The document discusses HTML5 and its implications for the mobile industry. Key points include: - HTML5 is advancing web applications to be as engaging as Flash apps and integrated like mobile apps. - Despite widespread adoption of the WebKit browser, mobile browser implementations remain fragmented. - HTML5 addresses technology but not discovery, distribution, or monetization challenges facing the web. - The web will coexist with native apps, with each retaining advantages in certain use cases. - A "Web 3.0" model is emerging for discovery, distribution, and monetization of content online following the app store model.

2. HTML5 and what it means for the mobile industry
Contents
About VisionMobile
Key takeaways 3
VisionMobile is an industry analysis and strategy firm.
We offer research reports, executive workshops and Background: web vs. apps 4
strategy at the crossroads of telecoms and software From web 1.0 to the mobile web 5
economics.
HTML5 as a technology change 6
VisionMobile Ltd.
90 Long Acre, Covent Garden, The web is dead. Long live Web 3.0 7
London WC2E 9RZ What the new web means for
+44 845 003 8742 the mobile industry 8
www.visionmobile.com/blog How to lead in the web era 9
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Contact us: hello@visionmobile.com
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3. HTML5 and what it means for the mobile industry
Key takeaways
- The web has evolved through two major phases: Web 1.0, the era of dumb terminals
and Web 2.0, the era of smarter terminals, where users are both consumers and
producers of content.
- The web is both a technology paradigm (HTML) and a business model paradigm for
the unfettered distribution and monetisation of content.
- HTML5 is pushing the capabilities of web applications to the point of making web
apps as engaging as Flash applications and as integrated with the device as mobile
applications.
- Despite the adoption of WebKit as the de-facto browser engine on over 500 million
handsets to date, mobile browser implementations remain consistently fragmented.
Even standards bodies W3C and the WHAT WG show fragmented approaches to
HTML5 completion, which is not expected before 2014.
- HTML5 remains a technology change that is not designed to solve discovery,
distribution or monetisation problems. Moreover, HTML5 app stores don’t address
fundamental user needs like access to top-10 apps, long-tail diversity and can’t compete
with Apple or Google in terms of app volume.
- The web is winning in developer mindshare, but it will not replace native platforms;
instead web applications will co-exist with native applications that maintain an edge in
terms of device and cloud integration capabilities. Web applications will retain an edge
in use cases such as business applications, mass-market services and cross-screen
experiences (mobile, TV, PC).
- The change to the web business model is emerging in what might called Web 3.0; a
new model for information discovery, distribution and monetisation following from the
app store paradigm.
- Web 3.0 is the model where content is created with semantic tagging (with its own
contextual profile), discovered via web stores (much like app stores), distributed within
walled gardens (much like Facebook), and monetised through micro-payments (much
like apps).
- Operators can lead in the era of web 3.0 – not by competing, but by leveraging on the
network effects of Apple, Google and Facebook platforms to become a new generation
of over-the-top players.
- To become over-the-top players, operators should leverage their enviable assets in
terms of ubiquitous billing, unprecedented consumer insights and access to consumer
channels. At the same time, operators need to move at software speeds in order to
catch-up and outrun the platform players.
- This is where we believe WAC has the best chances of success but helping operators
reach out to developers with ubiquitous billing, quality assurance, content curation,
local content deals, privacy and security assurance, and help extend app stores away
from the virtual and into the physical retail space.
© VisionMobile 2011 3

4. HTML5 and what it means for the mobile industry
Background: Web vs. apps
In today’s world of apps, the web seems to have taken a seat in the back row. But many
industry observers are predicting a comeback with HTML5 advancements, the
proliferation of smartphones and ubiquitous backing by both telcos and Internet
players. Is the web as we know it about to change?
First things first: what is the web?
Firstly, the web is a language for creating interactive, navigable content, which consists
of three main parts: HTML (the language used to define the static text and images), CSS
(the language defining styling and presentational elements) and JavaScript (the
language describing the interactions and animations).
Secondly, the web is a paradigm for open, unfettered access to content that is not
controlled by any single entity. In the era where apps distribution is controlled by single
vendors like Apple and Google, the web seems to challenge the status quo. We ‘ll
address the impact of the web to the mobile value chain later in this paper.
There are many ways in which web pages differ from mobile apps today, as shown in
the next table.
Key differences between web pages and mobile apps (simplified)
web pages mobile apps
development HTML, CSS, JavaScript Objective C, Java or other
packaging set of linked pages accessible self-contained applications
via a web browser or packaged accessible via the phone
as widgets user interface
personalisation via cookies via GPS location, contacts &
more
discovery via any search engine via certain app stores
distribution via any website via certain app stores
availability on any browser on specific smartphones
monetisation ads micro-payments, ads
success criteria unique visitors downloads
source: VisionMobile
© VisionMobile 2011 4

