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VisionMobile : distilling market noise into market sense

       Mobile Megatrends 2011
                                                                     updated 10 Feb 2011
Page                                                              Copyright VisionMobile 2011
Knowledge. Passion. Innovation.




                                                                                        Andreas Constantinou
                                                                                          Michael Vakulenko
                                                                                          Matos Kapetanakis
                                                                                                    (c) VisionMobile 2011



       Licensed under Creative Commons Attribution 3.0 Unported License (http://www.creativecommons.org/licenses/by/3.0)
       You are free to Share or Remix any part of this work as long as you attribute this work to VisionMobile (www.visionmobile.com).

Page                                                                                                     Copyright VisionMobile 2011
VisionMobile research
   Distilling market noise into market sense
   Research                             Training                                Market maps                           Strategy definition
   competitive analysis,                open source economics,                  Competitive landscape maps of         strategy design, ecosystem
   commissioned research,               Android commercials,                    the mobile industry                   positioning, product definition
   company due diligence                mobile industry dynamics

                 Developer
                 Economics 2010:
                 Everything on mobile
                 development




   Active Idle Screen                   Open Source Chessboard
   Who will own the                     business impacts of mobile open                                                Mobile Megatrends series
                                        source, the competitive landscape and   Mobile Industry Atlas, 3rd ed.
   screen?                                                                      1,100+ companies, 69 market sectors
                                        how to design your company strategy


                                                                                                                      Top-100 analyst blog
                                                                                                                      4,000+ subscribers
                                                                                                                      20,000+ monthly uniques
                                                                                                                      90% mobile industry insiders
                GPLv2 vs GPLv3
                White Paper


                                        The Android Game Plan
                                        the commercial mechanics                100 million club
                                        behind Android and how                  tracking successful businesses
                                        Google runs the show                    in mobile




Page                                                                                                                  Copyright VisionMobile 2011
Trusted by industry brands
       Clients




                     selected
          VisionMobile clients
                  2008-2010

Page                                      Copyright VisionMobile 2011
                                    Copyright VisionMobile 2007-2010
Mobile Megatrends 2011



       The DELL-ification of mobile                      Software: new era for telecoms                   Experience ecosystems
       How the mobile handset landscape is               and the new rules for innovation                 how telecoms + internet convergence
       becoming much like the PC                                                                          is leading to the next megabrands




       Apps are the new web                              open + closed                                    Developers, developers
       Why apps are the new information                  use of open + closed strategies to               the engine behind telecoms innovation
       paradigm for web 3.0                              commoditise + protect




       Communities: a new currency                       Stuck in the telecoms age
       Communities will provide the main                 how carriers are stuck in the telecoms age and
       differentiation above price, design and content    how to compete
Page                                                                                                           Copyright VisionMobile 2011
The DELL-ification of mobile
       How the mobile handset market is approaching PC-like commoditisation




Page                                                         Copyright VisionMobile 2011
Internet players agenda drive top-5 OEMs
        and OEM market is fragmenting, approaching the PC market



         2000                2002               2004	
     2006	
     2008	
               Q3	
  2010	
  




       Market share of top-5 OEMs (source: Gartner)

           67%               73%                72%         81%        80%                      61%

Page                                                                             Copyright VisionMobile 2011
Profits are driven by end-to-end players
       and away from the old top-5 OEM league




                                                source: Deutsche Bank


Page                                             Copyright VisionMobile 2011
OEM strategies: volume vs profit
                                                    = strategy
       $ profit per unit




                                                 data source: Deutsche Bank
                           2010 market share %
Page                                              Copyright VisionMobile 2011
OEMs at different stages of integration
        Three roles for handset manufacturers across the double helix

       Horizontal player structure                                                          Vertical player structure
                                                                  Leaders: new product experiences
                                                                  and enviable margins




       Assemblers
       razon-thin
       margins



                          wannabee
                          innovators
                                       wannabee
                                       leaders




                                                  Innovators: incremental innovation
                                                  strong brand, performance, good looks
                                                  and services


Page                                                                                          Copyright VisionMobile 2011
Lead, innovate or assemble
       The new role models for OEMs in the post-Android era


       1. Assemblers: Razor-thin margins
       10s of assemblers use Android to deliver ready-to-market smartphones with complete service and apps
       ecosystem competing head-to-head with major OEMs. iPhone me-too experience at $100 retail.

       2. Leaders: unique product experiences
       Manufacturers who can masterfully integrate hardware + software + services + industrial design into new
       product experiences - from phones and tablets to TVs. Unique product experiences at $500 retail.

       3. Innovators: incremental innovation
       The old top-5 OEM guard. Differentiation is on strong brand, performance, good looks and services.

       4. Mass producers: catering to developing markets                               ?
       Mass producers rely on huge economies of scale to break even at $50, but make up nearly 50% of unit sales
       in the mobile handset market.




Page                                                                                    Copyright VisionMobile 2011
The innovators are squeezed in

                            Revenue pyramid



          performance
          pressure                            Leaders:
                                              new product experiences




                                              Innovators:
                                              incremental innovation




                                              Assemblers:
          price                               razor-thin margins
          pressure




Page                                            Copyright VisionMobile 2011
DELLification in 2015
       closely modelling the PC business

       Profit pyramid    Revenue pyramid                                                 Present-day example



                                                                  Leaders
                                                                  Role model: Apple
                            €37.5B         5% @ $500


                                                                  Innovators
                                                                  Role model: Samsung
                                     €90B          25% @ $250


                                                                  Assemblers
                                                                  Role model: Dell

                                            €56B         25% @ $100
             s
           ce




                                                                  Mass producers
         vi




                                                                  Role model: Nokia                                 ?
       de




                                                    €37.5B      45% @ $50
    B
1.5




                         $200B
Page                                                                                  Copyright VisionMobile 2011
OEM + Android: winners and losers

       The winners:                                          The losers:
       low cost assemblers                                   ‘old guard’ OEMs
       Cost structure optimised for razor-thin margins       Cost structure requires high-margins
       Android is a long-term opportunity for global reach   Android is a short-term life support




                               No Name



Page                                                                                     Copyright VisionMobile 2011
The new world: Innovate or die
       The new rules of the handset industry


       1. Software and hardware is commodity
       - Software is a loss-leader, monetised by ads (Google), hardware (Apple), content (Amazon), services (RIM)
       - Software is provided a la carte and pre-integrated by chipset providers (e.g. Qualcomm, MediaTek)



       2. Points of differentiation rapidly disappearing
       - Android provides out-of-the-box, complete ecosystems; OEMs compete on equal footing to assemblers


       3. The search for innovation is on
       OEMs are search for new models of innovation beyond price, brand, performance and marketing:
       - communities BlackBerry messaging or facebook deals
       - made-to-order handsets; copying DELL’s PC model
       - white label services for carriers where OEMs trade service revenues for carrier subsidies
       - micro-retailing ‘slotting’ promos across distribution regions and channels
Page                                                                                       Copyright VisionMobile 2011
Software: the new era for telecoms
            and the new rules for innovation




   image source: maschinenraum / Flickr
Page                                           Copyright VisionMobile 2011
$$$ and software DNA are key for platforms
       20 dead platforms in the last 10 years
       Internet




                                             Danger OS
                                                                                                            Android                  Chrome OS




                                                     SavaJe OS
       PC




                   Trolltech $30M
                                                                  A la Mobile
                                                                                                   iOS


                   Nokia GEOS                   IXI Mobile       Palm 5/6         Azingo

                                                 Motorola L-J    Comneon Apoxi      Access ALP
       Mobile




                                                       e-SIM      Intrinsyc OS     OpenWave MIDAS

                                                                 Sasken Aria       Mizi Prizm

                                                                 SKY-MAP         MOAP
                                                         UIQ      TTPCom Ajar      OpenMoko




