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Mobile Megatrends 2014

The document outlines the evolution and current landscape of mobile app ecosystems, highlighting how platforms like iOS and Android dominate the market and how they create significant economic value. It discusses the competitive challenges faced by traditional telecom models and the emergence of messaging apps as new powerful ecosystems transforming engagement into e-commerce opportunities. Furthermore, it emphasizes the need for new players to innovate and compete in an increasingly interconnected mobile environment where hardware is shifting towards being a distribution channel rather than a profit center.

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Copyright VisionMobile 2014 Updated: 26 June 2014
Copyright VisionMobile 2014 Track developer trends & attitudes If you could speak to 10,000 app developers, what would you ask them? Learn digital business models Master the success patterns of ecosystem leaders and design effective digital business models VisionMobile | the ANALYSTS of the mobile Economy We#help#companies#track#developer#trends#and#learn#digital#business#models# Brand-Name clients trusted by the top names in tech 2 2 The Telco Innovation Toolbox: Economic Models for Managing Disruption and Reinventing the Telco 1 1 © VisionMobile 2012. Some rights reserved.VisionMobile.com/Strategy 1 Developer Economics 2014 6th ed.
Copyright VisionMobile 2014 Knowledge. Passion. Innovation. Stijn Schuermans @stijnSchuermans Andreas Constantinou @andreascon Michael Vakulenko @MVakulenko Updated 10/4/2014 © 2014 VisionMobile. This work is licensed under a  Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Copyright VisionMobile 2014 4 Mobile Megatrends 2014 Apps: The Tip of the Iceberg Mobile ecosystems: Don’t come late to the game Google: stripping Android Naked Handset business : Hardware is the new distribution The future of HTML5: Beyond the Browser Messaging Apps Are the New Platforms
Copyright VisionMobile 20145 APPS: the tip of the iceberg
Copyright VisionMobile 2014 6 1,000,000 apps ARE just the tip of the iceberg fundamental business model shifts are taking shape
Copyright VisionMobile 2014 There is a Fundamental shift in how value is created value is now in all aspects of user needs Source: Eurostat household spending for 2011, VisionMobile mobile telephony 2000s mobile creates value for communication needs 3% of user spending mobile computing 2010s mobile creates value for all needs and near 100% of user spending Housing, water, electricity, gas and other fuels 23% Transport 13% Food and non- alcoholic beverages 12% Miscellaneous goods and services 11% Recreation and culture 9% Restaurants and hotels 8% Furnishings, household equipment maintenance 6% Clothing and footwear 6% Alcoholic beverages, tobacco and narcotics 3% Health 3% Communications 3% Education 3% 3% Communications 7 household spending EU27 household spending EU27
Copyright VisionMobile 2014 Fundamental shift in how value is delivered and captured challenges the fundamentals of the traditional telecom-centric business model …but, apps are just the tip of the iceberg Source: VisionMobile mobile telephony telcos are the gatekeepers and those who profit from mobile mobile computing ecosystems are the gatekeepers and those who profit from mobile Housing, water, electricity, gas and other fuels 23% Transport 13% Food and non- alcoholic beverages 12% Miscellaneo us goods and services 11% Recreation and culture 9% Restaurants and hotels 8% Furnishings , household equipment maintenanc e 6% Clothing and footwear 6% Alcoholic beverages, tobacco and narcotics 3% Health 3% Communica tions 3% Education 3% 3% Communications 8
Copyright VisionMobile 2014 Fundamental shift in how competition is defined challenges the assumptions of competitive positioning Source: VisionMobile competition between products defined by product features what product the customer will buy? (inside-out thinking) 9 competition between industries defined by product benefits what customer is trying to get done? (outside-in thinking) vs. vs. “buying a newspaper” “killing 10 minutes of time” “buying phone service” “keep in touch with friends” vs. vs.
Copyright VisionMobile 2014 10 Fundamental value chain overlaps players across industries compete for control across the value chain, but not for profits Content Distribution Connectivity Screen User Apps Services App Stores / Portals Billing Telephony Network access Software platform Devices Discovery / retailing Customer insights devices Ads software licensing e-commerce Ads denotes vendor s core business networks
Copyright VisionMobile 2014 11 Apps are just the tip of the iceberg Mobile is changing - How value is created, delivered, captured - how competition is defined - Value chain overlaps - cross-industry subsidies
Copyright VisionMobile 2014 MOBILE ECOSYSTEMS: DON’T COME LATE TO THE GAME
Copyright VisionMobile 2014 It’s a green and blue APPS world For developers, iOS and Android dominate every developer market Source: Developer Economics Q1 2014 Platform priority by country, for app developers
Copyright VisionMobile 2014 iOS dominates developer revenues Median revenue per app, per month (n=2,425)* Source: Developer Economics Q1 2014
Copyright VisionMobile 2014 15 Below the iceberg.. The Apple and Google ecosystems Are 100+ billion dollar empires
Copyright VisionMobile 2014 The Apple GDP: The iOS ecosystem has grown to $163B Apple captures most of this revenue iOS platform devices App Store content platform device sales content revenue share accessories revenue share content licensing revenues direct revenues, user engagement premium mobile computing experience revenues from sales of premium devices accessory manufacturers accessories, revenue share access to market 16 how value is captured mobile app developers Source: VisionMobile analysis Figures for 2012 content owners (music, books, magazines, movies content apps and games App Store $129B iOS device revenue $22B app revenue, ads revenue and contract sales $6B content license revenue $7B accessory sales
Copyright VisionMobile 2014 The Android GDP: AN ecosystem valued at $149B Enormous defensive value for Google’s core business, but little direct value capture Android platform technology services, free content governance app store eyeballs insights apps user engagement and direct revenues 17 how value is captured Handset OEMs handsets technology and services mass-market mobile computing experience eyeballs mobile app developers Play Store compatibility certification $117B handset sales $3B est. revenue from ads on Android devices $19B app revenue, ads revenue and contract sales Source: VisionMobile analysis Figures for 2012
Copyright VisionMobile 2014 18 How did Apple, Google built ecosystem empires? What can history teach us?
