On market share

For the last couple of years, the standard way to look at the progress of the 'platform war' between Apple, Google and the now near-vanquished Nokia and RIM was 'smartphone market share': each platform's share of the share of the phone units sold each quarter that could be defined as 'smart'. The chart looks something like this. 

There's a fairly simple narrative here: Apple more or less flat for years at or around 20%, Nokia and RIM collapsing, Android (both activated and 'unactivated' - i.e. China) taking all the rest. You can also show it like this: 

Same data set, different chart.

However, there's a rather important problem with looking at the data like this: there is no such thing as a 'smartphone market'. Or rather, talking about the 'smartphone market' is like talking about the '3G' market or the 'colour screen phone' market: you're picking out a sub-segment that is going to grow to take over the whole market. And ignoring the growth. 

All of a sudden, you can see the growth.

This difference is particularly clear if you focus just on Apple. To take an analogy from another industry, Tesla's share of the 'electric car' market is probably going to fall over time, as more companies start making electric cars - but that's not the point, because its share of the 'car' market is probably going to grow. 

The whole mobile phone market is converting to smart. Apple is taking the high end and Android is taking the rest. Both are growing very fast, and Android is growing faster. But what matters is phone share, not smartphone share. 

The fact that Apple is taking the high end means that it has a disproportionate share of revenue and hence profit. Meanwhile, the fact that Samsung has squeezed most of the other branded OEMs down to a size at which it's very hard for them to make a profit means that Samsung and Apple between them make almost all the profit in the mobile handset industry. 

(This slide is taken from my presentation 'Mobile is eating the world')

At this point Apple advocates can risk getting a little carried away. 'Aha!', they say, 'Apple may only sell 10% of phones but it gets well over the half the profit, so it's winning the platform wars, or at least not losing.' 

Well, up to a point. The objective of any hardware maker is indeed to make a profit, and Apple's doing pretty well there. But it can't really take credit for the poor economic health of so many other OEMs - if anything that's down to Samsung. If there was some consolidation then those companies would be more profitable and Apple and Samsung's profit share would fall - that wouldn't mean their performance was deteriorating.

More importantly, the point of a platform war is the health of the platform itself, not necessarily the OEMs. Apple's Mac was soundly beaten by Microsoft, not by Gateway 2000 or any of the hundreds of forgotten failed PC clone makers.

That is, it doesn't matter to Google or to Android that Android OEMs are mostly much less profitable than Apple, so long as good Android phones keep getting brought to market (and they do). And the unprofitability of most Android OEMs tells us little or nothing about how much it matters to Apple that there are now a lot more Androids than iPhones out there. 

And then again, all the data we have about the systemically lower engagement of Android users means that 'platform market share' is also an unhelpful metric. 

To put this another way, looking at 'smartphone share' or 'profit share' or 'platform share' all tell you something about the industry, but all three metrics mislead you if you try to treat them as a way to see who's 'winning', because 'winning' means different things for Apple, Samsung or Google. After all, Google may well still make more money from searches on iOS than it does from searches on Android. There's no easy way to fit that into any of these charts. 

Google IO

My main impression of Google IO was not so much any specific announcement as the overwhelming sense of ambition and self-confidence. This was very reminiscent of Microsoft 20 years ago, at the height of its pomp (and of course just before it all started to go wrong). Just as Microsoft cross-leveraged Windows and Office, and then Internet Explorer, Google is cross-leveraging search, Gmail, Maps, Android and everything else, tying them together with Plus.

The objective is to index not just the web but the users - to drive better understanding of the data by knowing how and where people use it. This is the point of Google Plus - it's not a social network, but a unified Google identity to tie all of your search and indeed internet use together in a Google database just like Pagerank.  

This is coupled with a steady move away from standards, just a little like the old Microsoft 'embrace and extend' (and of course 'extinguish'). There's a long list of Google projects that started out based on open standards and slowly turned into closed proprietary products. This is often from perfectly sound technical reasons, but it does make me wonder if Google will ever, out of a desire to innovate and make the product better, deprecate IMAP access to Gmail, for example. And of course Google, like Microsoft, would be totally confident this was the right thing for users. 