                          2000       2001       2002                                        2007     2008      2009         2010
Page              = dead end        bubble size = company revenues                                                    Copyright VisionMobile 2011
The battle for mass-market smartphone reach

                                                  OEM internal                                          licensable
                             €600+
                                     computers
                                     mobile




                             €400
       device retail price




                                     connected




                                                   Nokia Series 40
                                     phones




                                                    Samsung SHP
                             €100                         LG Wise


                              €50
                                     phones
                                     voice




                                                                         Note: OSes omitted: Myriad, Mediatek OS, Mango (Qualcomm), Koretide Elastos



                                      14 out of 15 platforms are monetised indirectly by complementary products
                                      11 out of 15 platforms have developer ecosystems or industry consortia built around them
Page                                                                                                                      Copyright VisionMobile 2011
The battle for ecosystem completeness

                               Carriers           Nokia   RIM   Apple   Qualcomm    Google               facebook

       Components

       Social networks


       Cloud services


       Developer ecosystem


       Network


       User interface


       Operating system


       Hardware IP


       Manufacturing


                   denotes where vendor started
Page                                                                               Copyright VisionMobile 2011
Huge gap between telecoms & software worlds




                                                                 success as
                                                                 defined in
                                                                 2010
   success as
   defined in
   2005




Page                                     Copyright VisionMobile 2011
software: turning telecoms upside down
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                                                                                !"!#                      6>*E+8.#            $&%''#
                                                             internalised

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                                                                                                                                                    dual
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                                                                                                                                                 personality

                                   back to                "&(''#                                            S,81A#            (&'''#
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                                 square zero                                                                                             back to
                                                                                                          U+.7-F1#
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            %&(''#      %&'''#        )&(''#     )&'''#       "&(''#   "&'''#    (''#           '#                      '#             ('&'''#       "''&'''#    "('&'''#   )''&'''#    )('&'''#     %''&'''#

                =-:>?+@A0#B#C+1+-.D-E+,3#)'"'#
                FFFG4+1+-.*-E+,3G5-*#




Page                                                                                                                                                                                   Copyright VisionMobile 2011
Huge gap between telecoms & software worlds
                               Telecoms world                  Software world

        Success factor         Installed base                  Number of apps

        Speed of innovation    1 OS version every 2 years      5 OS versions/year

        Time to market         1-2 years                       1-2 weeks

        Type of services       comms-centric                   catering to entire needs portfolio

        Risk-taking            predictability / de-risking     entrepreneurship / uncertainty

        Access to innovation   100s of close partners          100,000s of developers

        Business model         B2B licensing                   B2C sales/ads/in-app sales

        Channel to market      voice, text and web             smartphones

        Discovery              On deck / on device             App store

        First step             “we need to sign an NDA”        “we need to download the SDK”

        Process                Waterfall: RFI, RFQ, deliver,   Agile: add feature, build, test,
                               QA                              repeat
        Attitude               “developers will come to us”    “we need to go to developers”
Page                                                                             Copyright VisionMobile 2011
The new rules of innovation
       1. Speed of innovation defined by internet companies, not hardware / networks
       - Companies from the Internet domain (Apple, Google, Facebook) out-innovate companies from the mobile
       industry domain (Nokia, Samsung, Sun) and the networks domain (Vodafone, China Mobile)
       - Internet players are at top of the food chain and are becoming increasingly assertive


       2. Innovation requires new competence and regional presence
       - California is the center for software and services innovation. Japan/Korea is the center of CE innovation.
       - You can’t innovate in software unless you have DNA in software and presence in those regions


       3. If you can’t innovate in software, you will be replaced
       - The evolutionary game has just accelerated 10-fold.
       - Players who cannot evolve at software speeds will eventually be replaced by alternatives
       (e.g. software has superseded carrier efforts in location, billing and distribution)


Page                                                                                          Copyright VisionMobile 2011
Experience Ecosystems
       telecoms + internet convergence is leading to experience ecosystems




Page                                                            Copyright VisionMobile 2011
telecoms + internet + PC + consumer electronics = ?

        our definition of convergence has changed

       2003	
                       2010	
                    2015	
  




                                                              ?	
  
Page                                                               Copyright VisionMobile 2011
Is                        the future of convergence?


       No	
  more.                                                                 Leaders


                                                                                   Innovators


       -­‐	
  Innovators	
  are	
  in	
  a	
  price	
  war                         Assemblers


       -­‐	
  Android	
  is	
  making	
  smart	
  devices	
  possible

       -­‐	
  ARM	
  becoming	
  defacto	
  in	
  CE	
  devices

       -­‐	
  Sensors	
  +	
  	
  form	
  factors	
  =	
  diverse	
  experiences

       -­‐	
  Developer	
  ecosystem	
  is	
  part	
  of	
  core	
  experience



Page                                                                                            Copyright VisionMobile 2011
Convergence is about experience roaming
       Convergence is about having an experience that roams consistently across ‘screens’




                               experience roaming                          across screens

                                Social circle
                                Developer ecosystem

       convergence =
                                User data roaming
                                Service roaming                   x
                                User interaction design
                                Industrial design
                                Brand




Page                                                                                  Copyright VisionMobile 2011
Apple is the poster child of experience roaming
       Apple leads by example, by delivering a consistent experience across divers screens




        Experience roaming                                                  Across screens

        Social circle                   Ping                     iPod
        Apps ecosystem                  App Store                iPhone
        User data roaming               MobileMe                 iPad

        Service roaming                 iTunes, AirPlay          Mac

        User interaction design         iOS                      Apple TV

        Industrial design               Apple                   ?

        Brand                           Apple




Page                                                                                   Copyright VisionMobile 2011
The next battle is for Experience Ecosystems
       Experience Ecosystems create major exit barriers and drive cross-sales; they are therefore a
       sustainable strategy for Innovator OEMs needing to survive margin pressures.




                network                                      network
                 effects                                      effects
Page                                                                                    Copyright VisionMobile 2011
the future of convergence is experience roaming
        convergence = screens + experience



       2003	
                               2010	
            2015	
  




       the future of convergence is in a single experience + developer ecosystem
       powered by ARM hardware across mobile, PC & embedded

Page                                                               Copyright VisionMobile 2011
Apps are the new web
       Why apps are the new information paradigm for web 3.0




Page                                                           Copyright VisionMobile 2011
Everyone wants their own app store
         but very few are above the radar         = number of apps when above 5,000


       OS vendors




       OEMs                    Carriers     Independent




        Source: Distimo
Page                                                   Copyright VisionMobile 2011
App stores are about control, not $$$
        App Stores are a control point for:                                      and an opportunity for:
        - access to applications
        e.g. Skype cannot have a video calling app on the iPhone

        - distribution of applications
        e.g Google uses Android Market to enforce compliance requirements
        on Android handsets

        - billing & monetisation of applications
        an opportunity to extract a commission in the form of revenue share
        for paid apps and in-app purchases

        - retailing & discovery of applications
        an opportunity to sell ads and personalisation services to developers,
        plus differentiate with content curation

        - consumer insights
        an opportunity to optimise device and service targeting

Page                                                                                 Copyright VisionMobile 2011
Building an app store is not easy




Page                                       Copyright VisionMobile 2011
Why is building an app store so hard?
       App stores need 5 genes from 5 species across the value chain

   Genes




   Species

               platform        mobile      handset     platform brands and
             companies     carriers &       OEMs     companies     retailers
                            payment
                             brokers