Copyright VisionMobile 2014 19 2000 2001 2002 appecosystemssoftwareplatforms Android iOS 2007 2008 2009 2010 2011 2012 2013 = dead end Apple, Google emerged out of the ashes of 20+ dead platforms. Only the first-mover app ecosystems survived A la Mobile Access ALP Azingo Comneon Apoxi Danger OS e-SIM Intrinsyc OS IXI Mobile Mizi Prizm S40 Motorola L-J Nokia GEOS OpenMoko OpenWave MIDAS Palm 5/6 Sasken Aria SavaJe OS SKY-MAP TTPCom Ajar MeeGo Tizen Firefox OS Windows Phone Blackberry Maemo Bada Jolla first two platforms with an app store Ubuntu bubble size = apps available Only the first-mover, app ecosystems survived
Copyright VisionMobile 2014 iOS, Android built app ecosystems with superior economics app ecosystems have very different economics to platforms before them software platform communications platform app ecosystem* examples Linux participants handset makers users users and developers wins by sharing costs and risks of software development connecting large number of users connecting users with developers economics economies of scale same-side network effects same- and cross-side network effects with winner- takes-all dynamics growth potential linear quadratic exponential *also referred to as a computing platform
Copyright VisionMobile 2014 App ecosystems won by superior growth potential 21 scale (users or devices) valuetoeachuser App ecosystem value grows exponentially due to increased number of interconnections Software platform value grows linearly due to cost saving and decreasing price moreusers>…
Copyright VisionMobile 2014 ecosystem economics resulted in a duopoly 22
Copyright VisionMobile 2014 23 ..Actually four duopolies network effects have created duopolies and huge barriers to entry for late comers Source: Developer Economics; VisionMobile estimates Figures for Q3 2013
Copyright VisionMobile 2014 24 What’s the secret Sauce? Can Apple’s and google’s success be replicated?
Copyright VisionMobile 2014 Apple, Android deliver benefits to all sides exponential growth comes from cross-side network effects across all five sides mobile platforms app developers handset makers operators 25 brands advertisers reach eyeballs increase ad value with insights engage audience reduce costs be able to compete in smartphone market find choice & novelty (apps) be sure of quality convenience support identity increase ARPU lock-in users achieve personal fulfilment have commercial success belong to a community
Copyright VisionMobile 2014 To compete, Challengers have to achieve the impossible three conditions necessary to compete with Apple / Android mobile platforms 26 2 activate all sides of the network simultaneously for same-rate growth 1 3 Incur additional opportunity cost for participants due to limited resources (e.g. to adopt WP you have to abandon Android) achieve the same outcomes cheaper/faster/better Three conditions to compete:
Copyright VisionMobile 2014 Predictably, Many have tried, none have succeeded. 27
Copyright VisionMobile 2014 28 Mobile App ecosystems Create black oceans Inspired by “Blue Ocean Strategy” (2005) by W. Chan Kim and Renée Mauborgne (INSEAD) Blue ocean uncontested markets no competition e.g. luxury home appliances Black ocean ecosystem-driven markets impossible competition e.g. app ecosystems Red ocean existing markets fierce competition e.g. mobile handsets no name
Copyright VisionMobile 2014 29 How do you compete IN a black ocean?
Copyright VisionMobile 2014 leveragE, don’t compete How Facebook seems the world of mobile platforms 30
Copyright VisionMobile 2014 FB and Amazon Leverage & attack weak points OF ecosystems Operating systems are a commodity, no longer the basis of competition operating system runtime APIs tool chain app platform monetization distribution retailing app ecosystem developers users compete head-on attack weak points & leverage ecosystems duopoly 31 tools ecosystem analytics monetisation discovery *rumored $2.6B in OEM incentives for 2014. Amazon adds: +better discovery +active paying customers +integrated device * FB adds: +better discovery +ad monetisation +deep app links +free SDK bundle
Copyright VisionMobile 2014 In the future, ecosystems will compete by experience roaming ecosystems will compete not by size, but how well the experience roams across screens Mac computers iPhone iPad Apple TV Chrome browser Android Android tablets Google TV, Chromecast Windows, Office Windows 8Windows Phone Xbox PC smartphone tablet living room 32 Online store Kindle FireSoon to come? Fire TV dashboard CarPlay Open Automotive Alliance Windows in the Car ?
Copyright VisionMobile 2014 GOOGLE: STRIPPING ANDROID NAKED
Copyright VisionMobile 2014 34 Android: NOT Google’s gift to the world
Copyright VisionMobile 2014 Android IS the most closed open source project Open to developers, closed to handset makers 35 Source: VisionMobile, Open Governance Index, 2011 Open Governance Index VisionMobile, 2011 free download
Copyright VisionMobile 2014 Android IS closed to handset makers on 3 control points 36 App store, billing relationship Access to 1 million apps, media content on Google Play Store only available to OEM licensees Killer services Gmail, Calendar, Now, Maps, YouTube, Drive, Hangouts, … only available to OEM licensees Trademark & brand Only Google licensees can claim to sell an “Android handset”
Copyright VisionMobile 2014 Handset makers inevitably reacted Google control points were systematically attacked and eroded 37 One Platform Foundation App store, billing relationship OnePF provides single app packaging format and in-app billing for all stores Amazon, Yandex successfully provided own stores Killer services Samsung replaced many of Google’s apps with its own Trademark & brand Vendors and operators promote their own brand over Android
Copyright VisionMobile 2014 Google strikes back with a 4th control point: APIs 38 App store, billing relationship Access to 1 million apps, media content on Google Play Store only available to OEM licensees Killer services Gmail, Calendar, Now, Maps, YouTube, Drive, Hangouts, … only available to OEM licensees Trademark & brand Only Google licensees can claim to sell an “Android handset” Google Play APIs and Services
Copyright VisionMobile 2014 Google stripped Android naked Google moved critical APIs out of open source OS, into proprietary service 39 Google Services (APIs) Google AppsAndroid OS Google Maps API Location APIs Games APIs In-App Billing Google Wallet Instant Buy Could-to-Device messaging Account Authentication Account syncing Google+ Sign-in Google+ Sharing APIs Google+ Photo Syncing Photosphere support Google Mobile Ads Remote Location Remote Wipe Google Settings App Malware scanner Cast API Search/Now Calendar Keyboard Chrome Maps Gmail Hangouts Google+ Drive Play Books Play Music Play Movies Play Magazines Play Games Voice Keep YouTube Wallet Phone app Settings Lock Screen System UI (button bar, notification panel) App Framework & APIs Linux Kernel & Drivers Hardware support differentiated APIs and appsbaseline migration of APIs and apps that are most valuable to developers & OEMs
