer programs  most vendor effort goes here   opportunities in last mile to user        ...
Myth: Telcos need to find a way        to increase ARPU
Reality: ARPU has a ceiling because  it deals with comms needs onlyCommunications spend needs to be seen in the context of...
Apps tap consumer $$$ beyond telecoms              1990-2010                                     2011+Operators targeting ...
Myth: Voice is the most stable       telco business
Reality: Voice is under pressure          to unbundle    The integrated telco will always by more   expensive/slower/worse...
The domino effect in mobile value-chainfrom handsets, to value-added services, to core services                           ...
The case for voice APIsHuge spike in developer interest for voice/SMS APIs   Last 14 days                        All time ...
Myth: Traditional telco economic tools are good to compete with              OTT
Reality: Telco need new economic      tools to play in the software eraTwo such economic tools are demand-side economies o...
Google Android ecosystemdrives commoditization of mobile    industry                                        $$$           ...
Networks effects stronger than economies of scale   user value                   Platform business                        ...
The economics of complementswidely used by Internet players in competitive strategies       Core Business                 ...
How Google uses economics of complementsto drive its core business of online advertising  Google Core Business            ...
Myth: Telcos can directlycompete with OTT players
Reality: Telcos need to unbundle    in order to compete in software eraThe integrated telco will always be more expensive/...
The all in one telco business..is take all or nothing               Telephony               Messaging               Servic...
Unbundling the telcointo three business layers                                    Leverage digital channels, retail and OT...
Knowledge. Passion. Innovation.want more?                                Updated: 12 November 2010             visionmobil...
get in touch                                             Knowledge. Passion. Innovation.       andreas@visionmobile.com   ...
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10+1 myths about the mobile economy

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10+1 Myths About the Mobile Economy is a presentation on the latest trends of the mobile industry, from app revenues and cross-platform development to the waging war between native and web apps

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  • Complements are used in three ways:To create competitive advantage To drive core business To commoditise other businesses
  • Transcript of "10+1 myths about the mobile economy"

    1. 1. VisionMobile10+1 myths on the Mobile App Economy
    2. 2. Knowledge. Passion. Innovation.Extracts from Mobile Innovation Economics January 2012 10+1 Myths on the Mobile App Economy Andreas Constantinou Managing Director Copyright VisionMobile 2011
    3. 3. VisionMobileDistilling market noise into market senseResearch Workshops Market maps Strategy definitioncompetitive mobile industry dynamics Competitive landscape maps strategy design, ecosystemanalysis, commissioned for telcos and OEMs positioning, productresearch definition Developer Economics 2011: How developers and brands are making money in the mobile app economy Mobile InnovationClash of Economics Mobile Megatrends Mobile Industry Atlas, 3rd ed.ecosystems how Internet business models are series 1,100+ companies, 69 market sectorsmobile platforms and impacting telecoms and how tothe battle for innovate in the age of softwaredominance Top-100 analyst blog 4,000+ subscribers 20,000+ monthly uniques 90% mobile industry insiders HTML5 and its impact to the mobile industry The Android Game Plan 100 million club the commercial mechanics tracking successful businesses behind Android and how in mobile Google runs the show Copyright VisionMobile 2011
    4. 4. VisionMobile - Trusted by industry brandsClients selected VisionMobile clients 2009-2011 Copyright VisionMobile 2011
    5. 5. Myth: Apps are making profits for Apple & Google
    6. 6. Reality: Apps drive the platform’score business - not content profitsfor Apple this is device sales; for Google this is on-line ads
    7. 7. Industry focuses on app revenuesbut misses the point Copyright VisionMobile 2011
    8. 8. The mobile platform landscapeplatforms are winning and losing by ecosystem strength iOS 550 K BlackBerry OS Symbian 40 K 90 K Windows Phone Android 50 K 400 K Copyright VisionMobile 2011
    9. 9. Apps and content create new empiresApple Q2’2011: 4.2% of volume, 52% of profits Copyright VisionMobile 2011
    10. 10. Apple core business is consumer electronics Apple’s app revenues are small compared to the core business Apple revenue by segment Q3 2011 ($ billions). Copyright VisionMobile 2011
    11. 11. Apple core business is consumer electronics Apple’s app revenues are small compared to the core business “ We run the App Store just a little over breakeven” Peter Oppenheimer, Apple CFO, Feb 2011 Apple revenue by segment Q3 2011 ($ billions). Copyright VisionMobile 2011