Page                                                               Copyright VisionMobile 2011
3 pillars to the app store evolution 2011-13	
       1. Merchandising: App stores will take retailing where it’s never been before
       - app retailing is bottleneck, resulting in price erosion as developers drop prices to bubble up to the top-25.
       -This will drive retail sophistication: App Malls (shops-in-shop), bundles, time-limited offers, friend
       endorsements, inventory micro-targeting, gift/beg options, second-hand apps, offers tied to carriers, etc



       2. Diversity: App Stores will cater to 100s of niche segments;
       Genre-centric stores (Games store), lifestyle-centric stores (e.g. sports or clothes brands), specialist content (e.g.
       adult or enterprise), region-centric stores (e.g. Seattle apps)



       3. Low barriers: App Malls will enable low-cost shops-in-shop setups
       SDP vendors will offer the infrastructure, catalogue and recommendations technology allowing wannabe
       app retailers to be setup at very low cost, with proven revenue models (setup fee + rent + sales commission)




Page                                                                                              Copyright VisionMobile 2011
                                                                                            Copyright VisionMobile 2007-2010
Apps succeed where the web failed
       - 2007: voice, text and web was main channel for services
       the old school of mobile services: voice, texting, ringtones, televoting, MMS, Mobile TV,..

       - 2011: 500,000+ applications on smartphones
       - Apps are the single biggest digital channel since the web
       - There are apps springing up everywhere there is a website
       for every website, for every brand and for every corporate intranet

       - Apps succeeded where cross-platform frameworks failed
       Mobile web pages and widgets are poor alternatives to apps
       Java and Flash failed to pick up where web left off

       - The web is now the lowest common denominator across screens
       across devices, the living room, the PC and the car




Page                                                                                    Copyright VisionMobile 2011
what is are apps?
   apps are a new information paradigm
           For..             Mobile apps            Web pages

           packaging         Self-contained         Set of pages

           personalising     access to location,    explicitly typed info only
                             contacts
           discovering       app store              text results or URL

           monetising        micropayments          ads

           interacting       touch, sensors, keys   mouse, keys

           measuring         downloads economy      attention economy


            .. information



Page                                                               Copyright VisionMobile 2011
Web 3.0 will adopt the app paradigm
       Web apps will proliferate in mobile handsets driven by
       - web benefactors Google, Microsoft, Apple
       - technology commoditisation; WebKit and V8;
       - consistent technology adoption WebKit on >350M handsets up to June 2010
       - platform vendors seeking to modernise their developer platforms
       e.g. WebOS vs Palm OS, RIM WebWorks vs BlackBerry OS 6, Nokia WRT. BREW to follow?

       - and “buy in” to a developer community and a “hype-ready” platform
       building a developer community is extremely expensive. It comes for free with web technologies

       - the need to tap into new developer segments from the web domain
       1.5 million web developers most of which are new to mobile

       - The need to reduce development costs for cross-screen apps
       mobile, tablet, PC, TV, consumer electronics, automotive, ..



Page                                                                                  Copyright VisionMobile 2011
Google under threat in web 3.0
       Google rose due to openness, info chaos and lack of monetisation
       - the open (crawlable) web,
       - the lack of information semantics (needing Pagerank to create order out of chaos)
       - the lack of a micropayments mechanism on the web (increasing demand for ads)



       Google is now threatened from web silos, app stores and micropayments
       - closed web silos (Facebook and Apple’s app store)
       - semantic information discovery in app stores (reducing greatly the search complexity)
       - app micropayments & NFC (reducing the need for ads)


       To survive, Google is trying to outrun the market trends
       - launching is own walled gardens (Orkut and Buzz), its own app stores (Android Market and Chrome Web
           Store) and integrating a payments technology (NFC) within Android handsets



Page                                                                                    Copyright VisionMobile 2011
Open + closed: two sides of the same coin
       use of open + closed strategies to commoditise + protect




Page                                                  Copyright VisionMobile 2011
Open is the new closed

         - Android, MeeGo, Webkit, Qt, Maemo, Eclipse, Linux all use open source
         all projects use an open source license for the public source code

         - Open source licenses are standardised and well understood
         3 licenses used most often in mobile projects (GPL, LGPL, APL)

         - But an open source license is only the tip of the iceberg
         a license determines access to the project (e.g. Android public source code)

         - Governance is what determines the rules of the game
         the governance model determines access and influence into the product (e.g. Android handsets)

         - Open licenses are used with closed governance
         many projects restrict governance while maintaining an open source license




Page                                                                                    Copyright VisionMobile 2011
Closed governance is used to control
       clever use of governance models can be used to control products based on OSS
                                                                                                      license type



                                                                                                      dual license
                                                                                                      (commercial + copyleft)
                                                                    Qt


                                                                                                      strong copyleft
                                                                                                      (GPL)
                             Linux kernel


                                                                                                      weak copyleft
                                                                         Foundation                   (LGPL, MPL, EPL,..)
                Foundation
                                       WebKit


                                                                                                      permissive
                                                                                                      (APL, BSD, MIT, ...)
                                                                                       Android




               open community                   managed community                      autocratic
                                                                                      community
                                        governance model (simplified)
Page                                                                                                Copyright VisionMobile 2011
What are the criteria for ‘openness’ ?
        Access
        •   Is source code available to all without discrimination?
        •   Are project mailing lists, forums, bug-tracking databases and developer tools available to all?
        •   Is the project roadmap available publicly?


        Development
        •   Are decision-making mechanisms transparent and accessible?
        •   Is the code contribution and acceptance process clear and accessible?
        •   Are the requirements to become a committer clear and equitable?
        •   Can you identify who the committers to the project are?
        •   Are the requirements to become a reviewer clear and equitable?
        •   Can you identify who the reviews to the project are?
        •   Does the contribution license require copyright assignment (vs. a copyright license)


        Derivatives
        •   Are trademarks used to control compliance and use of the project?
        •   Are go-to-market channels for Application Derivatives constrained?


        Community
        •   Do different community members have different rights?


Page                                                                                                          Copyright VisionMobile 2011
Openness to commoditise product complements
        beyond open source, openness is used as a business strategy to commoditise
        product complements while protecting core assets

                                                    Windows
                               iOS       Android               BlackBerry             Symbian
                                                     Phone


       Bundled services      Closed      Open       Closed      Closed                  Open



       App developers        Curated     Open       Curated    Curated                Curated



       Device vendor         Closed      Open        Open       Closed                  Open



       Software platform     Closed      Closed     Closed      Closed                Curated



       Hardware platform     Closed     Curated     Closed      Closed                  Open



Page                                                                Copyright VisionMobile 2011
Developers, Developers, Developers
       the engine behind telecoms innovation




Page                                           Copyright VisionMobile 2011
Based on
                                                    Mobile Developer Economics 2010

                                                                 - Analysis of the developer experience from design to monetisation
       Free download: www.Developer Economics.com




                                                                 - Across all 8 major platforms




                                                                 - Based on a sample of 401 mobile app developers
                                                                 - With significant experience in mobile development
                                                                 More than 60% of respondents have 3+ years of experience in app development.
                                                                 Nearly 30% have won one or more developer awards




Page                                                                                                             Copyright VisionMobile 2011
                                                                                                                  Copyright VisionMobile 2007-10
The diverse world of software developers
       With different business models and incentives



                                                content publishers
                  Internet service
                     providers
                                                                                system
                                                                              integrators




         mobile games
          developers


                                                                                     software
                                                                                      houses

                   independent
                    developers                                apps development
                                     software integration         agencies
                                           services
Page                                                                        Copyright VisionMobile 2011
Android has biggest mindshare