Copyright VisionMobile 2014 Immediate advantage: fragmentation relief Google Play Services is automatically updated on 99% of Android handsets 40 share of devices that support Google Play Services v2.2 v2.3 v4.0 v4.1 v4.2 v4.3 share of devices running a given version of the Android platform Source: Google November 2013
Copyright VisionMobile 2014 Long term impact: control over app ecosystem Developers are now forced to adjust app for each Android fork 41 Development Distribution Discovery Platform APIs Developer tool-chain Backend services Active developer community Marketplace connecting developers to users Monetization tools Partnerships Discovery, promotion, placement, search, recommendations Solution quality gatekeeping developers users control points before control points after
Copyright VisionMobile 2014 Android FITS INTO Google’s strategy: Flatten, expand, mine Android flattens, Google Play Services and apps help to expand and mine 42 Flatten Expand Mine Flatten anything standing between eyeballs and ad inventory Uses the economics of complements to increase the value of Google’s core product Expand the footprint of ad inventory … across the user journey, by introducing new (free) services like Gmail, Google Maps, YouTube, Google TV, Chromecast Mine information on every user Helps Google to better micro-target users, directly increasing the value of its inventory goals control points in mobile other examples
Copyright VisionMobile 2014 OTT SQUARED: MESSAGING APPS ARE THE NEW PLATFORMS
Copyright VisionMobile 2014 44 The dust of the platform wars has settled Time for a new form of ecosystem wars
Copyright VisionMobile 2014 Messaging apps are the 2nd wave of mobile ecosystems Gaining momentum among users and recognition among investors 45 Acquired by Facebook for $19B Valued at up to $70B by Nomura Rumored to prepare for $28B IPO Acquired by Rakuten for $900M Received $280M Series D investment Investors include Alibaba Preparing for $2B IPO MAU source: vendor reports, (*) Business Insider estimate ? *
Copyright VisionMobile 2014 46 Messaging ecosystems: - mobile-first - twice over-the-top telcos platforms messaging
Copyright VisionMobile 2014 The New ecosystems TURN ENGAGEMENT INTO in e-commerce contrary to Google/Facebook who monetise engagement through ads 47 source: http://wattsjones.org.uk/post/61010619439/messagingappmonetisation
Copyright VisionMobile 2014 Many Messaging ecosystems use asymmetric business models adding value in one value chain and capturing value in another 48 business model type symmetric asymmetric value created designing and manufacturing handsets connecting users and developers connecting users, OEM and developers helping users communicate value delivered telcos App Store Google Play messaging network value captured selling handsets selling devices selling on-line ads e-commerce 2000’s 2010’s
Copyright VisionMobile 2014 WeChat’s asymmetric business model displace traditional telco business triggering deflationary economics 49 Stickers, games, sponsored content, ads e-commerce, APIs mobile operators $$$ SMSbetter messaging and free calls engagement kills legacy SMS business model user reach$$$ commoditization how value is captured
Copyright VisionMobile 2014 How wechat captures value through e-commerce messaging apps are e-commerce platforms 50 WeChat sells movie tickets when you are near a cinema Xiaomi sold 150,000 flagship devices in under 10 minutes on WeChat WeChat sold taxi rides through the Didi Dache app WeChat offers health insurance services source: http://www.techinasia.com/ WeChat offers air-ticket service throutgh LY.com Pay for bottled drinks through WeChat
Copyright VisionMobile 2014 E-commerce is taking over app business models revenue model popularity and median revenue per app per month (n=5,715) Source: Developer Economics Q1 2014
Copyright VisionMobile 2014 HANDSET BUSINESS REBOOT: HARDWARE IS THE NEW DISTRIBUTION
Copyright VisionMobile 2014 The platform duopoly is here to stay How has the handset business been affected? 53
Copyright VisionMobile 2014 handset profits Are owned by Apple & Samsung. Why? The duopoly of profit share in the handset industry 54
Copyright VisionMobile 2014 In 2007/8 iPhone and Android created two disruptions 55
Copyright VisionMobile 2014 56 As a result, today’s handset leaders are vertically integrated Modular handset makers struggle to avoid the commoditization trap Horizontal player structure Vertical player structure no name Integrated across Bill of Materials Integrated metal-to-cloud Acquired by platform owner Following Samsung’s recipe Producing own OS and processors Now enterprise services company Unbundling BBM and cloud services Modular handsets component vendors capture profits, handset assemblers do not Samsung and Apple capture all profits in handset market “Competition to the best” Profitable growth Now enterprise services Unbundling BBM & cloud services
Copyright VisionMobile 2014 What’s next for the handset business? 57
Copyright VisionMobile 2014 58 the handset market now faces a third disruption New players no longer use handsets as as profit center; but as distribution medium Handset integrated with services “Competition to the best” Profitable growth Horizontal player structure Vertical player structure Profits are driven by services, hardware is a commodity with handsets offered at break-even
Copyright VisionMobile 2014 The emerging model: Hardware as distribution channel not the source of profits 59 Source: VisionMobile emerging model hardware = distribution traditional model hardware = profits No Name take most profits “demolition derby” break-even or lose money
Copyright VisionMobile 2014 THE FUTURE OF HTML5: BEYOND THE BROWSER
Copyright VisionMobile 2014 The future of HTML5 mobile is bright 61 HTML5 is open HTML5 can compete with native platforms *source: VisionMobile Developer Economics Q1 2014 & Q3 2013 ✔ ✔ HTML5 is cross-platform ✔ HTML5 is popular at 52% mindshare* ✔
Copyright VisionMobile 2014 Is the future of HTML5 bright? 62
Copyright VisionMobile 2014 Is the future of HTML5 bright? It is, but NOT for the reasons you would expect 63
Copyright VisionMobile 2014 HTML5 is a technology, IT won’t replace mobile platforms lacks key ingredients to compete with leading mobile platforms 64 Key ingredients Software foundations Developer ecosystem Monetisation Distribution Retailing ✔" = ✖" ✖" ✖"HTML5 fragmented platform always a step behind native complex tool-chain islands of developers using common language, but different API sets needs a leader not consensus Facebook? Google? Mozilla? Other ?