At times this self-confidence can be somewhat comical. Larry Page appeared to claim that any laws over 50 years old shouldn't apply to internet companies, for example. And attacking Microsoft for not being interoperable enough in instant messaging would have been more convincing if Google had not, 30 minutes earlier, announced a new IM product that abandons interoperability standards. This lack of self-awareness - criticising other companies for things Google does too - risks putting people's backs up, but on the other hand 20 years of geek hatred of Microsoft didn't do it any harm. 

I also had a powerful sense of the absurdity of piecemeal attempts to attack parts of the Google franchise head-on. You need a powerful franchise of your own on which to build an alternative vision. After all, parts of Google's actual execution can be pretty patchy, and Apple, Facebook and Amazon have strengths of their own (as well as weaknesses). I'm also unconvinced that Google can win against some category-killers, such as in messaging (Microsoft never had much impact on Quicken despite years of efforts, for example). But coming from outside with a me-too product is a complete waste of time.

Coincidentally, Lotus 1-2-3 was finally shut down this week. 

How many apps do Android and iOS users download?

Both Apple and Google give occasional numbers for cumulative downloads of apps on their respective smartphone platforms. These are generally round numbers and they're often given at scheduled events (quarterly results, developer conferences), so we don't know how precise they are (did it pass 25bn yesterday, last week or last month?), but they're still useful. I've plotted the data sets in the scatter chart below: the wobbles in the lines are probably more to do with this precision issue than actual user behaviour. 

Android started later and is catching up in cumulative terms. Both are now at or around 50bn: Apple announced 50bn on 15 May and Google announced 48bn on the same day at Google IO. 

What does this look like on a monthly basis? It's possible to build a model that interpolates the run between the data points we're given to work out what the monthly run rate would have to have been. This isn't perfect, but it's all we have. The chart below shows my model's output for Google Play laid over the data from Google itself, to illustrate the process; I've done the same for Apple. 

Working this through, we can infer:

  • Android app downloads on Google Play in Q1 2013 were about 9.75bn
  • iOS app downloads were about 5bn (conveniently, Apple stated 40bn in December and 45bn in March, which makes the maths easy even for a history graduate like me). 

How does that relate to users, though? 

If we take trailing 24m unit sales as reported by Apple, the iOS base was 400m at March 2013 and 370m in December, giving an average for the quarter of 385m. Hence there were an average of 13 app downloads per live iOS device in the March 2013 quarter. 

Android is a bit trickier, for two reasons. First, to get to an active base we again have to rely on interpolating cumulative numbers, in this case Android activations, with the same precision problem. Doing this, and taking the same trailing 24m sales, my model says there were 590m live Android devices at the end of 2012 and 680m at the end of March, an average of 635m. This implies an average of 15 downloads per live device in the quarter. Given the degree of imprecision in the model, this is probably close enough to be the same. 

Just to repeat - the data is not exact enough for these to be more than reasonable approximations. It's quite possible that Apple is at 15 and Android at 10, or the other way around. 

But then there's the second problem: Google's data, both for activations and downloads, does not actually give the fully picture for Android:

  • There are many third-party Android app stores, including Amazon's, for which we have no data, and piracy also appears to be more widespread on Android
  • Android in China is largely absent from both activations and installs, since most Android in China is sold without any Google services and so never appears in Google's statistics

Finally, of course, we have no hard data at all for Google Play revenue. Apple gives cumulative revenue on the same basis. This allows me to estimate that gross revenue on the app store (i.e. including Apple's commission) is running at about $1 a month per live device, and has been stable for at least a year. Google is not so forthcoming. 

Finally, these numbers are accelerating. Apple did 5bn downloads in the three months from December 2012 to March 2013, and then another 5bn from March to 15 May. The lack of precision means we can't say this was double the rate, but the trend is clear, and it looks the same at Android, which announced 'over 2.5bn downloads' in the last month' For all the talk of HTML5, apps are as popular as ever. 

Note: both Apple and Google derive these numbers properly. Updates, re-downloads and downloads to a second device are not included. It's one download per user account per app. Matthew Panzarino at The Next Web went and asked. 

BBM and the rest

Blackberry gave a few operating metrics for BBM today as part of their developer event, at which they stated BBM will go onto iOS 6 and Android ICS+. There are: 

  • 60m active users
  • 51m using it for 90 minutes a day (definition unclear)
  • 10bn messages a day (sent and received)

Blackberry claims that this is 'nearly twice' the message/user/day volume of any other platform, but this isn't quite true: on a sent-and-recieved basis BBM does 167 but Whatsapp does around 100. On a sent basis (assuming a 50/50 split), Kakao does 56 and BBM does 83. 

