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10+1 myths about the mobile economy


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10+1 myths about the mobile economy

  1. VisionMobile 10+1 myths on the Mobile App Economy
  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. VisionMobile Distilling market noise into market sense Research Workshops Market maps Strategy definition competitive mobile industry dynamics Competitive landscape maps strategy design, ecosystem analysis, commissioned for telcos and OEMs positioning, product research definition Developer Economics 2011: How developers and brands are making money in the mobile app economy Mobile Innovation Clash of Economics Mobile Megatrends Mobile Industry Atlas, 3rd ed. ecosystems how Internet business models are series 1,100+ companies, 69 market sectors mobile platforms and impacting telecoms and how to the battle for innovate in the age of software dominance 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. VisionMobile - Trusted by industry brands Clients selected VisionMobile clients 2009-2011 Copyright VisionMobile 2011
  5. Myth: Apps are making profits for Apple & Google
  6. Reality: Apps drive the platform’s core business - not content profits for Apple this is device sales; for Google this is on-line ads
  7. Industry focuses on app revenues but misses the point Copyright VisionMobile 2011
  8. The mobile platform landscape platforms 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. Apps and content create new empires Apple Q2’2011: 4.2% of volume, 52% of profits Copyright VisionMobile 2011
  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. 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. Apple iOS platform and ecosystem apps 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. Network effects drive external investment Network 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. Myth: It’s all about smartphones
  15. Reality: Ecosystem players battle across four screens
  16. Leading ecosystems battle across 4 screens Experience roaming becomes the key to future platform competition Mac computers iPhone iPad Apple TV Chrome browser Android Android tablets Google TV Kindle
  17. Myth: HTML5 is a platform that can replace native apps
  18. Reality: HTML5 is a complementary technology needs a leader to deliver a solution for monetisation, distribution and retailing of HTML5 apps
  19. HTML5 has many benefactors, but no clear leader all 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. HTML5 cannot compete with platforms HTML5 is a complementary technology, not yet a full-fledged platform App 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. 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 50 100 150 200 250 300 350 Source:, Nov 2011. See also: Copyright VisionMobile 2011
  22. Myth: Android’s success is mostly to do with its openness
  23. Reality: Android is the most closed open source project in mobile software ..and we have proved it.
  24. Source: Google-internal presentation disclosed as a result of Oracle's patent and copyright infringement lawsuit against Google Copyright VisionMobile 2011
  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 culture 109 Copyright VisionMobile 2011
  26. Closed governance is used to control clever 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. Myth: Apple directly competes with Google and Microsoft
  28. Reality: Apple, Google and Microsoft have very different core businesses They just establish the same complementary assets across the value chain
  29. Key players have very different core businesses Players 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. Myth: All developers want is to sell apps
  31. Reality: Distribution is overall more important than money for most developer segments and consumer brands
  32. Copyright VisionMobile 2011
  33. VisionMobile Developer segments and their motivations Builds 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. Myth: All you need to attract developers is APIs
  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. 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. Supply vs demand mismatch in developer programs most vendor effort goes here opportunities in last mile to user Copyright VisionMobile 2011
  38. Myth: Telcos need to find a way to increase ARPU
  39. Reality: ARPU has a ceiling because it deals with comms needs only Communications spend needs to be seen in the context of overall consumer spend by segment
  40. Apps tap consumer $$$ beyond telecoms 1990-2010 2011+ Operators targeting comms needs Apps opening mobile to all needs Source: US consumer expenditure survey, 2009 Copyright VisionMobile 2011
  41. Myth: Voice is the most stable telco business
  42. Reality: Voice is under pressure to unbundle The integrated telco will always by more expensive/slower/worse than OTT alternatives.
  43. The domino effect in mobile value-chain from handsets, to value-added services, to core services OTT messaging and voice platform app stores iOS Android Copyright VisionMobile 2011
  44. The case for voice APIs Huge spike in developer interest for voice/SMS APIs Last 14 days All time (to 4 October 2011) Telcos need to compete with OTT players on voice APIs Copyright VisionMobile 2011
  45. Myth: Traditional telco economic tools are good to compete with OTT
  46. Reality: Telco need new economic tools to play in the software era Two such economic tools are demand-side economies of scale; and economics of complements
  47. Google Android ecosystem drives commoditization of mobile industry $$$ 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. 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. The economics of complements widely 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. How Google uses economics of complements to 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. Myth: Telcos can directly compete with OTT players
  52. Reality: Telcos need to unbundle in order to compete in software era The integrated telco will always be more expensive/slower than OTT alternatives.
  53. The all in one telco business take all or nothing Telephony Messaging Services Voice plans Data plans Access Copyright VisionMobile 2011
  54. Unbundling the telco into 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. Knowledge. Passion. Innovation. want more? Updated: 12 November 2010 Copyright VisionMobile 2011 Copyright VisionMobile 2011
  56. get in touch Knowledge. Passion. Innovation. Andreas Constantinou | Managing Director | +44 2033 844163 Updated: 12 November 2010 Copyright VisionMobile 2011 Copyright VisionMobile 2011

Editor's Notes

  • Complements are used in three ways:To create competitive advantage To drive core business To commoditise other businesses