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
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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10+1 myths about the mobile economyPresentation Transcript
VisionMobile10+1 myths on the Mobile App Economy
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
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
VisionMobile - Trusted by industry brandsClients selected VisionMobile clients 2009-2011 Copyright VisionMobile 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-line ads
Industry focuses on app revenuesbut misses the point Copyright VisionMobile 2011
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
Apps and content create new empiresApple Q2’2011: 4.2% of volume, 52% of profits Copyright VisionMobile 2011
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
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
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
Reality: Ecosystem players battle across four screens
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
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 retailing of HTML5 apps
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
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
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
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 Google Copyright VisionMobile 2011
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
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
Myth: Apple directly competes with Google and Microsoft
Reality: Apple, Google and Microsoft have very different core businesses They just establish the same complementary assets across the value chain
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
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 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
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 consider entire developer journey
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
Supply vs demand mismatch in developer programs most vendor effort goes here opportunities in last mile to user Copyright VisionMobile 2011
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 overall consumer spend by segment
Apps tap consumer $$$ beyond telecoms 1990-2010 2011+Operators targeting comms needs Apps opening mobile to all needs Source: US consumer expenditure survey, 2009 Copyright VisionMobile 2011
Myth: Voice is the most stable telco business
Reality: Voice is under pressure to unbundle The integrated telco will always by more expensive/slower/worse than OTT alternatives.
The domino effect in mobile value-chainfrom handsets, to value-added services, to core services OTT messaging and voice platform app stores iOS Android Copyright VisionMobile 2011
The case for voice APIsHuge spike in developer interest for voice/SMS APIs Last 14 days All time (to 4 October 2011) Telcos need to compete with OTT players on voice APIs Copyright VisionMobile 2011
Myth: Traditional telco economic tools are good to compete with OTT
Reality: Telco need new economic tools to play in the software eraTwo such economic tools are demand-side economies of scale; and economics of complements
Google Android ecosystemdrives commoditization of mobile industry $$$ 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
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
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
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
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/slower than OTT alternatives.
The all in one telco business..is take all or nothing Telephony Messaging Services Voice plans Data plans Access Copyright VisionMobile 2011
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
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