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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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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.

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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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Android is Leaving the Door Open for Microsoft’s Windows Phone 7

Sunday, July 25th, 2010

When discussing the mobile landscape many people I talk with dismiss Microsoft’s upcoming Windows Phone 7 as too late.  They are definitely late, but not out.  Given a large enough market Microsoft knows how to execute (see gaming and enterprise software).  Additionally, the strong number two player in the market – Google –  is leaving the door open for them.

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

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Mobile Design & Development Resources

Wednesday, May 26th, 2010

I have accumulated lots of links that serve as resources for understanding, building, and launching mobile apps and services.   Every so often I will share a data point or an insight I gleaned from these resources and somebody will ask me for the link – I then go digging.   To reduce the amount of digging I do and provide a better way to share these mobile resources I will start to organize them by topic here.  If you would like to add something to this small directory please add them in the comments.

Mobile Design

Mobile Development

Mobile Technologies

New Forms of Mobile Search & Discovery

App Store and App Marketing

Mobile Monetization

Web Businesses Adapting to the Mobile Era

Mobile Strategy

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65,000 New Android Devices Ship Each Day. How Much Are They Worth To Google?

Friday, May 14th, 2010

Google recently announced that partners are shipping 65,000 new units of Android each day. How much is that worth to Google – in revenues, not brand equity, rather real hard cash?  Some simple math will provide us the answer.

First, What % of Android Devices are Shipping with Google as Default?

Most users are default users.  They use the email service, search engine, browser, etc. put in front of them.   Of these 65,000 Android devices, how many have Google as the default search engine? Almost all.  Lets assume 95% because there are just a few Android devices shipping with Yahoo! Search as the default.  So, 61,750 Android devices ship each day with the home screen search box or built-in search button hardwired to Google.

How many searches per month does an Android user perform?

Last year Google and Stanford published an excellent report on mobile search query behavior comparing the search usage patterns across PC, iPhone, and feature phones.   The report discloses two important numbers: the average number of search sessions (8.06) the average number of queries per session (1.86) users perform on their iPhone over a 35 day period.

Multiplying those two numbers (search sessions by queries per session) produces the average number of queries (14.7) an iPhone user does per 35 days.  Lets adjust this number upwards by 50% for two reasons:

  1. The data-set is from the summer of 2008. Since that time as the underlying devices and networks get faster the number of queries users perform increases.
  2. Android devices ship with a search box sitting on the home screen or a built-in search button. Whereas, the iPhone the web search box is out of sight integrated into the Safari app.

After adjusting the number upwards by 50% an Android user is performing 22 queries per 35 days, or 19 per 30 days to keep our units similar.

65,000 New Android Devices are  Worth: $7,011/month

$7,000 a month — thats it.  Lets see how we get to this number.  The 61,750 Android devices with Google as the default are generating 1.2M queries per month (# of shipped Android devices times monthly searches per Android device).  At an RPM (revenue per thousand) of $20 that is $23,370 a month or $0.36 per device/month.   Now, hold on. Google does not keep all of this revenue.  Google is paying carriers a traffic acquisition cost (commonly referred to as TAC) anywhere between 60% to 80%.  Using a 70% TAC we get our answer:

Google earns $7,011 a month in search revenues from the 65,000 Android devices that ship each day.

Google earns $0.11 a month in search revenue per shipped Android device.

Looking Ahead: What is the Search Lifetime Value of an Android User?

Android users are worth more then just $0.11/month because they usually keep their phones for longer – twenty-four months or the average contract length.  Assuming twenty-four months the lifetime value of an Android user is $8.63 (monthly search revenues per device x 24 months).  Put simply, each Android device shipping is worth $8.63 in search revenues over the lifetime of their Android device.  As Google improves monetization of mobile search queries this number will go up.  Using a TAC of 70%  Google earns $2.6 in search revenues per user over the life of an Android device after paying the carriers.

So, why was Google trying to bypass carriers and sell Android phones directly to consumers?  Simple economics.  By selling directly they earn 3x more on each Android device, it’s the difference between $2.6 and $8.6.

Notes:

  1. If you have better data you can change the assumptions, the spreadsheet is here
  2. I did not calculate the search monetization opportunity from the Maps application.  I believe a significant percentage of local search queries are moving from web search to the Maps application, I am not aware of sufficient data to estimate this revenue.
  3. Search monetization differs by market — I do not account for this.  I assume $20 RPM across all markets.

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