The two charts below give a somewhat impressionistic sense of the landscape. These are just the biggest players, and the definitions are variable. WeChat has stated 190m active users as opposed to 300m registered: Whatsapp says 'over 200m' actives. In total, there are several billion accounts on all of the services out there (with massive duplication, of course): I've lost count of how many such services there are in total. 

BBM is now one of many such services, and not the biggest any more. Cross-platform may not be enough. 

(Note - I updated the second chart after Blackberry said it is quoting 10bn messages as both sent and received Link)

Cameras

Interesting that both Apple and Nokia are running campaigns around the camera. For Nokia this is a real point of differentiation: the Pureview camera tech is very good. For Apple it's part of the broader lifestyle positioning: don't worry about widgets, just enjoy your phone. 

The poignant thing, of course, is that Nokia doesn't have Instagram, or many of the other photo-sharing services: it had to launch the new 925 with Hipstamatic (remember that?)

Both, incidentally, are doing good advertising at the moment, unlike some others in the space. Although I'm not sure about the wisdom of a close-up on the ISO settings in the Nokia spot...

LinkedIn

LinkedIn annoys me.

It proliferates news aggregation features, and new apps, and all sorts of services. It recently bought an iPad news aggregator, you can use it as a publishing platform and it's spewing out money by selling CVs to recruiters. Reid Hoffman is a genius. 

But consider some of the things you can't do on LinkedIn. 

  • You cannot make a status update that your boss will not see. Want to tell your network you want a job, or you're having problems at work? You can't. 
  • Maybe that's too hard. How about seeing a list of which of your contacts have changed jobs in the last six months and might need your help? Nope. There's no way to do that. 

So, this is a social network for your professional connections, and there's no way to talk to your network with a degree of control and there's no way to see what they're doing.  

Then there's a job recommendation system. This is one role LinkedIn offered me recently.

LinkedIn KNOWS I graduated in 1998. I TOLD THEM. They have perfectly structured data, and they use it to offer a graduate job. Sadly, I didn't take a screenshot of the suggestion I apply to work as a SAP consultant in Germany, though I don't speak German or have the word 'SAP' on my profile. 

On mobile it's even worse. LinkedIn recently relaunched a completely redesigned iPhone app. It got a lot of attention for moving from hybrid HTML5 to native code, which is much faster. Here are some of the things the much faster native code can't do: 

  • Look up a contact's email address
  • Dial a phone number, reliably (if the phone number in the mobile app lacks a country code it won't dial properly: copying is disabled, so it cannot be edited)
  • Delete contacts
  • Reply to connection requests without accepting
  • Edit some of the unwanted news aggregation categories you're automatically subscribed to (and these categories are different from the ones you're forced to subscribe to on the desktop. Why?)

LinkedIn fails to hit absolutely basic product features that should have been in there 5 years ago, both on mobile and desktop. Instead, the core features get buried under successive layers of mediocre non-core products, the latest being a flood of me-too news aggregation that's creeping through the product like ivy, and none of which can be properly configured, let alone turned off.  

This is now so bad that the company has announced a 'Contacts' app for iPhone - which as far as I can see is simply LinkedIn without all the useless junk that's been piled on top. What would we say if Google announced a new 'Search' app, or Facebook a new 'share stuff with your friends' app? Contacts is what LinkedIn IS - it shouldn't be a side-project.

It appears that LinkedIn's back-end was a horrible mess and has had to be completely rebuilt in the last couple of years. This is an excuse of sorts for the chaos that is the interaction design on the website, with half a dozen different navigation schemes and bizarre archaic time-warps, like a Groups system that looks like a message board from 2002. The new 'Contacts' is perhaps one of the fruits of that rebuilding. But that doesn't explain why the new 'LinkedIn' mobile app is such a mess.  Nor does it explain why this new service is being launched on a wait-list basis starting in the USA. Waiting lists are cute PR for lightly-capitalised startups. LinkedIn has had ten years to buy servers. 

Now, I entirely understand that the LinkedIn business model is to sell my CV to recruiters, not give me useful tools to manage my network. I also understand that all the mediocre me-too news-aggregation is a way to try to get me to spend more time on the site, rather than visiting every month or two. But really, it needs to get the basics right. It needs to give me useful tools. Right now it's a not-very-good CV database with an interface that would be second-rate a decade ago, that I have no reason to stick with if something remotely, you know, useful came along. 