5. HTML5 and what it means for the mobile industry
From web 1.0 to the mobile web
The web has gone through two major phases: Web 1.0 and Web 2.0.
Web 1.0 was the era of the dumb terminals and static web pages. The first generation of
the web assumed all intelligence was in the network; the device had to issue a simple
request to fetch a page and then present it on the screen.
Web 2.0 was is the era of smarter terminals and interactive pages. This second
generation was designed around the ‘read-write web’ where the user is not just a
consumer but also an editor, curator and producer of content. Web 2.0 helped create
today’s phenomena of Wikipedia, Facebook, Twitter, blogs and nano-publishing.
Despite starting off as an outsider to the web, the mobile industry has been rapidly
catching up since the early WAP days. WebKit, the Apple-born browser engine is now
the common ‘circuitry’ behind more than 500 million devices shipped to Q1 2011, by all
major smartphone vendors. Opera, the mobile browser vendor, counts over 100 million
monthly active users on its Mobile and Mini browsers.
In the manufacturer camp, smartphones are expected to reach well into sub-$100 retail
price points in 2011. In the operator camp, content delivery optimization solutions from
the likes of ByteMobile, Openwave, and Ortiva Wireless are being deployed across tier-1
operators, facilitating efficient use of the network while browsing the web.
Mobile industry initiatives such as the Wholesale Applications Community (WAC) are
pushing the envelope for web applications (also known as widgets) while EU-funded
initiatives like webinos aim to use the web as a medium for deploying applications
across mobile, PC, TV and automotive screens.
HTML5 as a technology change
The hype surrounding HTML5 has peaked in 2011. HTML5 promises to push the
capabilities of web applications to the point of making web apps as engaging as Flash
applications and as integrated with the device as mobile applications. HTML5
introduces several technology improvements in these domains by adding off-line
storage, 2D graphics capabilities, video/audio streaming, geo-location, access to the
phone’s camera and sensors, as well as user interface tools.
This next generation of web languages in the form of HTML5 is being standardized by
the W3C and the WHAT working group who are driving forward web apps as equal
citizens to mobile applications. The W3C consists of 51 member organizations, over 440
participants with strong backing from Google, Apple, Opera, IBM, Microsoft, and
Mozilla. In parallel the WHAT working group is working closely with Mozilla, Opera
and WebKit who are implementing and testing the latest browser features.
Yet HTML5 is still work in progress and even standards bodies show fragmented
approaches to HTML5 completion. The W3C expects official completion of the HTML5
set of standards in 2014. In parallel, WHAT has taken a different approach to
completion and is now working on ‘HTML’ as a continually evolving set of
specifications.
Despite the adoption of the WebKit engine as a de-facto standard, HTML5
implementation on mobile devices is both fragmented and incomplete.
© VisionMobile 2011 5

6. HTML5 and what it means for the mobile industry
Independent studies by quirksmode.org and NetBiscuits have shown that every mobile
WebKit implementation is slightly different. In addition, the leading smartphone
platforms show inadequate HTML5 support; iOS, BlackBerry OS and Android devices
show partial HTML5 support (at best 2 our of 3 HTML5 features supported), while
Symbian and Windows Phone devices are lagging further behind.
Much like history has shown with the PC browser wars of the 1990’s and the Java ME
fragmentation of the 2000’s, mobile browser fragmentation in 2010’s will be driven by
the need to differentiate ('embrace and extend'), and the varying speeds among vendors
in implementing the latest WebKit engine.
What about HTML5 app stores? Already a number of start-ups such as OpenAppMkt,
Openspace and Zeewe have proposed app stores focused on web apps. The key
advantages of HTML5 app stores are cross-device portability and a buy-once-use-
everywhere application model.
Unfortunately, supply does not always imply demand; HTML5 app stores can’t deliver a
business model change if demand is not there, for three reasons. Firstly, users care
about availability of popular content (see Angry Birds, Skype and Facebook) most of
which are not available as web apps often due to HTML technology limitations.
Secondly, users care about choosing among hundreds of thousands of apps, which is
currently a 2-horse race (Apple and Google) with the web lagging far behind in terms of
number of apps. Thirdly, users are becoming loyal to their smartphone platform
(Android, iOS or BlackBerry) where the native app store dominates.
The web is dead. Long live web 3.0
HTML5 introduces several technology innovations. However HTML5 remains a
technology change that is not designed to solve discovery, distribution or monetisation
problems – in other words it is not designed to change the business model.
The business models of Web 1.0 and Web 2.0 have largely evolved around
decentralised, unencumbered access to sites and information. In this paradigm,
discovery takes place via search engines like Google, Yahoo, Baidu and Bing or social
bookmarking like Digg and Twitter. Distribution takes places via websites and
browsers, which are ubiquitous. Finally, monetisation is achieved via advertisements,
from text links to video ads with CPM, CPC and increasingly CPA business models.
In the post Facebook and post app store world, we are moving away from the Web 2.0
legacy into what can be called Web 3.0, an information model akin to those introduced
by social networks and mobile applications.
Web 3.0 is the model of the web where content is created with semantic tagging (with
its own profile), discovered via web stores (much like app stores), distributed within
walled gardens (much like Facebook), and monetised through micro-payments (much
like apps).
© VisionMobile 2011 6