                                                                       “
                                                                           Android is better than other
       -Android has biggest mindshare                                      platforms in terms of tools,
       - Symbian/Java down from #1/#2 in 2008                              platform features, and it’s
                                                                           easier to stand out as
       - Most developers work on multiple platforms                        developer.”
       The average is 2.8 platforms, across sample of 401 developers       Android developer
Page                                                                                 Copyright VisionMobile 2011
Android 3x easier to learn than Symbian




Page                                   Copyright VisionMobile 2011
Developers becoming market savvy




                                                                “
                                                                       technical considerations are
       Commercial above technical reasoning                            irrelevant, the choice of
       -Large market penetration (70% of respondents) is               platform is ALWAYS
       more important than ability to code & prototype quickly (45%)   marketing-driven.”
       - Revenue potential (55%) is more relevant than                 Mobile web developer

       good documentation (35%)
Page                                                                                   Copyright VisionMobile 2011
App Stores reduce time-to-market by 3x




                              “
                                   App Stores minimised
                                   time-to-shelf from 68 days
                                   to 22 days and halved
                                   time-to-payment




Page                                       Copyright VisionMobile 2011
The app developer journey
       The many facets of the app developer experience

                              - platform hype                                - developer certification                           - analytics & sales tracking
                              - addressable market                           - app signing, certification & approval             - user ratings
                              (devices/regions)                              - regional testing & sandbox networks               - user support
                              - platform features                            - beta testing with peers and end users             - application updates
                              - learning curve & coding effort               - localisation frameworks                           - cross-selling
                              - conferences & competitions                   - packaging and SKU management tools                - privacy compliance



                      *                         *                                                                            *

                                                             develop,
       application               platform                                             market                  retailing &                      in-life
                                                             debug &
        planning                 selection                                           readiness               monetisation                 application use
                                                             support




   - audience targeting                                - IDEs, SDKs and documentation                    - go-to-market channels
   - concept design                                    - UI tools                                        - promotional tools
   - feature design                                    - emulator and on-target debugging                - co-marketing programs
   - prototyping tools                                 - community & official forums/websites            - revenue models
   - market research                                   - profiling tools                                 - billing & settlement
   - focus groups                                      - test frameworks
                                                       - porting tools
  *: mostly applicable to developers who sell apps     - premium technical support
Page                                                                                                                   Copyright VisionMobile 2011
Key developer pain points
       based on Developer Economics 2010 research




                                App submission & certification                                Application marketing
                         application certification is expensive, approval takes too           lack of effective marketing channels to increase
                                                  long, and signing is complicated            app exposure and discovery




                                                          develop,
       application                platform                                         market                 retailing &                    in-life
                                                          debug &
        planning                  selection                                       readiness              monetisation               application use
                                                          support




                     most vendor effort goes here

                                                               Localisation                   Dubious long-tail economics
                                   lack of localised apps for most regions, lack of           average RoI through an app store is much less than
                                                   localisation tools for developers          the cost of producing the app




Page                                                                                                             Copyright VisionMobile 2011
Are you a mobile developer?
       Want to share your own views on app development?

       Join in Developer Economics 2011.
       Have your say on the hottest issues in app development and win a $1,500 Amazon voucher.


       www.visionmobile.com/dev
       open until end March 2011.




                                                                                                           created by




                                                                                                            sponsored by


Page                                                                                    Copyright VisionMobile 2011
Communities: the new currency




Page                                   Copyright VisionMobile 2011
Communities are the new frontier
       Building a brand, product or technology is science
       Building a community is a form of art
       Whether it’s a consumer, enterprise or a developer community
       New techniques are emerging; game mechanics and religion engineering




Page                                                          Copyright VisionMobile 2011
you can buy an audience but..
       you can’t buy a community
       an audience is people who interact with a service.
       a community is a network of people who interact amongst them
       you can buy an audience (eyeballs or subscribers)
       but you can’t buy a community (network interactions)




Page                                                          Copyright VisionMobile 2011
Communities are the new differentiator
       Service brands, OEMs and carriers have tried to create own communities
       But found that community creation needs a very different rulebook
       And ended up partnering with communities (Facebook, Twitter, etc)
       Exclusive deals with communities will be the new differentiator above
       price, design and premium content.




Page                                                            Copyright VisionMobile 2011
Communities are the new currency
       Zynga's CityVille grew to 100 million users in just 43 days
       Facebook is a platform between 500M+ users and 2.5M+ developers
       Facebook is #1 social network across the world except China, Russia, Brazil, Japan
       Skype: 8 million paid users and 25% of global international calling traffic




Page                                                                          Copyright VisionMobile 2011
Carriers: stuck in the telecoms age
       and how to compete




Page                                     Copyright VisionMobile 2011
Carriers in the midst of an identity crisis
       Carriers are telecoms-age species in a software age
       - Carriers have grown in the telecoms age; this affects their ability to adapt and their speed of innovation


       ..In an identity crisis
       - Carriers are still undecided as to whether they want to be an access company (e.g. LightSquared, KPN), a
       supermarket (Verizon), a shelf (Vodafone) or a broker (Three). They want to be everything to everyone.


       Losing battle after battle for control points
       - non-communication needs (apps), location (GPS), billing (app stores), service retailing & discovery (app
       stores), authentication (Twitter/facebook), mobile termination (Google C2DM), subscriber activation
       (iPhone soft SIM?)


       With no innovation in their core business
       - voice, texting and SIM cards have seen no innovation in the last decade.
Page                                                                                        Copyright VisionMobile 2011
Taking baby steps in the software age
       Carriers don’t know how to use software
       - Carriers software efforts are mediocre; see Vodafone VSCL, VFX and widgets
       - Using WAC to profit from apps, when Apple/Google are not profiting from apps


       Carriers are accelerating the PC-like commoditisation of handsets
       - skewing the natural OEM selection process (by ranging handsets on a OS basis) and forcing
       Innovator OEMs to struggle while nimble assemblers thrive
       - The $100 smartphone means loss of subsidy power for carriers, therefore loss of differentiation


       Carriers are funding their antagonists
       - most Android projects 2007-2009 were carrier-funded.
       - Android and iPhone are playing AT&T and Verizon like puppets on strings; e.g. Verizon now
       heavily marketing iPhone, while AT&T heavily pushing Android.



Page                                                                                      Copyright VisionMobile 2011
The real value of carriers
       The real value of carriers is still untapped


       1. Leverage apps to drive core business, not generate revenues
       - Deliver voice and messaging apps that build on core network business, at 10x deployment speeds
       - quit pushing for higher communications ARPU, but leverage apps to extent revenues across untapped
       segments of consumer spending portfolio (transport, health, food, housing, etc)
       - expose network APIs that drive lock-in to core business, not APIs that generate revenue
       - leverage apps to drive premium customer acquisition, customer retention and increase switching costs


       2. Divide and conquer among app stores
       - Don’t create new app stores (WAC) but divide and conquer among existing app stores
       - Create shop fronts for app retailing and promotions
       - Monetise by helping developers target apps to the right demographic in real time
       - Offer recommendation services by tapping into users’ social graph
Page                                                                                        Copyright VisionMobile 2011
The real value of carriers
       3. Increase power over OEM suppliers
       - Shift handset purchasing model to a performance based per-device bonus based on hitting ARPU,
       messaging and churn targets; leverage on network analytics.
       - Resist a price war on handsets by favouring an oligopoly of traditional suppliers


       4. Become the VISA of mobile
       - aggressively grow carrier billing usage via in-app payments
       - provide micro-billing at VISA-like rates activated via SMS


       5. Invest in retail differentiation
       - as devices commoditise, retail will become a stronger control point for customer acquisition
       - Invest in retail differentiation, for example visual service retailing, bundling services/apps in handsets,
       deploying handset PoS configurators and carrying out PoS customer segmentation analysis.



