Mobile Megatrends 2014

SlashData
SlashDataResearch Director at SlashData
Copyright VisionMobile 2014
Updated: 26 June 2014
Copyright VisionMobile 2014
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© VisionMobile 2012. Some rights reserved.VisionMobile.com/Strategy
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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?
1 of 76

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Mobile Megatrends 2014

  • 2. 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.
  • 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 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
  • 5. Copyright VisionMobile 20145 APPS: the tip of the iceberg
  • 6. Copyright VisionMobile 2014 6 1,000,000 apps ARE just the tip of the iceberg fundamental business model shifts are taking shape
  • 7. 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
  • 8. 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
  • 9. 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.
  • 10. 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
  • 11. 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
  • 12. Copyright VisionMobile 2014 MOBILE ECOSYSTEMS: DON’T COME LATE TO THE GAME
  • 13. 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
  • 14. Copyright VisionMobile 2014 iOS dominates developer revenues Median revenue per app, per month (n=2,425)* Source: Developer Economics Q1 2014
  • 15. Copyright VisionMobile 2014 15 Below the iceberg.. The Apple and Google ecosystems Are 100+ billion dollar empires
  • 16. 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
  • 17. 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
  • 18. Copyright VisionMobile 2014 18 How did Apple, Google built ecosystem empires? What can history teach us?
  • 19. 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
  • 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 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>…
  • 22. Copyright VisionMobile 2014 ecosystem economics resulted in a duopoly 22
  • 23. 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
  • 24. Copyright VisionMobile 2014 24 What’s the 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 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:
  • 27. Copyright VisionMobile 2014 Predictably, Many have tried, none have succeeded. 27
  • 28. 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
  • 29. Copyright VisionMobile 2014 29 How do 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 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
  • 32. 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 ?
  • 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 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
  • 36. 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”
  • 37. 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
  • 38. 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
  • 39. 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
  • 40. 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
  • 41. 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
  • 42. 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
  • 43. Copyright VisionMobile 2014 OTT SQUARED: MESSAGING APPS ARE THE NEW PLATFORMS
  • 44. Copyright VisionMobile 2014 44 The dust of the platform wars has settled Time for a new form of ecosystem wars
  • 45. 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 ? *
  • 46. Copyright VisionMobile 2014 46 Messaging ecosystems: - mobile-first - twice over-the-top telcos platforms messaging
  • 47. 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
  • 48. 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
  • 49. 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
  • 50. 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
  • 51. 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
  • 52. Copyright VisionMobile 2014 HANDSET BUSINESS REBOOT: HARDWARE IS THE NEW DISTRIBUTION
  • 53. Copyright VisionMobile 2014 The platform duopoly is here to stay How has the handset business been affected? 53
  • 54. Copyright VisionMobile 2014 handset profits Are owned by Apple & Samsung. Why? The duopoly of profit share in the handset industry 54
  • 55. Copyright VisionMobile 2014 In 2007/8 iPhone and Android created two disruptions 55
  • 56. 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
  • 57. Copyright VisionMobile 2014 What’s next for the handset business? 57
  • 58. 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
  • 59. 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
  • 60. Copyright VisionMobile 2014 THE FUTURE OF HTML5: BEYOND THE BROWSER
  • 61. 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* ✔
  • 62. Copyright VisionMobile 2014 Is the future of HTML5 bright? 62
  • 63. Copyright VisionMobile 2014 Is the future of HTML5 bright? It is, but NOT for the reasons you would expect 63
  • 64. 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 ?
  • 65. 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
  • 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 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.
  • 68. 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
  • 69. 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
  • 70. Copyright VisionMobile 2014 For now, HTML5 apps offer a trade-off to native apps 70
  • 71. 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
  • 72. Copyright VisionMobile 2014 But the future of HTML5 Is beyond the browser 72
  • 73. Copyright VisionMobile 2014 HTML5 Is 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 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
  • 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?