7. HTML5 and what it means for the mobile industry
Web 3.0 changes creation discovery, distribution and monetisation of content
Web 2.0 Web 3.0
role model Google, Yahoo Facebook, Apple
creation loosely structured text, self-contained web apps
images & video carrying their own profile
discovery discovery via text-based contextual discovery via web
search engines stores or app stores
distribution open distribution via any distribution within walled
website gardens (e.g. Facebook)
monetisation advertisements micro-payments (pay per
download and virtual goods)
source: VisionMobile
In Web 3.0 we are seeing creation of content in the form of self-contained applications
(whether mobile apps, micro-sites or social networks) which are semantically tagged
with contents description and type, as well as user ratings, ‘likes’, and
recommendations. Discovery takes place not via text-based search engines, but
contextually through web stores or app stores enabling discovery in a relevant, intuitive
manner.
Distribution of the ‘short head’ content is via walled gardens (the likes of Facebook and
Twitter) that retain information silos away from search engines. Of course, the long-tail
content will continue to be open-access. Finally, monetisation is increasingly taking
place via micropayments, often in the form of virtual goods, which are locked to the
distribution medium (e.g. Facebook credits).
What the new web means for the mobile industry
HTML5 is a technology change, pushing web applications to reach the interactivity and
media capabilities of Flash application, while ensuring web apps are equal citizens to
mobile applications in terms of level of integration with the device and the user data.
Web 3.0 is a business model change which marks a move away from the unfettered
discovery and distribution model of the 2.0 paradigm and into the new walled gardens
role modelled after Facebook and Apple.
In Web 3.0 walled gardens the barriers to entry are far higher than ever before. Apple
runs the App Store at just about breakeven, in what we estimate is an average cost of
$2,350 per app listed if amortised across all listed iOS apps at the end 2010. In the Web
3.0 era, content discovery, distribution and monetization a again controlled by the few.
The web is winning in developer mindshare, but it will not replace native platforms.
Web applications and widgets are considerably limited in capabilities compared to
native platform apps (iOS, Android and Windows Phone) and therefore are not able to
© VisionMobile 2011 7

8. HTML5 and what it means for the mobile industry
compete on equal footing with native apps, especially in games, which typically lead
application and download volumes.
The lead of native platforms over web platforms in terms of cloud and device
capabilities is unlikely to equalize as native application vendors will always push their
own native platform interests ahead of browser implementation or integration; instead
web applications will co-exist with native applications and will be better suited to
categories such as business applications, mass-market services and cross-screen
experiences (mobile, TV, PC) where HTML holds a sustainable advantage.
However, a few, bold web-based application platforms are making a comeback, like
HP’s WebOS and RIM’s WebWorks, that have developed web-based smartphone
platforms while retaining control of discovery, distribution and monetisation.
One might dismiss new platforms as too small to compete in the two horse race that is
now taking place between iOS and Android. If history has any lessons to teach it is that
there is continual expansion and contraction in the numbers of application platforms
coming in and phasing out. We expect to see the next Android competitor to emerge as
a platform that will use the web as its native environment. There are two key
advantages that come free with any web platform:
• hype ready: a web ‘platform’ comes with implicit goodwill and ‘built-in’ hype,
meaning that the marketing investment to create a new platform is reduced manifold.
Indicatively, Microsoft is rumoured to have spent an enormous $500 million on
marketing Windows Phone during the first few months since launch
• established and untapped developer communities: there are millions of web
developers who are new to mobile. These constitute untapped developer communities
that can be enlisted to the cause of a new web-based mobile platform
How to lead in the web 3.0 era
Despite the high entry barriers, there are plenty of opportunities to take the lead in the
era of web 3.0 business models. The trick here is not to compete, but to leverage on the
network effects of the Apple, Google and Microsoft platforms where operators can
position themselves as a new generation of over-the-top players.
Operators hold enviable assets in terms of ubiquitous billing, unprecedented consumer
insights and access to distribution channels. For example, operators can act as the
matchmakers between developers and end-users by helping developers get the right
apps in front of the right users through techniques such as featured placements, social-
graph-based recommendations and segment targeting.
This is where we believe WAC has the best chances of success but helping operators
reposition as over-the-top players on top of the Android and Apple app stores – that is
by helping developers reach out to users with ubiquitous billing, quality assurance,
content curation, local content deals, privacy and security assurance, and help extend
app stores away from the virtual and into the physical retail space.
In parallel, operators can help push the web into a viable alternative for native
platforms in many ways. Operators can push the development of WebKit towards better
bandwidth management, and closer integration with hardware multimedia
acceleration. Moreover, operators can sponsor the development of better cross-
© VisionMobile 2011 8

9. HTML5 and what it means for the mobile industry
platform developer tools that allow HTML and JavaScript developers to target multiple
native platforms and mass-market browsers.
No matter how operators decide to compete in the software world, they need to adopt
‘agile’ development methods and move at software speeds to catch-up the platform
players in controlling the last mile to the consumer.
One thing is certain; the future of connected web and devices is going to surprise us –
much like how applications turned telecoms economics upside down. Like Bill Gates
once famously said "we always overestimate the change that will occur in the next two
years and underestimate the change that will occur in the next ten".
Web is going to be a game changer, but not in the way we expect it.
© VisionMobile 2011 9

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