Page                                                                                         Copyright VisionMobile 2011
The real value of carriers
       6. Customer experience management
       - Identify influencers and improve lifetime value metrics
       - Understand customer behaviour and enable behavioural targeting by third parties


       7. Drive wholesale business beyond mobile
       - Drive wholesale model in CE business (ala Kindle) to de-risk and differentiate bandwidth pricing


       8. Handset customisation: focus on merchandising and addressbook
       - focus on a single app (active idle screen) to be provisioned on all smartphones + some Java handsets
       - idle screen app can encompass service merchandising/promos and addressbook functionality
       - leave all other apps to 3rd parties!




Page                                                                                      Copyright VisionMobile 2011
a note of caution

       is WAC repeating history mistakes?
       - WAC is a framework for creating carrier-owned app stores
           even if carriers don’t have most of the genes to create their own app store
       -   and making money from apps
           when Apple/Google use apps as a complementary business, not as a revenue generator

       - Needs software agility, but moves with telecoms rigidity
           12 months since announcement and no distribution channel, no marketplace, no billing
           Telecoms rigidity and ‘design by committee’ is the key reason why LiMo failed
       - Smartphone focus, but feature phone opportunity
           Smartphone focus (Opera, S60, iPhone), where competition is fierce. Opportunity is in feature
           phones but challenge is fragmentation of widget runtimes and buying power - why i-mode alliance failed.
       - Distribution channel will fail once runtimes fragment
           Same reason why a Java app store would fail.
       - Distribution will fragment among carriers
           Each carrier to have different app requirements and revenue shares
           Same reason while the BREW app store (since 2001) failed to reach Apple’s proportions
Page                                                                                             Copyright VisionMobile 2011
Thanks for listening.
                                                                               Knowledge. Passion. Innovation.




                           want more?

                           hello@visionmobile.com
                           contact us to schedule an on-site workshop.




                                                                         Updated: 12 November 2010




Page                                                                       Copyright VisionMobile 2011
Mobile megatrends 2011 (VisionMobile)
Mobile megatrends 2011 (VisionMobile)
Mobile megatrends 2011 (VisionMobile)
Mobile megatrends 2011 (VisionMobile)
Mobile megatrends 2011 (VisionMobile)
Mobile megatrends 2011 (VisionMobile)

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Mobile megatrends 2011 (VisionMobile)

