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Windows Phones is Still Part of the Conversation

Sunday, March 20th, 2011

Last week I had dinner with thirty entrepreneurs and former entrepreneurs (mostly VCs now) — founders of Pandora, DropBox, and lots of other companies that you will hear about in the next few years.  Everybody in the room are making mobile platform decisions on a weekly basis — i.e. they are the folks on the ground deploying capital and building the next generation of mobile applications and services.   Apple, Google, Microsoft, HP, and RIM are all trying to sway them to build on their platform.

Everybody agreed that you have to build for iOS (Apple) and Android (Google) – every company will sequence development for these differently based on their monetization strategy, demographics, and geographical focus.  The only other mobile platform that is still part of the conversation is Windows Phone.  Yes, they have a unique product experience, but do they have the distribution horsepower to reach a critical mass of users to make it a must for application developers?  Not yet. But given Microsoft’s cash position and its distribution smarts (Nokia) nobody in the room would bet against them.

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Are Users Aware They are Running Android?

Tuesday, January 18th, 2011

Android’s strategy is to provide both hardware and software diversity to spread Android globally and quickly. So far, it’s working.   A hardware diversity strategy for non-niche markets (greater than 300M units) works – Microsoft used this successfully in the PC market.  The question remains whether software diversity is a good long-term strategy for Android.  Are they building brand loyalty and experience lock-in that will stand the test of time.

(1) Users don’t know  they are carrying an Android powered device.

As part of Gigwalk recruitment we ask users to provide us with the type of phone they own.  Here is the exact wording of the question

If you don’t own an iPhone, what kind of operating system is your device running?

That means that the vast majority of users don’t know they are using an Android device.  I was curious so I dug deeper and asked some users who did not include the term Android in describing their phone what they thought Android was and here are some of the responses I got:

  • Android is a place to buy apps
  • Android is a specific kind of phone (but I don’t have one)

(2) No Experience Lock-In

Longer term this software diversity strategy hampers Google’s ability to lock-in users to the Android platform.  One of the last remaining ways to lock-in users over extended period of times is experience lock-in. Getting a user to switch from Windows to Mac is hard as most don’t want to re-learn how to use an operating system – that is experience lock-in. The same thing will happen for mobile operating systems; as users develop gesture muscle memory around common mobile tasks (calling, texting, emailing, photos, etc.) they are not going to eagerly switch devices.  By inviting hardware partners to customize the Android UI (e.g. HTC Sense) they are introducing software diversity into the ecosystem.  This software diversity means their are no consistent experiences across Android devices.  When a user upgrades their device switching from their HTC Incredible (Android device) to a Samsung Galaxy (another Android device) or Windows Phone is nearly as much relearning work for the user.

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The Mobile Hardware Diversity Strategy

Friday, January 14th, 2011
Recently Marco Arment made the point that Android suffers from too much hardware choice.  This is really an argument against the hardware diversity strategy.  I have purchased two iPhones and will likely purchase another one in the future.  Yet, to argue against the hardware diversity strategy is a mistake. Here’s why:
  1. 5 Billion Mobile Subscribers
    • Ultimately all 5 billions of these subscribers will be buying a smartphone. Some people will buy two so it could be more. While I really like my iPhone, in a market of this size a lot of people won’t agree.  Some won’t like its price, others its size, , some won’t buy because of a missing feature(s), and the list goes on . I think you will be hard pressed to find a non-niche market (>300 million units) in the tech consumer space where a single product dominates.
  2. Calling a Game in the 1st Inning
    • The smartphone revolution has only started — their are only a few hundred million devices out there.  Drawing conclusions on the hardware diversity strategy at this stage is like calling a baseball game in the 1st inning with the score 2-1.  The hardware diversity strategy takes many years to fully play out.
    • To suggest that the hardware accessory market won’t develop because of hardware diversity seems is wrong.  Samsung sold 10M Galaxy Android devices in about six months and the accessory vendors jumped on board.
  3. Big Bang vs. Constant Drumbeat
    • iPhone takes the big bang approach to marketing.  A single big launch every year a frenzied build-up. For most people who don’t follow technology that big Apple event quickly fades from memory after a day or two – they simply don’t keep this stuff top of mind.  Whereas the marketing power of Android and Windows Phone is a constant drumbeat in TV, web, radio, billboards, etc.  The aggregate marketing spend of the hardware vendor, mobile OS provider, and carrier is going to be huge.
  4. How People Buy Phones
    • How techies buy phones is very different then normal people. Head to a Verizon or AT&T store in Waukegan, IL and watch how normal people buy phones.  That will give you a sense of how normal people make phone purchasing decisions.  If they see a huge and sexy Windows Phone display and the sales guy is talking up the Windows Phones’, normals are going to play around with a few of the Windows Phones and buy one of them.