Copyright VisionMobile 2014 openness is not within primary audience needs The open nature of HTML5 doesn’t intrinsically help anybody do their job better 65 mobile platforms app developers Handset OEMsoperators brands advertisers reach eyeballs increase ad value with insights engage audience reduce costs be able to compete in the smartphone market find choice & novelty (apps) ensure quality convenience adjust to my identify increase ARPU lower churn achieve personal fulfilment have commercial success belong to a community
Copyright VisionMobile 2014 Key ingredients Google & Facebook are creating new web walled gardens adding missing ingredients on top of HTML5 enabling technology 66 Software foundations Developer ecosystem Monetisation Distribution Retailing application runtime, developer tool-chain, & platform APIs Developers building and publishing apps around the software foundation micropayments, ad networks and settlement app distribution to end users through SaaS or devices app discovery, promotion, placement, search & recommendations HTML5 with Chrome API web developers Google Wallet PC, Mac, Android, iOS, Chrome OS Chrome Web Store HTML5 with Facebook APIs web, Flash and mobile developers Facebook Credits 1B+ Facebook users Facebook app recommendations HTML5 browsers (fragmentation) web developers ? ? ? HTML5 may end up a yet another walled garden despite the promise of openness
Copyright VisionMobile 2014 Browsers don’t deliver on cross-platform capabilities Only 37% of Android apps can be developed for a mobile browser na#ve&JavaScript&API,& 98%& Web7to7na#ve& converter,&63%& Web&wrapper,&49%& Mobile&browser,&37%& Percentage of apps in Google Play US store that can be implemented with each HTML5 route to market, i.e that utilise APIs available through that HTML5 route to market alone.
Copyright VisionMobile 2014 Browsers are heavily fragmented across platforms HTML5 features and APIs vary widely across browsers 68 Source: html5test.com, April 2014. 0" 100" 200" 300" 400" 500" 600" BlackBerry 10.2 Chrome 33 Opera Mobile 16 Firefox Mobile 27 Jolla Sailfish Android 4.4 Nokia X » iOS 7.0 Windows Phone 8.1 Sony Playstation 4 Google TV (Chrome 11) Amazon Kindle HTML5 test score
Copyright VisionMobile 2014 69 API iOS Safari Android Browser Windows Phone IE Blackberry Browser Opera Mobile Chrome Firefox Audio settings - - - - - - - Battery - - - - - - Since v.11.0+ Bluetooth - - - - - - - Calendar - - - - - - - Camera - - - 10.0+ 11.5+ - Since v.15.0+ Compass 4.2+ 3.0+ - 10.0+ 12.0+ Yes 6.0+ Contacts - - - - - - - Filesystem 6.0+ 3.0+ 8.0+ 10.0+ 11.10+ 18.0+ 10.0+ Geolocation 3.0+ 2.1+ - 6.0+ 10.60+ Yes 4.0+ Mic - - - 10.0+ 11.5+ - 15.0+ Motion 4.2+ 3.0+ - 10.0+ 12.0+ Yes 6.0+ Network Yes 2.2+ - Yes Yes Yes 12.0+ NFC - - - - - - - Notifications - - - 10.0+ - Yes Yes Power management - - - - - - - SMS - - - - - - - Telephony - - - - - - - Vibration - - - - - - 11.0+ WiFi - - - - - - - Web app APIS are heavily fragmented across platforms HTML5 API implementation varies widely across browsers Source: VisionMobile
Copyright VisionMobile 2014 For now, HTML5 apps offer a trade-off to native apps 70
Copyright VisionMobile 2014 Web vs native trade-Offs for app development native smartphone apps hybrid apps web apps Ease of discovery through native app stores through native app stores search or referrals (Facebook, twitter, other) Reach fragmented across multiple platforms fragmented across multiple platforms works on almost all devices Depth of experience full access to platform resources access to native APIs at the expense of a less capable UI limited by browser sandbox Customer ownership and terms Apple App Store enforces onerous terms Apple App Store enforces onerous terms complete ownership of customer Engagement and recurring use notifications and home screen icon notifications and home screen icon no notifications, difficult to get user to save the link Monetisation potential high on iOS, lower on Android high on iOS, lower on Android no accepted method of payment Ease of cross platform development developed separately for each platform, with some code reuse using CPTs significant reuse of UI components for some apps significant fragmentation for advanced apps 71
Copyright VisionMobile 2014 But the future of HTML5 Is beyond the browser 72
Copyright VisionMobile 2014 HTML5 Is the 3rd choice AMONG MOBILE DEVELOPERS
Copyright VisionMobile 2014 39% of HTML5 Mobile devs are going beyond the browser Overall five HTML5 technology routes to market to choose from *source: Developer Economics Q3 2013
Copyright VisionMobile 2014 Architectural frameworks CSS UI frameworks JavaScript UI frameworks Web wrappers Web-to-Native Converters Native Javascript APIs 2D Gaming Engines 3D Gaming Engines A flurry of tools to support off-browser web apps Hundreds of tools to make that possible
Copyright VisionMobile 2014 Knowledge. Passion. Innovation. Andreas Constantinou CEO & Principal Analyst andreas@visionmobile.com +44 20 8123 1738 Track developer trends Learn DIGITAL Business Models Master the success patterns of ecosystem leaders and design effective digital business models Developer Economics 2014 6th ed. Talk to us Work With us If you could speak to 10,000 app developers, what would you ask them?

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Mobile Megatrends 2014

  • 1.
  • 2.
    Copyright VisionMobile 2014 Trackdeveloper trends & attitudes If you could speak to 10,000 app developers, what would you ask them? Learn digital business models Master the success patterns of ecosystem leaders and design effective digital business models VisionMobile | the ANALYSTS of the mobile Economy We#help#companies#track#developer#trends#and#learn#digital#business#models# Brand-Name clients trusted by the top names in tech 2 2 The Telco Innovation Toolbox: Economic Models for Managing Disruption and Reinventing the Telco 1 1 © VisionMobile 2012. Some rights reserved.VisionMobile.com/Strategy 1 Developer Economics 2014 6th ed.