    12. 12. Apple iOS platform and ecosystemapps drive hardware sales for Apple $$$ developers media sw publishers buyers content retailers user internet players $$$/users engagement applications $$$ same-side and services users and data plans + network effects subsidies operators iOS platform premium premium $$$ product experience Copyright VisionMobile 2011
    13. 13. Network effects drive external investmentNetwork effects attract developer investment and innovation developers developer & brands brands investment $15B iOS platform $1.5B operators Apple app store cost $125B iOS device sales Copyright VisionMobile 2011
    14. 14. Myth: It’s all about smartphones
    15. 15. Reality: Ecosystem players battle across four screens
    16. 16. Leading ecosystems battle across 4 screensExperience roaming becomes the key to future platform competition Mac computers iPhone iPad Apple TV Chrome browser Android Android tablets Google TV amazon.com Kindle
    17. 17. Myth: HTML5 is a platformthat can replace native apps
    18. 18. Reality: HTML5 is a complementary technology needs a leader to deliver a solution formonetisation, distribution and retailing of HTML5 apps
    19. 19. HTML5 has many benefactors, but no clear leaderall pushing HTML5 and web apps for their own unrelated reasons Apple looks to move the web away from Flash offers best-in-class support for HTML5 in mobile Safari browser Google searches for more ways to commoditize complements offers strong HTML support in Chrome and Android web browsers Facebook aims to break-down Apple/Google silos and distance Adobe looks to take over native and web app discovery Microsoft tries to leverage web innovation to Windows 8 designs strong support for HTML5 into next generation Windows versions Mobile operators hope to regain control lost to native platforms promote HTML5 as an alternative to smartphone platforms Qualcomm works to create competitive advantage for its chips offers hardware-acceleration for mobile browsers Brands look use web as a low-cost way to go cross-screen fund mobile web developers through projects Tool makers facilitate web-to-native hybrid development Adobe (PhoneGap), Sencha, The M Project, Red Foundry Copyright VisionMobile 2011
    20. 20. HTML5 cannot compete with platformsHTML5 is a complementary technology, not yet a full-fledged platformApp platform ingredients Software Developer Monetisation Distribution Retailing foundations ecosystem HTML5 ✔ = ✖ ✖ ✖ fragmented platform always a step behind native will depend on app store complex tool-chain waiting for a leader Facebook? Google? Microsoft? Other? most appealing to those who do not yet develop for mobile complimentary tech to those who develops native apps Copyright VisionMobile 2011
    21. 21. Platforms differ in level of HTML5 support HTML5 Test Score iOS 5 296 MeeGo 272 Opera Mobile 11.10 269 BlackBerry OS 7 260 FirefoxMobile 6 254 Android 3.2 Honeycomb 222 Android 2.3 177 Windows Phone 7.5 (Mango) 140 0 50 100 150 200 250 300 350Source: html5test.com, Nov 2011. See also: http://www.lostinmobile.com/home/for-html5-ios5-wins.html Copyright VisionMobile 2011
    22. 22. Myth: Android’s success ismostly to do with its openness
    23. 23. Reality: Android is the most closed open source project in mobile software ..and we have proved it.
    24. 24. Source: Google-internal presentation disclosed as a result of Oracles patent and copyright infringement lawsuit against Google Copyright VisionMobile 2011
    25. 25. How Google runs the show: Six control points: - Private codelines (6+ months ahead) available to 2 OEM partners per release - Exceptionally fast pace of innovation 5 new versions (2 major, 3 minor) released in 1 year - Gated developer community Android Market is the default channel for 300,000+ apps - Closed-source apps Android Market, GMail, Google Maps, GTalk, etc under commercial agreement - Android trademark use of Android trademark subject to commercial terms - Controlled review process all reviewers work for Google, plus rampant NIH culture109 Copyright VisionMobile 2011
    26. 26. Closed governance is used to controlclever use of governance models can be used to control products based on OSS license type dual license Foundation (commercial + copyleft) Qt (58%) (58%) strong copyleft Linux kernel (GPL) (71%) weak copyleft MeeGo WebKit Foundation (LGPL, MPL, EPL,..) (61%) Mozilla (68%) (84%) (65%) permissive Android (APL, BSD, MIT, .. (23%) .) Closed governance open governance open governance index Copyright VisionMobile 2011
    27. 27. Myth: Apple directly competes with Google and Microsoft
    28. 28. Reality: Apple, Google and Microsoft have very different core businesses They just establish the same complementary assets across the value chain
    29. 29. Key players have very different core businessesPlayers old and new expand across value-chain to capture more profits Apps Content Services Ads Ads App Stores / Portals Distribution Billing Telephony Connectivity Access Network access software Software platform licensing Screen Devices Devices retailing Discovery / retailing User Customer insights denotes vendor’s core business Copyright VisionMobile 2011
    30. 30. Myth: All developers want is to sell apps