    Additionally, Android and Windows Phone are not using the exact same strategies.  Android is taking a hardware AND software diversity strategy – they allow their hardware partners to layer on custom user experiences.  This is a dangerous long term strategy as users never mentally develop brand affinity towards a single user experience.  Whereas, Microsoft is only employing a hardware diversity strategy, and even there its taking on a slightly different form than Android.  Specifically, Windows Phone hardware specs are very strict compared to Android.

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    The iPhone Camera Grows Up

    Tuesday, September 7th, 2010

    The iPhone camera and video always felt like a checkbox feature.  A feature Apple half-heartedly shipped so no competitor could say hey “but they don’t have a camera.”

    Those days are over.  With the iPhone 4 and iOS 4.1 Apple decided its time to double-down.

    The improved iPhone 4 camera and video permeates every aspect of the device’s design.  The industrial design borrows heavily from the famous Leica camera while up the stack the iMovie video-editing app is the first multimedia content creation tool that actually works.  In between are a new front-facing camera, more megapixel, LED flash, and more. See the full details below.

    Why Buy a Flip or Poot n’Shoot Camera

    If you intend to buy a smartphone in the next twelve months there is no sensible reason to buy a Flip (my four month old Flip found a place in the gadget cemetery) or point-and-shoot camera.  In fact, Apple is set to disrupt both of these markets – point and shoot camera and hand-held videos.

    50 Million Photographer and Videographer Prosumers Equipped 90% of the Day

    As the camera gets even better what market will they disrupt next – SLR?  I don’t know but I do know that this is an accelerating trend.  Over the next nine to twelve months fifty million plus people will be walking around with semi-professional quality camera and video equipment for most of the day.  If you add some of the Android devices this number will look more like 75M devices.  On this foundation new businesses will be formed that only a year ago were simply not possible.

    Timeline of the iPhone Camera Improvements:

    iPhone 1 photo quality

    iPhone 1 (June 2007)

    • 2 megapixels
    • No flash or auto-focus
    • No video

    iPhone 3G (June 2008)

    • No improvements.

    iPhone 3G S (June 2009)

    • 3 megapixels
    • Added basic video

    iPhone 4 (June 2010)

    Camera Improvements
    • 5 megapixel camera
    • Auto-focus
    • LED flash
    • Backside illuminated sensor (lets more light in)
    • Faster picture snap-time (A4 + iOS 4.0)
    • Front facing camera for Facetime
    Video improvements
    • HD video quality 720p
    • 30 FPSi
    • Movie App editing software

    iOS 4.1 (Sept 2010)

    • HDR (High Dynamic Range) Photos – example below.  See the AppleInsider review.

    iPhone 4 with HDR

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    Why Talent is Limiting Supply in the Smartphone OS Market

    Tuesday, August 17th, 2010

    How many smartphone mobile operating systems can the market support? Wrong question. In a market of billions of potential devices with limited network effects [1] and hyper-growth demand the market could support lots of smartphone mobile operating systems – where lots is defined as greater than six and less than twenty. The limiting factor is not demand but rather supply. How many companies can build a competitive mobile OS? The fire sale of Palm and the launch of Blackberry Torch makes it clear that the list of companies that have the skills and resources to build, launch, and sustain a competitive mobile OS is getting smaller each month. Watching this playout feels like watching the top riders in the Tour de France fight their way to the top of Col du Tourmalet — each and every year only the most talented riders keep pace as the ride becomes absolutely grueling.

    Companies are starting to fall by the wayside as the stacked teams of Apple, Google, and soon Microsoft take firm control of the race.
    Lets look at a checklist of capabilities one needs to launch a competitive mobile OS. Half way down this list you will realize that very few companies have assembled a deep and wide enough talent pool to execute a smartphone mobile os on a global scale.