  • 3.
    Copyright VisionMobile 2014 Knowledge.Passion. Innovation. Stijn Schuermans @stijnSchuermans Andreas Constantinou @andreascon Michael Vakulenko @MVakulenko Updated 10/4/2014 © 2014 VisionMobile. This work is licensed under a  Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
  • 4.
    Copyright VisionMobile 2014 4 MobileMegatrends 2014 Apps: The Tip of the Iceberg Mobile ecosystems: Don’t come late to the game Google: stripping Android Naked Handset business : Hardware is the new distribution The future of HTML5: Beyond the Browser Messaging Apps Are the New Platforms
  • 5.
    Copyright VisionMobile 20145 APPS:the tip of the iceberg
  • 6.
    Copyright VisionMobile 2014 6 1,000,000apps ARE just the tip of the iceberg fundamental business model shifts are taking shape
  • 7.
    Copyright VisionMobile 2014 Thereis a Fundamental shift in how value is created value is now in all aspects of user needs Source: Eurostat household spending for 2011, VisionMobile mobile telephony 2000s mobile creates value for communication needs 3% of user spending mobile computing 2010s mobile creates value for all needs and near 100% of user spending Housing, water, electricity, gas and other fuels 23% Transport 13% Food and non- alcoholic beverages 12% Miscellaneous goods and services 11% Recreation and culture 9% Restaurants and hotels 8% Furnishings, household equipment maintenance 6% Clothing and footwear 6% Alcoholic beverages, tobacco and narcotics 3% Health 3% Communications 3% Education 3% 3% Communications 7 household spending EU27 household spending EU27
  • 8.
    Copyright VisionMobile 2014 Fundamentalshift in how value is delivered and captured challenges the fundamentals of the traditional telecom-centric business model …but, apps are just the tip of the iceberg Source: VisionMobile mobile telephony telcos are the gatekeepers and those who profit from mobile mobile computing ecosystems are the gatekeepers and those who profit from mobile Housing, water, electricity, gas and other fuels 23% Transport 13% Food and non- alcoholic beverages 12% Miscellaneo us goods and services 11% Recreation and culture 9% Restaurants and hotels 8% Furnishings , household equipment maintenanc e 6% Clothing and footwear 6% Alcoholic beverages, tobacco and narcotics 3% Health 3% Communica tions 3% Education 3% 3% Communications 8
  • 9.
    Copyright VisionMobile 2014 Fundamentalshift in how competition is defined challenges the assumptions of competitive positioning Source: VisionMobile competition between products defined by product features what product the customer will buy? (inside-out thinking) 9 competition between industries defined by product benefits what customer is trying to get done? (outside-in thinking) vs. vs. “buying a newspaper” “killing 10 minutes of time” “buying phone service” “keep in touch with friends” vs. vs.
  • 10.
    Copyright VisionMobile 2014 10 Fundamentalvalue chain overlaps players across industries compete for control across the value chain, but not for profits Content Distribution Connectivity Screen User Apps Services App Stores / Portals Billing Telephony Network access Software platform Devices Discovery / retailing Customer insights devices Ads software licensing e-commerce Ads denotes vendor s core business networks
  • 11.
    Copyright VisionMobile 2014 11 Appsare just the tip of the iceberg Mobile is changing - How value is created, delivered, captured - how competition is defined - Value chain overlaps - cross-industry subsidies
  • 12.
    Copyright VisionMobile 2014 MOBILEECOSYSTEMS: DON’T COME LATE TO THE GAME
  • 13.
    Copyright VisionMobile 2014 It’sa green and blue APPS world For developers, iOS and Android dominate every developer market Source: Developer Economics Q1 2014 Platform priority by country, for app developers
  • 14.
    Copyright VisionMobile 2014 iOSdominates developer revenues Median revenue per app, per month (n=2,425)* Source: Developer Economics Q1 2014
  • 15.
    Copyright VisionMobile 2014 15 Belowthe iceberg.. The Apple and Google ecosystems Are 100+ billion dollar empires
  • 16.
    Copyright VisionMobile 2014 TheApple GDP: The iOS ecosystem has grown to $163B Apple captures most of this revenue iOS platform devices App Store content platform device sales content revenue share accessories revenue share content licensing revenues direct revenues, user engagement premium mobile computing experience revenues from sales of premium devices accessory manufacturers accessories, revenue share access to market 16 how value is captured mobile app developers Source: VisionMobile analysis Figures for 2012 content owners (music, books, magazines, movies content apps and games App Store $129B iOS device revenue $22B app revenue, ads revenue and contract sales $6B content license revenue $7B accessory sales
  • 17.
    Copyright VisionMobile 2014 TheAndroid GDP: AN ecosystem valued at $149B Enormous defensive value for Google’s core business, but little direct value capture Android platform technology services, free content governance app store eyeballs insights apps user engagement and direct revenues 17 how value is captured Handset OEMs handsets technology and services mass-market mobile computing experience eyeballs mobile app developers Play Store compatibility certification $117B handset sales $3B est. revenue from ads on Android devices $19B app revenue, ads revenue and contract sales Source: VisionMobile analysis Figures for 2012
  • 18.
    Copyright VisionMobile 2014 18 Howdid Apple, Google built ecosystem empires? What can history teach us?
  • 19.
    Copyright VisionMobile 2014 19 20002001 2002 appecosystemssoftwareplatforms Android iOS 2007 2008 2009 2010 2011 2012 2013 = dead end Apple, Google emerged out of the ashes of 20+ dead platforms. Only the first-mover app ecosystems survived A la Mobile Access ALP Azingo Comneon Apoxi Danger OS e-SIM Intrinsyc OS IXI Mobile Mizi Prizm S40 Motorola L-J Nokia GEOS OpenMoko OpenWave MIDAS Palm 5/6 Sasken Aria SavaJe OS SKY-MAP TTPCom Ajar MeeGo Tizen Firefox OS Windows Phone Blackberry Maemo Bada Jolla first two platforms with an app store Ubuntu bubble size = apps available Only the first-mover, app ecosystems survived
  • 20.