    31. 31. Reality: Distribution is overall more important than moneyfor most developer segments and consumer brands
    32. 32. Copyright VisionMobile 2011
    33. 33. VisionMobileDeveloper segments and their motivationsBuilds on jobs-based approach, i.e. what developers are trying to get done Motivations & drivers Hobbyist developers/students Fun and coolness Independent software vendors Sales and opportunity Commissioned developers Probability of winning a project Marketing agencies Client requests User reach is the key factor for Brands and verticals Brand affinity and user engagement making platform Digital content publishers Large addressable market decisions Venture-backed startups Attract investment Corporate IT ROI, information security Copyright VisionMobile 2011
    34. 34. Myth: All you need to attract developers is APIs
    35. 35. Reality: The bar for developer offerings is very high You need simple, zero-entry-cost offerings Programs need to consider entire developer journey
    36. 36. Developers need zero barriers- Developer pays + 2 developer ✖ pays for API use broken loop 1 user pays for app or service+ User pays - 1 developer 3 users pay for gets free APIs telco services + ✔ 4 gets rev share positive feedback loop 2 developer deploys app or service Copyright VisionMobile 2011
    37. 37. Supply vs demand mismatch in developer programs most vendor effort goes here opportunities in last mile to user Copyright VisionMobile 2011
    38. 38. Myth: Telcos need to find a way to increase ARPU
    39. 39. Reality: ARPU has a ceiling because it deals with comms needs onlyCommunications spend needs to be seen in the context of overall consumer spend by segment
    40. 40. Apps tap consumer $$$ beyond telecoms 1990-2010 2011+Operators targeting comms needs Apps opening mobile to all needs Source: US consumer expenditure survey, 2009 Copyright VisionMobile 2011
    41. 41. Myth: Voice is the most stable telco business
    42. 42. Reality: Voice is under pressure to unbundle The integrated telco will always by more expensive/slower/worse than OTT alternatives.
    43. 43. The domino effect in mobile value-chainfrom handsets, to value-added services, to core services OTT messaging and voice platform app stores iOS Android Copyright VisionMobile 2011
    44. 44. The case for voice APIsHuge spike in developer interest for voice/SMS APIs Last 14 days All time (to 4 October 2011) Telcos need to compete with OTT players on voice APIs Copyright VisionMobile 2011
    45. 45. Myth: Traditional telco economic tools are good to compete with OTT
    46. 46. Reality: Telco need new economic tools to play in the software eraTwo such economic tools are demand-side economies of scale; and economics of complements
    47. 47. Google Android ecosystemdrives commoditization of mobile industry $$$ app developers verticals media publishers monetisation same-side Ad network & user reach + network effects $$$ applications and services users and data plans ticket to smartphone market subsidies devices operators Android platform Handset OEMs End-to-end Eyeballs Product Experience Copyright VisionMobile 2011
    48. 48. Networks effects stronger than economies of scale user value Platform business value grows exponentially due to increased number of interconnections Conventional business value grows linearly due to cost saving and decreasing price scale Copyright VisionMobile 2011
    49. 49. The economics of complementswidely used by Internet players in competitive strategies Core Business Complement A product consumed Main product with the main product Product demand increases as complement prices decrease Copyright VisionMobile 2011
    50. 50. How Google uses economics of complementsto drive its core business of online advertising Google Core Business Google Complements On-line advertising mobile networks handsets browsers (95% of profits) Commoditisation of mobile increases demand for Google products Closed net open source Chrome, ad network neutrality OS WebKit Closed Open Copyright VisionMobile 2011
    51. 51. Myth: Telcos can directlycompete with OTT players
    52. 52. Reality: Telcos need to unbundle in order to compete in software eraThe integrated telco will always be more expensive/slower than OTT alternatives.
    53. 53. The all in one telco business..is take all or nothing Telephony Messaging Services Voice plans Data plans Access Copyright VisionMobile 2011
    54. 54. Unbundling the telcointo three business layers Leverage digital channels, retail and OTT assets plus local presence as a profit center. Distribution business Unbundled voice Messaging APIs Billing APIs Services business Authentication APIs Customer analytics as a service Ubiquitous data connectivity across billions of terminals Access business Copyright VisionMobile 2011
    55. 55. Knowledge. Passion. Innovation.want more? Updated: 12 November 2010 visionmobile.com/workshops Copyright VisionMobile 2011 Copyright VisionMobile 2011
    56. 56. get in touch Knowledge. Passion. Innovation. andreas@visionmobile.com Andreas Constantinou | Managing Director | +44 2033 844163 Updated: 12 November 2010 Copyright VisionMobile 2011 Copyright VisionMobile 2011

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