    What you need What it gets you
    User Experience
    Multi-touch interface Parity
    Visual appeal Potential differentiation
    Multi-tasking Parity
    Apps
    Games, Games, and Games (1) Acquisition (great games sell devices)
    (2) Lock-In (spend creates switching costs)
    20,000 Quality Apps Parity
    Discovery & Merchandising Easy & trust worthy
    Media
    Music Lock-In (spend creates switching costs)
    Movie rentals Engagement
    TV show rentals Engagement
    Browser
    HTML5 + CSS3 Compliant Browser Parity
    Information Finding
    Search Utility
    Carrier financial incentive via revenue share
    Voice Search Cool demo
    Maps (limited number of suppliers) Utility + parity
    Navigation (limited number of suppliers) Utility + parity
    Communication Cloud
    Mail Utility + parity
    Voice Transcription Diffentriated
    PIM Services Utility + parity
    Payments
    One Click Buy (micro transactions) Parity + Frictionless commerce
    Global (90+ markets) Utility + parity
    Fraud Mgmt Utility + parity
    Launch Marketing
    $250M consumer marketing Consumer awareness.
    Percieved momentum for developers
    $50M App developer launch Studio compensation to seed app library and app competitions
    Devices & Distribution
    #1 and/or #2 Carrier in top 20 markets (first yr) Market coverage
    3 to 4 OEM’s building 8 million devices (first yr) Consumer choice of mid to high-end devices
    Developers, Developers, Developers!
    Popular IDE App quality
    Time to market
    Developer happiness
    Deep SDK Device access (e.g. camera, acceleramator)
    UI (e.g. animation, controls)
    Service access (e.g. maps, contacts, mails)
    Enterprise
    Security Parity
    Employee device & app provisioning Parity

    [1] Limited Network Effects: During the PC war application developers propelled Windows PC to its monopoly position – users adopted the OS with the widest range of applications and developers adopted the platform with the most users. In the mobile smartphone OS war the top 20,000 apps that matter will be replicated to the top five mobile os platforms in each market or region muting the possible network effects because the development costs are relatively low.

    Posted in Mobile, Product, Strategy | No Responses »
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    Myth of the Month: Microsoft Windows Phone 7 is Too Late.

    Sunday, August 8th, 2010

    Only two short years ago many thought Apple had built an insurmountable lead.  Android’s recent surge is proving that entirely wrong. Today, many believe that Microsoft is too late to the game.   This too is entirely wrong.  A lead of sixty million devices is not much of a lead in the mobile phone market.  To put this in perspective:

    • 140 million DVD units per year [source]
    • 360 million PCs (laptops, netbooks, tablets) units per year [source]
    • 100 million videogame consoles units per year [source]
    • 1.3 billion mobile phone units per year [source]

    Mobile phones sell more than all of those – combined.  The two largest handset manufacturers Nokia and Samsung shipped 175M mobile phones (mostly feature phones) in Q1 of 2010.  That is more than 3x the total global PC shipments for Q1 2010.

    The smartphone market of today is not what Google, Apple, Microsoft, HP, and Nokia are fighting for.   Today’s smartphone market is measured in tens of millions of devices per quarter across all the major players and by 2011 there will be 449M smartphone users (i.e. active subscribers).  The smartphone market of three to four years will be measured in hundreds of millions of smartphone devices per quarter.

    Let’s be clear why Microsoft is not too late to this game:

    • Massive market.  An early lead of 60M devices in a 1.3B/yr shipped devices is not much a of a lead.
    • Device churn: People churn through phones rapidly (PC turnover is ~4 yrs and phones is ~18 months)
    • Weak lock-In:  Users are not spending hundreds or thousands of dollars on content (music, apps).
    • Weak network effects:  Given low cost of developing apps, the important ones are being replicated to the top tier platforms.
    • Carriers want Microsoft: They don’t want a Google and Android dominated market.  They want at least four major platforms each with 25% of the market, and believe Microsoft has the patience (i.e. warchest) and persistence to be one of them.

    Full Disclosure:  I don’t work at Microsoft and I don’t own any Microsoft shares.  I simply believe the Android vs. iPhone conversation is myopic and ignores how insignificant of a lead both of them have established.

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