    Copyright VisionMobile 2014 iOS,Android built app ecosystems with superior economics app ecosystems have very different economics to platforms before them software platform communications platform app ecosystem* examples Linux participants handset makers users users and developers wins by sharing costs and risks of software development connecting large number of users connecting users with developers economics economies of scale same-side network effects same- and cross-side network effects with winner- takes-all dynamics growth potential linear quadratic exponential *also referred to as a computing platform
  • 21.
    Copyright VisionMobile 2014 Appecosystems won by superior growth potential 21 scale (users or devices) valuetoeachuser App ecosystem value grows exponentially due to increased number of interconnections Software platform value grows linearly due to cost saving and decreasing price moreusers>…
  • 22.
    Copyright VisionMobile 2014 ecosystemeconomics resulted in a duopoly 22
  • 23.
    Copyright VisionMobile 2014 23 ..Actuallyfour duopolies network effects have created duopolies and huge barriers to entry for late comers Source: Developer Economics; VisionMobile estimates Figures for Q3 2013
  • 24.
    Copyright VisionMobile 2014 24 What’sthe secret Sauce? Can Apple’s and google’s success be replicated?
  • 25.
    Copyright VisionMobile 2014 Apple,Android deliver benefits to all sides exponential growth comes from cross-side network effects across all five sides mobile platforms app developers handset makers operators 25 brands advertisers reach eyeballs increase ad value with insights engage audience reduce costs be able to compete in smartphone market find choice & novelty (apps) be sure of quality convenience support identity increase ARPU lock-in users achieve personal fulfilment have commercial success belong to a community
  • 26.
    Copyright VisionMobile 2014 Tocompete, Challengers have to achieve the impossible three conditions necessary to compete with Apple / Android mobile platforms 26 2 activate all sides of the network simultaneously for same-rate growth 1 3 Incur additional opportunity cost for participants due to limited resources (e.g. to adopt WP you have to abandon Android) achieve the same outcomes cheaper/faster/better Three conditions to compete:
  • 27.
    Copyright VisionMobile 2014 Predictably, Manyhave tried, none have succeeded. 27
  • 28.
    Copyright VisionMobile 2014 28 MobileApp ecosystems Create black oceans Inspired by “Blue Ocean Strategy” (2005) by W. Chan Kim and Renée Mauborgne (INSEAD) Blue ocean uncontested markets no competition e.g. luxury home appliances Black ocean ecosystem-driven markets impossible competition e.g. app ecosystems Red ocean existing markets fierce competition e.g. mobile handsets no name
  • 29.
    Copyright VisionMobile 2014 29 Howdo you compete IN a black ocean?
  • 30.
    Copyright VisionMobile 2014 leveragE,don’t compete How Facebook seems the world of mobile platforms 30
  • 31.
    Copyright VisionMobile 2014 FBand Amazon Leverage & attack weak points OF ecosystems Operating systems are a commodity, no longer the basis of competition operating system runtime APIs tool chain app platform monetization distribution retailing app ecosystem developers users compete head-on attack weak points & leverage ecosystems duopoly 31 tools ecosystem analytics monetisation discovery *rumored $2.6B in OEM incentives for 2014. Amazon adds: +better discovery +active paying customers +integrated device * FB adds: +better discovery +ad monetisation +deep app links +free SDK bundle
  • 32.
    Copyright VisionMobile 2014 Inthe future, ecosystems will compete by experience roaming ecosystems will compete not by size, but how well the experience roams across screens Mac computers iPhone iPad Apple TV Chrome browser Android Android tablets Google TV, Chromecast Windows, Office Windows 8Windows Phone Xbox PC smartphone tablet living room 32 Online store Kindle FireSoon to come? Fire TV dashboard CarPlay Open Automotive Alliance Windows in the Car ?
  • 33.
    Copyright VisionMobile 2014 GOOGLE:STRIPPING ANDROID NAKED
  • 34.
    Copyright VisionMobile 2014 34 Android:NOT Google’s gift to the world
  • 35.
    Copyright VisionMobile 2014 AndroidIS the most closed open source project Open to developers, closed to handset makers 35 Source: VisionMobile, Open Governance Index, 2011 Open Governance Index VisionMobile, 2011 free download
  • 36.
    Copyright VisionMobile 2014 AndroidIS closed to handset makers on 3 control points 36 App store, billing relationship Access to 1 million apps, media content on Google Play Store only available to OEM licensees Killer services Gmail, Calendar, Now, Maps, YouTube, Drive, Hangouts, … only available to OEM licensees Trademark & brand Only Google licensees can claim to sell an “Android handset”
  • 37.
    Copyright VisionMobile 2014 Handsetmakers inevitably reacted Google control points were systematically attacked and eroded 37 One Platform Foundation App store, billing relationship OnePF provides single app packaging format and in-app billing for all stores Amazon, Yandex successfully provided own stores Killer services Samsung replaced many of Google’s apps with its own Trademark & brand Vendors and operators promote their own brand over Android
  • 38.
    Copyright VisionMobile 2014 Googlestrikes back with a 4th control point: APIs 38 App store, billing relationship Access to 1 million apps, media content on Google Play Store only available to OEM licensees Killer services Gmail, Calendar, Now, Maps, YouTube, Drive, Hangouts, … only available to OEM licensees Trademark & brand Only Google licensees can claim to sell an “Android handset” Google Play APIs and Services
  • 39.
    Copyright VisionMobile 2014 Googlestripped Android naked Google moved critical APIs out of open source OS, into proprietary service 39 Google Services (APIs) Google AppsAndroid OS Google Maps API Location APIs Games APIs In-App Billing Google Wallet Instant Buy Could-to-Device messaging Account Authentication Account syncing Google+ Sign-in Google+ Sharing APIs Google+ Photo Syncing Photosphere support Google Mobile Ads Remote Location Remote Wipe Google Settings App Malware scanner Cast API Search/Now Calendar Keyboard Chrome Maps Gmail Hangouts Google+ Drive Play Books Play Music Play Movies Play Magazines Play Games Voice Keep YouTube Wallet Phone app Settings Lock Screen System UI (button bar, notification panel) App Framework & APIs Linux Kernel & Drivers Hardware support differentiated APIs and appsbaseline migration of APIs and apps that are most valuable to developers & OEMs
  • 40.
