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.

(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.

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.

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 (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)

iOS 4.1 (Sept 2010)

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

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.

[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.

• 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.

• New Magic trackpad  – this  is very cool as it brings full multi-touch to the desktop (review here)
• 27 Inch LED Display (review here)
• Upgrades to iMac line (review here)

A pretty significant product launch.  So, you would think with Apple passing on a big Steve Jobs press event at the very least they would swap the Apple.com homepage to promote the new products.  Not a chance.  They are laser focused on the iPhone.

Fragmented User Experiences

Each Android device OEM (HTC, Motorala, Samsung, etc.) has created their own user experience layer on top of the out-of-the-box Android UI.  None of them have done a particularly good job.  Beyond the poor execution these fragmented user experiences create two problems for Android.  First, it creates a learning curve as user upgrade their devices. Users abhor relearning basic functions (ever wonder why Mapquest still has significant traffic in the face of far superior products).  If you are running the HTC Sense UI for Android and one day consider upgrading to a Motorola device running Motoblur these UI differences will appear daunting.  HTC is perfectly fine with this kind of reaction as they are trying to build lock-in to HTC devices.  But what happens when the user says to themselves well as long as I will need to relearn a user experience why don’t I try an iPhone or Windows Phone.  The second and perhaps more serious risk to Google from these fragmented user experience is the user never carves away a piece of their mind for Android.  To the consumer Android means ten different things based upon what kind of marketing the carrier did for the device, which UI layer you were running.  In fact many people have no idea that they are even running Android as there is nothing unique about the user experience that says I am running Android.

Google sees this as a serious liability and future versions of Android are focused almost exclusively on improving the out of the box user experience to avoid this experience fragmentation.

Bloatware

Yes, everybody pre-installs applications – even the iPhone.  While the iPhone does pre-install maps, weather, finance.  Carriers selling Android devices are going much further.  They are pre-installing niche products like the Nascar and Football apps – Wired provides the gory details here.  For example, my Droid Incredible from Verizon pre-installs City ID (a zip code lookup application), Footprint (local guides), Teeter (a game).  It is bad enough to pre-install niche apps, they prohibit you from removing these applications.  With that kind of experience it’s not surprising that 80% of Android owners will not buy another one.

Mess of a Marketplace

The Android Marketplace is a living example of a philosophy taken to its extreme with negative consequences. Android believes in a laissez-faire market.  Let all the apps in and allow the use to decide what is best.  The Android narrative goes something like this. Apple is the North Korea of the smartphone market and we (Android) are the open enlightened western country – where would you rather live?   This positioning may work for a small subset of developers but for users who actually simply want to find and install the latest app it is really not so simple.   Jon Lech Johansen’s recent blog post Google’s Mismanagement of the Android Market captures it well:

one should not need a PhD in Computer Science to use a smartphone. How is a consumer supposed to know exactly what the permission “act as an account authenticator” means?

Another example of this mismanagement, try searching for Yahoo in the Android Market. If you don’t have an Android I included a screenshot of what you see.  The first result (as of July 25, 2010) is an app made by a company called Lovemaq.  They stole the Yahoo logo, wrapped a few Yahoo.com web pages into an Android app, layered some ads around the app, and threw it into the Android Market.

Updated July 29, 2010:  Android app that steals your data was downloaded by millions.

The Case for Microsoft

After killing Windows Mobile 6 and the KIN Microsoft finally has their shit together. They are bringing a unique user experience (opens engadget’s recent review) in Windows Phone 7, a history of cultivating and supporting application developers, and strong relationships with both enterprise customer and OEM device manufacturers.  Combine this with a stomach for losing billions of dollars to build scale and the door Android is leaving open Windows Phone 7 will be a serious competitor far faster than most people realize.