  • 1. VisionMobile : distilling market noise into market sense Mobile Megatrends 2011 updated 10 Feb 2011 Page Copyright VisionMobile 2011
  • 2. Knowledge. Passion. Innovation. Andreas Constantinou Michael Vakulenko Matos Kapetanakis (c) VisionMobile 2011 Licensed under Creative Commons Attribution 3.0 Unported License (http://www.creativecommons.org/licenses/by/3.0) You are free to Share or Remix any part of this work as long as you attribute this work to VisionMobile (www.visionmobile.com). Page Copyright VisionMobile 2011
  • 3. VisionMobile research Distilling market noise into market sense Research Training Market maps Strategy definition competitive analysis, open source economics, Competitive landscape maps of strategy design, ecosystem commissioned research, Android commercials, the mobile industry positioning, product definition company due diligence mobile industry dynamics Developer Economics 2010: Everything on mobile development Active Idle Screen Open Source Chessboard Who will own the business impacts of mobile open Mobile Megatrends series source, the competitive landscape and Mobile Industry Atlas, 3rd ed. screen? 1,100+ companies, 69 market sectors how to design your company strategy Top-100 analyst blog 4,000+ subscribers 20,000+ monthly uniques 90% mobile industry insiders GPLv2 vs GPLv3 White Paper The Android Game Plan the commercial mechanics 100 million club behind Android and how tracking successful businesses Google runs the show in mobile Page Copyright VisionMobile 2011
  • 4. Trusted by industry brands Clients selected VisionMobile clients 2008-2010 Page Copyright VisionMobile 2011 Copyright VisionMobile 2007-2010
  • 5. Mobile Megatrends 2011 The DELL-ification of mobile Software: new era for telecoms Experience ecosystems How the mobile handset landscape is and the new rules for innovation how telecoms + internet convergence becoming much like the PC is leading to the next megabrands Apps are the new web open + closed Developers, developers Why apps are the new information use of open + closed strategies to the engine behind telecoms innovation paradigm for web 3.0 commoditise + protect Communities: a new currency Stuck in the telecoms age Communities will provide the main how carriers are stuck in the telecoms age and differentiation above price, design and content how to compete Page Copyright VisionMobile 2011
  • 6. The DELL-ification of mobile How the mobile handset market is approaching PC-like commoditisation Page Copyright VisionMobile 2011
  • 7. Internet players agenda drive top-5 OEMs and OEM market is fragmenting, approaching the PC market 2000 2002 2004   2006   2008   Q3  2010   Market share of top-5 OEMs (source: Gartner) 67% 73% 72% 81% 80% 61% Page Copyright VisionMobile 2011
  • 8. Profits are driven by end-to-end players and away from the old top-5 OEM league source: Deutsche Bank Page Copyright VisionMobile 2011
  • 9. OEM strategies: volume vs profit = strategy $ profit per unit data source: Deutsche Bank 2010 market share % Page Copyright VisionMobile 2011
  • 10. OEMs at different stages of integration Three roles for handset manufacturers across the double helix Horizontal player structure Vertical player structure Leaders: new product experiences and enviable margins Assemblers razon-thin margins wannabee innovators wannabee leaders Innovators: incremental innovation strong brand, performance, good looks and services Page Copyright VisionMobile 2011
  • 11. Lead, innovate or assemble The new role models for OEMs in the post-Android era 1. Assemblers: Razor-thin margins 10s of assemblers use Android to deliver ready-to-market smartphones with complete service and apps ecosystem competing head-to-head with major OEMs. iPhone me-too experience at $100 retail. 2. Leaders: unique product experiences Manufacturers who can masterfully integrate hardware + software + services + industrial design into new product experiences - from phones and tablets to TVs. Unique product experiences at $500 retail. 3. Innovators: incremental innovation The old top-5 OEM guard. Differentiation is on strong brand, performance, good looks and services. 4. Mass producers: catering to developing markets ? Mass producers rely on huge economies of scale to break even at $50, but make up nearly 50% of unit sales in the mobile handset market. Page Copyright VisionMobile 2011
  • 12. The innovators are squeezed in Revenue pyramid performance pressure Leaders: new product experiences Innovators: incremental innovation Assemblers: price razor-thin margins pressure Page Copyright VisionMobile 2011
  • 13. DELLification in 2015 closely modelling the PC business Profit pyramid Revenue pyramid Present-day example Leaders Role model: Apple €37.5B 5% @ $500 Innovators Role model: Samsung €90B 25% @ $250 Assemblers Role model: Dell €56B 25% @ $100 s ce Mass producers vi Role model: Nokia ? de €37.5B 45% @ $50 B 1.5 $200B Page Copyright VisionMobile 2011
  • 14. OEM + Android: winners and losers The winners: The losers: low cost assemblers ‘old guard’ OEMs Cost structure optimised for razor-thin margins Cost structure requires high-margins Android is a long-term opportunity for global reach Android is a short-term life support No Name Page Copyright VisionMobile 2011
  • 15. The new world: Innovate or die The new rules of the handset industry 1. Software and hardware is commodity - Software is a loss-leader, monetised by ads (Google), hardware (Apple), content (Amazon), services (RIM) - Software is provided a la carte and pre-integrated by chipset providers (e.g. Qualcomm, MediaTek) 2. Points of differentiation rapidly disappearing - Android provides out-of-the-box, complete ecosystems; OEMs compete on equal footing to assemblers 3. The search for innovation is on OEMs are search for new models of innovation beyond price, brand, performance and marketing: - communities BlackBerry messaging or facebook deals - made-to-order handsets; copying DELL’s PC model - white label services for carriers where OEMs trade service revenues for carrier subsidies - micro-retailing ‘slotting’ promos across distribution regions and channels Page Copyright VisionMobile 2011
  • 16. Software: the new era for telecoms and the new rules for innovation image source: maschinenraum / Flickr Page Copyright VisionMobile 2011
  • 17. $$$ and software DNA are key for platforms 20 dead platforms in the last 10 years Internet Danger OS Android Chrome OS SavaJe OS PC Trolltech $30M A la Mobile iOS Nokia GEOS IXI Mobile Palm 5/6 Azingo Motorola L-J Comneon Apoxi Access ALP Mobile e-SIM Intrinsyc OS OpenWave MIDAS Sasken Aria Mizi Prizm SKY-MAP MOAP UIQ TTPCom Ajar OpenMoko 2000 2001 2002 2007 2008 2009 2010 Page = dead end bubble size = company revenues Copyright VisionMobile 2011
  • 18. The battle for mass-market smartphone reach OEM internal licensable €600+ computers mobile €400 device retail price connected Nokia Series 40 phones Samsung SHP €100 LG Wise €50 phones voice Note: OSes omitted: Myriad, Mediatek OS, Mango (Qualcomm), Koretide Elastos 14 out of 15 platforms are monetised indirectly by complementary products 11 out of 15 platforms have developer ecosystems or industry consortia built around them Page Copyright VisionMobile 2011
  • 19. The battle for ecosystem completeness Carriers Nokia RIM Apple Qualcomm Google facebook Components Social networks Cloud services Developer ecosystem Network User interface Operating system Hardware IP Manufacturing denotes where vendor started Page Copyright VisionMobile 2011
  • 20. Huge gap between telecoms & software worlds success as defined in 2010 success as defined in 2005 Page Copyright VisionMobile 2011
  • 21. software: turning telecoms upside down VA3#234+53#41G#N::1#L8?87-W#XX#C+1+-.D-E+,3#Y3138?5A# 234+531#6-,7#0-#7803#9/:#0-#;%#)'"'<# J/*E3?#-K#8::1#848+,8E,3#+.#8::#10-?31#9;%#)'"'<# !"!# 6>*E+8.# $&%''# internalised $!# +LA-.3# )H'&'''# 9+M6<# the new !!# N.7?-+7# I'&'''# networks %&%''# O848#DP# !(&'''# dual stasis ""(# Q,85RQ3??># "'&'''# personality back to "&(''# S,81A# (&'''# T+03# square zero back to U+.7-F1# '# I''# square zero *+,,+-.#/.+01# LA-.3# 8::1# %&(''# %&'''# )&(''# )&'''# "&(''# "&'''# (''# '# '# ('&'''# "''&'''# "('&'''# )''&'''# )('&'''# %''&'''# =-:>?+@A0#B#C+1+-.D-E+,3#)'"'# FFFG4+1+-.*-E+,3G5-*# Page Copyright VisionMobile 2011
  • 22. Huge gap between telecoms & software worlds Telecoms world Software world Success factor Installed base Number of apps Speed of innovation 1 OS version every 2 years 5 OS versions/year Time to market 1-2 years 1-2 weeks Type of services comms-centric catering to entire needs portfolio Risk-taking predictability / de-risking entrepreneurship / uncertainty Access to innovation 100s of close partners 100,000s of developers Business model B2B licensing B2C sales/ads/in-app sales Channel to market voice, text and web smartphones Discovery On deck / on device App store First step “we need to sign an NDA” “we need to download the SDK” Process Waterfall: RFI, RFQ, deliver, Agile: add feature, build, test, QA repeat Attitude “developers will come to us” “we need to go to developers” Page Copyright VisionMobile 2011
  • 23. The new rules of innovation 1. Speed of innovation defined by internet companies, not hardware / networks - Companies from the Internet domain (Apple, Google, Facebook) out-innovate companies from the mobile industry domain (Nokia, Samsung, Sun) and the networks domain (Vodafone, China Mobile) - Internet players are at top of the food chain and are becoming increasingly assertive 2. Innovation requires new competence and regional presence - California is the center for software and services innovation. Japan/Korea is the center of CE innovation. - You can’t innovate in software unless you have DNA in software and presence in those regions 3. If you can’t innovate in software, you will be replaced - The evolutionary game has just accelerated 10-fold. - Players who cannot evolve at software speeds will eventually be replaced by alternatives (e.g. software has superseded carrier efforts in location, billing and distribution) Page Copyright VisionMobile 2011
  • 24. Experience Ecosystems telecoms + internet convergence is leading to experience ecosystems Page Copyright VisionMobile 2011
  • 25. telecoms + internet + PC + consumer electronics = ? our definition of convergence has changed 2003   2010   2015   ?   Page Copyright VisionMobile 2011