    Copyright VisionMobile 2014 Immediateadvantage: fragmentation relief Google Play Services is automatically updated on 99% of Android handsets 40 share of devices that support Google Play Services v2.2 v2.3 v4.0 v4.1 v4.2 v4.3 share of devices running a given version of the Android platform Source: Google November 2013
  • 41.
    Copyright VisionMobile 2014 Longterm impact: control over app ecosystem Developers are now forced to adjust app for each Android fork 41 Development Distribution Discovery Platform APIs Developer tool-chain Backend services Active developer community Marketplace connecting developers to users Monetization tools Partnerships Discovery, promotion, placement, search, recommendations Solution quality gatekeeping developers users control points before control points after
  • 42.
    Copyright VisionMobile 2014 AndroidFITS INTO Google’s strategy: Flatten, expand, mine Android flattens, Google Play Services and apps help to expand and mine 42 Flatten Expand Mine Flatten anything standing between eyeballs and ad inventory Uses the economics of complements to increase the value of Google’s core product Expand the footprint of ad inventory … across the user journey, by introducing new (free) services like Gmail, Google Maps, YouTube, Google TV, Chromecast Mine information on every user Helps Google to better micro-target users, directly increasing the value of its inventory goals control points in mobile other examples
  • 43.
    Copyright VisionMobile 2014 OTTSQUARED: MESSAGING APPS ARE THE NEW PLATFORMS
  • 44.
    Copyright VisionMobile 2014 44 Thedust of the platform wars has settled Time for a new form of ecosystem wars
  • 45.
    Copyright VisionMobile 2014 Messagingapps are the 2nd wave of mobile ecosystems Gaining momentum among users and recognition among investors 45 Acquired by Facebook for $19B Valued at up to $70B by Nomura Rumored to prepare for $28B IPO Acquired by Rakuten for $900M Received $280M Series D investment Investors include Alibaba Preparing for $2B IPO MAU source: vendor reports, (*) Business Insider estimate ? *
  • 46.
    Copyright VisionMobile 2014 46 Messagingecosystems: - mobile-first - twice over-the-top telcos platforms messaging
  • 47.
    Copyright VisionMobile 2014 TheNew ecosystems TURN ENGAGEMENT INTO in e-commerce contrary to Google/Facebook who monetise engagement through ads 47 source: http://wattsjones.org.uk/post/61010619439/messagingappmonetisation
  • 48.
    Copyright VisionMobile 2014 ManyMessaging ecosystems use asymmetric business models adding value in one value chain and capturing value in another 48 business model type symmetric asymmetric value created designing and manufacturing handsets connecting users and developers connecting users, OEM and developers helping users communicate value delivered telcos App Store Google Play messaging network value captured selling handsets selling devices selling on-line ads e-commerce 2000’s 2010’s
  • 49.
    Copyright VisionMobile 2014 WeChat’sasymmetric business model displace traditional telco business triggering deflationary economics 49 Stickers, games, sponsored content, ads e-commerce, APIs mobile operators $$$ SMSbetter messaging and free calls engagement kills legacy SMS business model user reach$$$ commoditization how value is captured
  • 50.
    Copyright VisionMobile 2014 Howwechat captures value through e-commerce messaging apps are e-commerce platforms 50 WeChat sells movie tickets when you are near a cinema Xiaomi sold 150,000 flagship devices in under 10 minutes on WeChat WeChat sold taxi rides through the Didi Dache app WeChat offers health insurance services source: http://www.techinasia.com/ WeChat offers air-ticket service throutgh LY.com Pay for bottled drinks through WeChat
  • 51.
    Copyright VisionMobile 2014 E-commerceis taking over app business models revenue model popularity and median revenue per app per month (n=5,715) Source: Developer Economics Q1 2014
  • 52.
    Copyright VisionMobile 2014 HANDSETBUSINESS REBOOT: HARDWARE IS THE NEW DISTRIBUTION
  • 53.
    Copyright VisionMobile 2014 Theplatform duopoly is here to stay How has the handset business been affected? 53
  • 54.
    Copyright VisionMobile 2014 handsetprofits Are owned by Apple & Samsung. Why? The duopoly of profit share in the handset industry 54
  • 55.
    Copyright VisionMobile 2014 In2007/8 iPhone and Android created two disruptions 55
  • 56.
    Copyright VisionMobile 2014 56 Asa result, today’s handset leaders are vertically integrated Modular handset makers struggle to avoid the commoditization trap Horizontal player structure Vertical player structure no name Integrated across Bill of Materials Integrated metal-to-cloud Acquired by platform owner Following Samsung’s recipe Producing own OS and processors Now enterprise services company Unbundling BBM and cloud services Modular handsets component vendors capture profits, handset assemblers do not Samsung and Apple capture all profits in handset market “Competition to the best” Profitable growth Now enterprise services Unbundling BBM & cloud services
  • 57.
    Copyright VisionMobile 2014 What’snext for the handset business? 57
  • 58.
    Copyright VisionMobile 2014 58 thehandset market now faces a third disruption New players no longer use handsets as as profit center; but as distribution medium Handset integrated with services “Competition to the best” Profitable growth Horizontal player structure Vertical player structure Profits are driven by services, hardware is a commodity with handsets offered at break-even
  • 59.
    Copyright VisionMobile 2014 Theemerging model: Hardware as distribution channel not the source of profits 59 Source: VisionMobile emerging model hardware = distribution traditional model hardware = profits No Name take most profits “demolition derby” break-even or lose money
  • 60.
    Copyright VisionMobile 2014 THEFUTURE OF HTML5: BEYOND THE BROWSER
  • 61.
    Copyright VisionMobile 2014 Thefuture of HTML5 mobile is bright 61 HTML5 is open HTML5 can compete with native platforms *source: VisionMobile Developer Economics Q1 2014 & Q3 2013 ✔ ✔ HTML5 is cross-platform ✔ HTML5 is popular at 52% mindshare* ✔
  • 62.
    Copyright VisionMobile 2014 Isthe future of HTML5 bright? 62
  • 63.