Image courtesy of Flickr twenty_questions

1. Limits Google’s Ability to Achieve Mobile Ad Dominance: The mobile ad business is a two-sided network. Apple is ripping away one side of that marketplace (or at least a very large chunk of it — 100M eyeballs).  This will limit AdMob’s (i.e. Google) ability to achieve critical mass in the mobile ad space during these formative growth years.
2. iAd Accelerator: With AdMob out of the picture advertisers will move their mobile ad budgets to other ad networks and clearly  the iAd network will grab some of these dollars accelerating its growth as it attempts to reach critical mass.  Remember, in any market with strong network effects the strong get stronger and the weak get weaker.  Apple is positioning iAd to get stronger.
3. Keeps Ad Innovation Alive (some): A key hallmark of an open system is the increased rate of innovation. By opening iPhone to select mobile ad networks the iOS platform will still benefit from the ad innovation these providers generate.
4. Switching Costs for Developers are Still Low: In a mature market developers could incur significant switching costs i.e. if AdMob had 10x better ad relevancy algorithms combined with an advertiser base 20x the combined competition it would be challenging for the others players to match the revenues developers were generating.  But in such a nascent marketplace nobody has these kinds of advantages.

• • Other mobile ad networks (Apple iAd, Millennial, Greystripe, and Mojiva) will quickly pick up the slack and provide comparable monetization rates.
  • The cost of switching to another ad mobile provider is not significant – a new billing relationship, a couple of lines of code, and new analytic tools to monitor your performance.
  • The vast majority of mobile developers making real money (now) are not doing so with AdMob display ads — they are doing it with paid apps.

Finally, do you really believe that app developers would give up access to 100M mobile users who have a credit card on file.

Mobile Design

• iPhone 3.0 GUI Photoshop Templates
• iPhone 4.0 GUI Photoshop Templates
• iPhone icons
• Android GUI Photoshop Templates
• Android Device Display/Screen Sizes
• Windows Phone 7 UI Design and Interaction Guide
• Windows Phone 7 GUI Photoshop Templates
• Windows Phone 7 Application Bar Icons
• Better Mobile Web Forms
• Mobile Touch Target Sizes
• Android Human Interface Guidelines

Mobile Development

• Android SDK from an iPhone Developer’s perspective
• Lessons Learned Developing Flickr Site for Mobile
• jQuery Plugin for Mobile Web Development
• HTML5 Web App Tutorial for iPhone Safari
• Sencha Touch Framework (HTML5 toolkit)

Mobile Technologies

• Location Technologies 101 (Wifi triangulation, GPS, Assisted GPS, etc.)
• How Accelerometers Work (opens pdf file)
• How Projected Capacitive Touch Technology Works (i.e. touch screen)

New Forms of Mobile Search & Discovery

• Gesture based Search (Yahoo! Sketch-a-Search)
• Image Recognition based Search (Google Goggles)
• Augmented Reality (Yelp: “Monocle”)
• Audio Search for Music (Shazam and SoundHound)

App Store and App Marketing

• App Store Metrics: Free vs. Paid, Growth, # of Apps, by App Store (Apple, Android, etc.)
• App Store Economy
• How to Launch an App on the App Store:  Charting the App Store
• The Two App Stores:  The Premium vs. Cheap App Store (deals with App Store pricing strategy)
• Building a Screencast for iPhone Apps

Mobile Monetization

• How Much Does Google Make on Each Android Device
• Performance of In-App Purchases
• Microsoft guarantees Verizon $400 for default search position

Web Businesses Adapting to the Mobile Era

• Kayak: 5% of Kayak’s Traffic Comes from Apps
• OpenTable: 3M Diners Sat Through OpenTable Mobile Apps (Worth $150M)
• Amazon: Mobile revenues 2009: $600M, 2010 on track to do $1.5B
• eBay: 11M downloads of eBay app, $1.5B in revenues from mobile channel

Mobile Strategy

• The Two Faces of Android: The Open vs. Commercial version
• Mobile Fragmentation is Forever
• Are People Willing to Pay for Digital Goods on Mobile Devices?
• What is Strategic for Google?
• The Very Personal Computer Era, Beyond PC
• Mobile Internet will Overtake PC (Mary Meeker presentation at Web 2.0 conference)