So, Reid Hoffman is a genius, with a great vision. I just wish he'd join LinkedIn, and implement some of it.

Falling interest in Kindle and Nook: the decline of ereaders?

I'm a big fan of Google Trends. It's partial, and you need to think carefully about what you're actually looking at, but used properly it can be very revealing of market trends.

So, caveats aside, this chart shows US search volume for Kindle, Kindle Fire and Nook. Three things stand out: 

  • A large and unsurprising spike at each Christmas
  • A really substantial decline for 2012 versus 2011 - close to 50%
  • The Kindle Fire, supposedly the future-proof successor to the Kindle, appears to be falling, not growing

Amazon, of course, tells us nothing tangible about how the Kindle is doing, but Nook's numbers (as reported by Barnes & Noble) are looking terrible, which is consistent with this.

It seems to me that several things may be going on here:

  • General-purpose tablets (mainly the iPad) are more proving more compelling to consumers than special purpose tablets like the Nook and even the (rather more capable) Kindle Fire
  • Cheap general purpose tablets (which are very hard to capture in Google Trends, as an aside) have removed or reduced the price advantage the Nook and Fire had last year
  • These devices have quite long lives - especially ereaders (i.e. the Kindle). Maybe most of the addressable market bought one in 2010 and 2011 and those people didn't come back to the market in 2012

There's a broader story here, of course, in the way that the growth rate of ebooks seems to be slowing as they reach a third or so of the market.

The UK data shows a trend that's slightly different: Nook is MUCH weaker (reflecting the absence of real distribution or brand) and Kindle Christmas interest held up better in 2012, probably reflecting the later UK date - ebooks seems to be about 1 Christmas behind the USA. However, the drop-off seems to be sharper in the beginning of 2013 than in the beginning of 2012, just as in the USA.  

The same point is even more clear if we look at search volume for 'ebooks'. The deceleration is clear.

Addressable markets for high-end phones

There are all sorts of ways to estimate the addressable market for a high-end phone like the iPhone. One way is to look at price sensitivity, the propensity of lower income groups to spend on expensive entertainment products and how that might be affected by the increasing capabilities of cheaper devices. Another is to look at the mobile operators that do and do not actually offer the iPhone, which gives you a figure for people who cannot in fact buy one, at least on subsidy, even if they want to (assuming they're not willing to switch operator). 

However, it seems to me that the central issue in sales of the iPhone and other high-end models is the availability of subsidies themselves. After all, if a phone is good enough for consumers to want it and the OEM has the scale and budget to provide it (an issue for some) then distribution is just execution and time, not a fundamental constraint. Ability to pay, too, is a moving target: people substitute spending for products they really want, and $600 isn't that much money over two years for a large proportion of the world's population. 

So actually, the real questions are the big numbers: how many people are getting subsidies? How many are buying phones? 

Hence, my first chart shows just how the smartphone install base compares to the total global population. 

There were about 5.2bn adults on earth at the end of 2012. Of those, around 3.2bn had mobile connections, though not necessarily phones (some people have a SIM but no phone, and many have multiple SIMs, which is why the number of connections is well over 6bn). Within that, roughly 1.1bn had 'smartphones' at the end of 2012, of which around 900m ran either the iOS or Android versions of Unix. (As an aside, it is pretty striking that almost a fifth of the earth's adult population has a Unix box in their pocket.)

So how does that relate to contracts, and hence subsidies? According to my old colleague at The Mobile World, there were around 1.6bn contracts in place at the end of 2012. 

For now, the overall smartphone base remains below the contract base, though it is growing fast. But the non-contract portion of the world's population is much bigger. If I turn the chart upside-down the point is clearer. 

At the end of 2012, 2bn adults had yet to buy a mobile connection of any kind, and another 1.6bn were on prepay and not eligible to get subsidies. It doesn't matter how many operators Apple or Samsung puts on distribution: those people are not going to buy a $600 phone.

However, that leaves about 1.6bn who might. 

Polarisation, continued

Playing with a new chart format. This shows quarterly handset unit revenue at the 8 'branded' handset OEMs, over the past three years. It includes all phones, not just smart.

The polarisation of the industry is pretty clear. Not shown: the 'other category - Chinese OEMs making up increasingly large volumes for which this sort of data simply isn't available.