    Copyright VisionMobile 2014 Isthe future of HTML5 bright? It is, but NOT for the reasons you would expect 63
  • 64.
    Copyright VisionMobile 2014 HTML5is a technology, IT won’t replace mobile platforms lacks key ingredients to compete with leading mobile platforms 64 Key ingredients Software foundations Developer ecosystem Monetisation Distribution Retailing ✔" = ✖" ✖" ✖"HTML5 fragmented platform always a step behind native complex tool-chain islands of developers using common language, but different API sets needs a leader not consensus Facebook? Google? Mozilla? Other ?
  • 65.
    Copyright VisionMobile 2014 opennessis not within primary audience needs The open nature of HTML5 doesn’t intrinsically help anybody do their job better 65 mobile platforms app developers Handset OEMsoperators brands advertisers reach eyeballs increase ad value with insights engage audience reduce costs be able to compete in the smartphone market find choice & novelty (apps) ensure quality convenience adjust to my identify increase ARPU lower churn achieve personal fulfilment have commercial success belong to a community
  • 66.
    Copyright VisionMobile 2014 Key ingredients Google& Facebook are creating new web walled gardens adding missing ingredients on top of HTML5 enabling technology 66 Software foundations Developer ecosystem Monetisation Distribution Retailing application runtime, developer tool-chain, & platform APIs Developers building and publishing apps around the software foundation micropayments, ad networks and settlement app distribution to end users through SaaS or devices app discovery, promotion, placement, search & recommendations HTML5 with Chrome API web developers Google Wallet PC, Mac, Android, iOS, Chrome OS Chrome Web Store HTML5 with Facebook APIs web, Flash and mobile developers Facebook Credits 1B+ Facebook users Facebook app recommendations HTML5 browsers (fragmentation) web developers ? ? ? HTML5 may end up a yet another walled garden despite the promise of openness
  • 67.
    Copyright VisionMobile 2014 Browsersdon’t deliver on cross-platform capabilities Only 37% of Android apps can be developed for a mobile browser na#ve&JavaScript&API,& 98%& Web7to7na#ve& converter,&63%& Web&wrapper,&49%& Mobile&browser,&37%& Percentage of apps in Google Play US store that can be implemented with each HTML5 route to market, i.e that utilise APIs available through that HTML5 route to market alone.
  • 68.
    Copyright VisionMobile 2014 Browsersare heavily fragmented across platforms HTML5 features and APIs vary widely across browsers 68 Source: html5test.com, April 2014. 0" 100" 200" 300" 400" 500" 600" BlackBerry 10.2 Chrome 33 Opera Mobile 16 Firefox Mobile 27 Jolla Sailfish Android 4.4 Nokia X » iOS 7.0 Windows Phone 8.1 Sony Playstation 4 Google TV (Chrome 11) Amazon Kindle HTML5 test score
  • 69.
    Copyright VisionMobile 2014 69 APIiOS Safari Android Browser Windows Phone IE Blackberry Browser Opera Mobile Chrome Firefox Audio settings - - - - - - - Battery - - - - - - Since v.11.0+ Bluetooth - - - - - - - Calendar - - - - - - - Camera - - - 10.0+ 11.5+ - Since v.15.0+ Compass 4.2+ 3.0+ - 10.0+ 12.0+ Yes 6.0+ Contacts - - - - - - - Filesystem 6.0+ 3.0+ 8.0+ 10.0+ 11.10+ 18.0+ 10.0+ Geolocation 3.0+ 2.1+ - 6.0+ 10.60+ Yes 4.0+ Mic - - - 10.0+ 11.5+ - 15.0+ Motion 4.2+ 3.0+ - 10.0+ 12.0+ Yes 6.0+ Network Yes 2.2+ - Yes Yes Yes 12.0+ NFC - - - - - - - Notifications - - - 10.0+ - Yes Yes Power management - - - - - - - SMS - - - - - - - Telephony - - - - - - - Vibration - - - - - - 11.0+ WiFi - - - - - - - Web app APIS are heavily fragmented across platforms HTML5 API implementation varies widely across browsers Source: VisionMobile
  • 70.
    Copyright VisionMobile 2014 Fornow, HTML5 apps offer a trade-off to native apps 70
  • 71.
    Copyright VisionMobile 2014 Webvs native trade-Offs for app development native smartphone apps hybrid apps web apps Ease of discovery through native app stores through native app stores search or referrals (Facebook, twitter, other) Reach fragmented across multiple platforms fragmented across multiple platforms works on almost all devices Depth of experience full access to platform resources access to native APIs at the expense of a less capable UI limited by browser sandbox Customer ownership and terms Apple App Store enforces onerous terms Apple App Store enforces onerous terms complete ownership of customer Engagement and recurring use notifications and home screen icon notifications and home screen icon no notifications, difficult to get user to save the link Monetisation potential high on iOS, lower on Android high on iOS, lower on Android no accepted method of payment Ease of cross platform development developed separately for each platform, with some code reuse using CPTs significant reuse of UI components for some apps significant fragmentation for advanced apps 71
  • 72.
    Copyright VisionMobile 2014 Butthe future of HTML5 Is beyond the browser 72
  • 73.
    Copyright VisionMobile 2014 HTML5Is the 3rd choice AMONG MOBILE DEVELOPERS
  • 74.
    Copyright VisionMobile 2014 39%of HTML5 Mobile devs are going beyond the browser Overall five HTML5 technology routes to market to choose from *source: Developer Economics Q3 2013
  • 75.
    Copyright VisionMobile 2014 Architectural frameworks CSS UIframeworks JavaScript UI frameworks Web wrappers Web-to-Native Converters Native Javascript APIs 2D Gaming Engines 3D Gaming Engines A flurry of tools to support off-browser web apps Hundreds of tools to make that possible
  • 76.
    Copyright VisionMobile 2014 Knowledge.Passion. Innovation. Andreas Constantinou CEO & Principal Analyst andreas@visionmobile.com +44 20 8123 1738 Track developer trends Learn DIGITAL Business Models Master the success patterns of ecosystem leaders and design effective digital business models Developer Economics 2014 6th ed. Talk to us Work With us If you could speak to 10,000 app developers, what would you ask them?