  • 26. Is the future of convergence? No  more. Leaders Innovators -­‐  Innovators  are  in  a  price  war Assemblers -­‐  Android  is  making  smart  devices  possible -­‐  ARM  becoming  defacto  in  CE  devices -­‐  Sensors  +    form  factors  =  diverse  experiences -­‐  Developer  ecosystem  is  part  of  core  experience Page Copyright VisionMobile 2011
  • 27. Convergence is about experience roaming Convergence is about having an experience that roams consistently across ‘screens’ experience roaming across screens Social circle Developer ecosystem convergence = User data roaming Service roaming x User interaction design Industrial design Brand Page Copyright VisionMobile 2011
  • 28. Apple is the poster child of experience roaming Apple leads by example, by delivering a consistent experience across divers screens Experience roaming Across screens Social circle Ping iPod Apps ecosystem App Store iPhone User data roaming MobileMe iPad Service roaming iTunes, AirPlay Mac User interaction design iOS Apple TV Industrial design Apple ? Brand Apple Page Copyright VisionMobile 2011
  • 29. The next battle is for Experience Ecosystems Experience Ecosystems create major exit barriers and drive cross-sales; they are therefore a sustainable strategy for Innovator OEMs needing to survive margin pressures. network network effects effects Page Copyright VisionMobile 2011
  • 30. the future of convergence is experience roaming convergence = screens + experience 2003   2010   2015   the future of convergence is in a single experience + developer ecosystem powered by ARM hardware across mobile, PC & embedded Page Copyright VisionMobile 2011
  • 31. Apps are the new web Why apps are the new information paradigm for web 3.0 Page Copyright VisionMobile 2011
  • 32. Everyone wants their own app store but very few are above the radar = number of apps when above 5,000 OS vendors OEMs Carriers Independent Source: Distimo Page Copyright VisionMobile 2011
  • 33. App stores are about control, not $$$ App Stores are a control point for: and an opportunity for: - access to applications e.g. Skype cannot have a video calling app on the iPhone - distribution of applications e.g Google uses Android Market to enforce compliance requirements on Android handsets - billing & monetisation of applications an opportunity to extract a commission in the form of revenue share for paid apps and in-app purchases - retailing & discovery of applications an opportunity to sell ads and personalisation services to developers, plus differentiate with content curation - consumer insights an opportunity to optimise device and service targeting Page Copyright VisionMobile 2011
  • 34. Building an app store is not easy Page Copyright VisionMobile 2011
  • 35. Why is building an app store so hard? App stores need 5 genes from 5 species across the value chain Genes Species platform mobile handset platform brands and companies carriers & OEMs companies retailers payment brokers Page Copyright VisionMobile 2011
  • 36. 3 pillars to the app store evolution 2011-13 1. Merchandising: App stores will take retailing where it’s never been before - app retailing is bottleneck, resulting in price erosion as developers drop prices to bubble up to the top-25. -This will drive retail sophistication: App Malls (shops-in-shop), bundles, time-limited offers, friend endorsements, inventory micro-targeting, gift/beg options, second-hand apps, offers tied to carriers, etc 2. Diversity: App Stores will cater to 100s of niche segments; Genre-centric stores (Games store), lifestyle-centric stores (e.g. sports or clothes brands), specialist content (e.g. adult or enterprise), region-centric stores (e.g. Seattle apps) 3. Low barriers: App Malls will enable low-cost shops-in-shop setups SDP vendors will offer the infrastructure, catalogue and recommendations technology allowing wannabe app retailers to be setup at very low cost, with proven revenue models (setup fee + rent + sales commission) Page Copyright VisionMobile 2011 Copyright VisionMobile 2007-2010
  • 37. Apps succeed where the web failed - 2007: voice, text and web was main channel for services the old school of mobile services: voice, texting, ringtones, televoting, MMS, Mobile TV,.. - 2011: 500,000+ applications on smartphones - Apps are the single biggest digital channel since the web - There are apps springing up everywhere there is a website for every website, for every brand and for every corporate intranet - Apps succeeded where cross-platform frameworks failed Mobile web pages and widgets are poor alternatives to apps Java and Flash failed to pick up where web left off - The web is now the lowest common denominator across screens across devices, the living room, the PC and the car Page Copyright VisionMobile 2011
  • 38. what is are apps? apps are a new information paradigm For.. Mobile apps Web pages packaging Self-contained Set of pages personalising access to location, explicitly typed info only contacts discovering app store text results or URL monetising micropayments ads interacting touch, sensors, keys mouse, keys measuring downloads economy attention economy .. information Page Copyright VisionMobile 2011
  • 39. Web 3.0 will adopt the app paradigm Web apps will proliferate in mobile handsets driven by - web benefactors Google, Microsoft, Apple - technology commoditisation; WebKit and V8; - consistent technology adoption WebKit on >350M handsets up to June 2010 - platform vendors seeking to modernise their developer platforms e.g. WebOS vs Palm OS, RIM WebWorks vs BlackBerry OS 6, Nokia WRT. BREW to follow? - and “buy in” to a developer community and a “hype-ready” platform building a developer community is extremely expensive. It comes for free with web technologies - the need to tap into new developer segments from the web domain 1.5 million web developers most of which are new to mobile - The need to reduce development costs for cross-screen apps mobile, tablet, PC, TV, consumer electronics, automotive, .. Page Copyright VisionMobile 2011
  • 40. Google under threat in web 3.0 Google rose due to openness, info chaos and lack of monetisation - the open (crawlable) web, - the lack of information semantics (needing Pagerank to create order out of chaos) - the lack of a micropayments mechanism on the web (increasing demand for ads) Google is now threatened from web silos, app stores and micropayments - closed web silos (Facebook and Apple’s app store) - semantic information discovery in app stores (reducing greatly the search complexity) - app micropayments & NFC (reducing the need for ads) To survive, Google is trying to outrun the market trends - launching is own walled gardens (Orkut and Buzz), its own app stores (Android Market and Chrome Web Store) and integrating a payments technology (NFC) within Android handsets Page Copyright VisionMobile 2011
  • 41. Open + closed: two sides of the same coin use of open + closed strategies to commoditise + protect Page Copyright VisionMobile 2011
  • 42. Open is the new closed - Android, MeeGo, Webkit, Qt, Maemo, Eclipse, Linux all use open source all projects use an open source license for the public source code - Open source licenses are standardised and well understood 3 licenses used most often in mobile projects (GPL, LGPL, APL) - But an open source license is only the tip of the iceberg a license determines access to the project (e.g. Android public source code) - Governance is what determines the rules of the game the governance model determines access and influence into the product (e.g. Android handsets) - Open licenses are used with closed governance many projects restrict governance while maintaining an open source license Page Copyright VisionMobile 2011
  • 43. Closed governance is used to control clever use of governance models can be used to control products based on OSS license type dual license (commercial + copyleft) Qt strong copyleft (GPL) Linux kernel weak copyleft Foundation (LGPL, MPL, EPL,..) Foundation WebKit permissive (APL, BSD, MIT, ...) Android open community managed community autocratic community governance model (simplified) Page Copyright VisionMobile 2011
  • 44. What are the criteria for ‘openness’ ? Access • Is source code available to all without discrimination? • Are project mailing lists, forums, bug-tracking databases and developer tools available to all? • Is the project roadmap available publicly? Development • Are decision-making mechanisms transparent and accessible? • Is the code contribution and acceptance process clear and accessible? • Are the requirements to become a committer clear and equitable? • Can you identify who the committers to the project are? • Are the requirements to become a reviewer clear and equitable? • Can you identify who the reviews to the project are? • Does the contribution license require copyright assignment (vs. a copyright license) Derivatives • Are trademarks used to control compliance and use of the project? • Are go-to-market channels for Application Derivatives constrained? Community • Do different community members have different rights? Page Copyright VisionMobile 2011
  • 45. Openness to commoditise product complements beyond open source, openness is used as a business strategy to commoditise product complements while protecting core assets Windows iOS Android BlackBerry Symbian Phone Bundled services Closed Open Closed Closed Open App developers Curated Open Curated Curated Curated Device vendor Closed Open Open Closed Open Software platform Closed Closed Closed Closed Curated Hardware platform Closed Curated Closed Closed Open Page Copyright VisionMobile 2011
  • 46. Developers, Developers, Developers the engine behind telecoms innovation Page Copyright VisionMobile 2011
  • 47. Based on Mobile Developer Economics 2010 - Analysis of the developer experience from design to monetisation Free download: www.Developer Economics.com - Across all 8 major platforms - Based on a sample of 401 mobile app developers - With significant experience in mobile development More than 60% of respondents have 3+ years of experience in app development. Nearly 30% have won one or more developer awards Page Copyright VisionMobile 2011 Copyright VisionMobile 2007-10
  • 48. The diverse world of software developers With different business models and incentives content publishers Internet service providers system integrators mobile games developers software houses independent developers apps development software integration agencies services Page Copyright VisionMobile 2011
  • 49. Android has biggest mindshare “ Android is better than other -Android has biggest mindshare platforms in terms of tools, - Symbian/Java down from #1/#2 in 2008 platform features, and it’s easier to stand out as - Most developers work on multiple platforms developer.” The average is 2.8 platforms, across sample of 401 developers Android developer Page Copyright VisionMobile 2011
  • 50. Android 3x easier to learn than Symbian Page Copyright VisionMobile 2011
  • 51. Developers becoming market savvy “ technical considerations are Commercial above technical reasoning irrelevant, the choice of -Large market penetration (70% of respondents) is platform is ALWAYS more important than ability to code & prototype quickly (45%) marketing-driven.” - Revenue potential (55%) is more relevant than Mobile web developer good documentation (35%) Page Copyright VisionMobile 2011
  • 52. App Stores reduce time-to-market by 3x “ App Stores minimised time-to-shelf from 68 days to 22 days and halved time-to-payment Page Copyright VisionMobile 2011
  • 53. The app developer journey The many facets of the app developer experience - platform hype - developer certification - analytics & sales tracking - addressable market - app signing, certification & approval - user ratings (devices/regions) - regional testing & sandbox networks - user support - platform features - beta testing with peers and end users - application updates - learning curve & coding effort - localisation frameworks - cross-selling - conferences & competitions - packaging and SKU management tools - privacy compliance * * * develop, application platform market retailing & in-life debug & planning selection readiness monetisation application use support - audience targeting - IDEs, SDKs and documentation - go-to-market channels - concept design - UI tools - promotional tools - feature design - emulator and on-target debugging - co-marketing programs - prototyping tools - community & official forums/websites - revenue models - market research - profiling tools - billing & settlement - focus groups - test frameworks - porting tools *: mostly applicable to developers who sell apps - premium technical support Page Copyright VisionMobile 2011
  • 54. Key developer pain points based on Developer Economics 2010 research App submission & certification Application marketing application certification is expensive, approval takes too lack of effective marketing channels to increase long, and signing is complicated app exposure and discovery develop, application platform market retailing & in-life debug & planning selection readiness monetisation application use support most vendor effort goes here Localisation Dubious long-tail economics lack of localised apps for most regions, lack of average RoI through an app store is much less than localisation tools for developers the cost of producing the app Page Copyright VisionMobile 2011
  • 55. Are you a mobile developer? Want to share your own views on app development? Join in Developer Economics 2011. Have your say on the hottest issues in app development and win a $1,500 Amazon voucher. www.visionmobile.com/dev open until end March 2011. created by sponsored by Page Copyright VisionMobile 2011
  • 56. Communities: the new currency Page Copyright VisionMobile 2011
  • 57. Communities are the new frontier Building a brand, product or technology is science Building a community is a form of art Whether it’s a consumer, enterprise or a developer community New techniques are emerging; game mechanics and religion engineering Page Copyright VisionMobile 2011
  • 58. you can buy an audience but.. you can’t buy a community an audience is people who interact with a service. a community is a network of people who interact amongst them you can buy an audience (eyeballs or subscribers) but you can’t buy a community (network interactions) Page Copyright VisionMobile 2011
  • 59. Communities are the new differentiator Service brands, OEMs and carriers have tried to create own communities But found that community creation needs a very different rulebook And ended up partnering with communities (Facebook, Twitter, etc) Exclusive deals with communities will be the new differentiator above price, design and premium content. Page Copyright VisionMobile 2011
  • 60. Communities are the new currency Zynga's CityVille grew to 100 million users in just 43 days Facebook is a platform between 500M+ users and 2.5M+ developers Facebook is #1 social network across the world except China, Russia, Brazil, Japan Skype: 8 million paid users and 25% of global international calling traffic Page Copyright VisionMobile 2011
  • 61. Carriers: stuck in the telecoms age and how to compete Page Copyright VisionMobile 2011
  • 62. Carriers in the midst of an identity crisis Carriers are telecoms-age species in a software age - Carriers have grown in the telecoms age; this affects their ability to adapt and their speed of innovation ..In an identity crisis - Carriers are still undecided as to whether they want to be an access company (e.g. LightSquared, KPN), a supermarket (Verizon), a shelf (Vodafone) or a broker (Three). They want to be everything to everyone. Losing battle after battle for control points - non-communication needs (apps), location (GPS), billing (app stores), service retailing & discovery (app stores), authentication (Twitter/facebook), mobile termination (Google C2DM), subscriber activation (iPhone soft SIM?) With no innovation in their core business - voice, texting and SIM cards have seen no innovation in the last decade. Page Copyright VisionMobile 2011
  • 63. Taking baby steps in the software age Carriers don’t know how to use software - Carriers software efforts are mediocre; see Vodafone VSCL, VFX and widgets - Using WAC to profit from apps, when Apple/Google are not profiting from apps Carriers are accelerating the PC-like commoditisation of handsets - skewing the natural OEM selection process (by ranging handsets on a OS basis) and forcing Innovator OEMs to struggle while nimble assemblers thrive - The $100 smartphone means loss of subsidy power for carriers, therefore loss of differentiation Carriers are funding their antagonists - most Android projects 2007-2009 were carrier-funded. - Android and iPhone are playing AT&T and Verizon like puppets on strings; e.g. Verizon now heavily marketing iPhone, while AT&T heavily pushing Android. Page Copyright VisionMobile 2011
  • 64. The real value of carriers The real value of carriers is still untapped 1. Leverage apps to drive core business, not generate revenues - Deliver voice and messaging apps that build on core network business, at 10x deployment speeds - quit pushing for higher communications ARPU, but leverage apps to extent revenues across untapped segments of consumer spending portfolio (transport, health, food, housing, etc) - expose network APIs that drive lock-in to core business, not APIs that generate revenue - leverage apps to drive premium customer acquisition, customer retention and increase switching costs 2. Divide and conquer among app stores - Don’t create new app stores (WAC) but divide and conquer among existing app stores - Create shop fronts for app retailing and promotions - Monetise by helping developers target apps to the right demographic in real time - Offer recommendation services by tapping into users’ social graph Page Copyright VisionMobile 2011
  • 65. The real value of carriers 3. Increase power over OEM suppliers - Shift handset purchasing model to a performance based per-device bonus based on hitting ARPU, messaging and churn targets; leverage on network analytics. - Resist a price war on handsets by favouring an oligopoly of traditional suppliers 4. Become the VISA of mobile - aggressively grow carrier billing usage via in-app payments - provide micro-billing at VISA-like rates activated via SMS 5. Invest in retail differentiation - as devices commoditise, retail will become a stronger control point for customer acquisition - Invest in retail differentiation, for example visual service retailing, bundling services/apps in handsets, deploying handset PoS configurators and carrying out PoS customer segmentation analysis. Page Copyright VisionMobile 2011
  • 66. The real value of carriers 6. Customer experience management - Identify influencers and improve lifetime value metrics - Understand customer behaviour and enable behavioural targeting by third parties 7. Drive wholesale business beyond mobile - Drive wholesale model in CE business (ala Kindle) to de-risk and differentiate bandwidth pricing 8. Handset customisation: focus on merchandising and addressbook - focus on a single app (active idle screen) to be provisioned on all smartphones + some Java handsets - idle screen app can encompass service merchandising/promos and addressbook functionality - leave all other apps to 3rd parties! Page Copyright VisionMobile 2011
  • 67. a note of caution is WAC repeating history mistakes? - WAC is a framework for creating carrier-owned app stores even if carriers don’t have most of the genes to create their own app store - and making money from apps when Apple/Google use apps as a complementary business, not as a revenue generator - Needs software agility, but moves with telecoms rigidity 12 months since announcement and no distribution channel, no marketplace, no billing Telecoms rigidity and ‘design by committee’ is the key reason why LiMo failed - Smartphone focus, but feature phone opportunity Smartphone focus (Opera, S60, iPhone), where competition is fierce. Opportunity is in feature phones but challenge is fragmentation of widget runtimes and buying power - why i-mode alliance failed. - Distribution channel will fail once runtimes fragment Same reason why a Java app store would fail. - Distribution will fragment among carriers Each carrier to have different app requirements and revenue shares Same reason while the BREW app store (since 2001) failed to reach Apple’s proportions Page Copyright VisionMobile 2011
  • 68. Thanks for listening. Knowledge. Passion. Innovation. want more? hello@visionmobile.com contact us to schedule an on-site workshop. Updated: 12 November 2010 Page Copyright VisionMobile 2011