Phases in mobile

This was the launch ad for Orange, in 1994. Orange was one of the very first mobile operators to think that mobile could be a consumer product rather than a piece of technology sold to niches, and one of the first to think in terms of brand and brand values, and the products that might flow out of them. The founding CEO, Hans Snook, was crazy enough to suggest that pretty much everyone would have a mobile phone. 

It's probably one of the best ads ever made. 

Also, note the freephone number and the lack of any suggestion of data services. All about voice. 

This video was made by Orange in 2000, 6 years later, the year of Europe's €110bn 3G spectrum auctions. At this point there were no phones with colour screens on sale outside Japan, but they did a pretty good job of predicting the future - it's fun to try to spot how many of those services have now been launched. None by telecoms companies, of course. 

This, of course, is the first of the original launch ads for the iPhone, in 2007, 7 years later. The fascinating thing about this video, today, is how much that we now take for granted was then entirely new. And, of course, this changed the world again. 

Finally, another 7 years later, Apple's note to the developers for a platform that didn't exist before. By the end of this year around 2bn people will have a smartphone, spending around $20bn a year on apps. 

This, of course, begs the question of what extraordinary leap we'll have made in another 7 years. 

Android fragmentation and the cloud

Game Oven's post on Android gyroscope support is a nice illustration of a general issue (another good illustration here): Android fragmentation is both massively overstated and massively understated, depending on what you want to do. 

On one hand, Google has been quite successful in reducing the impact of Android version fragmentation. Around three quarters of the Android devices that hit Google Play are running 4.X, but more importantly, Google has moved its own key services (maps, payment, notifications etc) out of the OS itself and into a software layer, 'Google Play Services'. By putting key platform APIs into a software layer that can be updated in that background over the air, Google has reduced its dependance on OEMs to produce firmware updates - it can update its own tools any time it wants, across the great majority of phones. When Google announces new APIs for Maps or notifications at this year's IO, they'll be available on devices running year-old and two-year-old versions of Android. There is no more fragmentation if you're using Google's cloud.

On the other hand, hardware fragmentation is if anything accelerating. This chart from OpenSignal, from last summer, is a nice visualization of the market dynamic. 

Android fragmentation isn't of itself a bad thing - it's inherent in the choices that Google made. This is what 'open' and 'choice' look like. And I doubt if it's possible to have an 'un-fragmented' device landscape that includes both $600 devices and $50 devices: some scattering in capability is part of the deal. If you want to have thousands (literally) of OEMs, and a huge range of choice and price points, well, you're going to have different devices with different capabilities. 

This is only interesting, then, to the degree that it has broader consequences. The consequence of Apple's approach is that pretty much everything behaves in predictable ways, but you have a very narrow range of devices at a narrow range of prices (and screen sizes), and that severely restricts the addressable market. More people can afford $50 phones than can afford $600 phones. The consequence of the Android approach is that you have a much wide range of devices and prices, and a much larger market, but anything on the bleeding edge doesn't work predictably at all. This doesn't just apply to the gyroscope - it also applies to varying degrees to almost anything trying to do clever things with the hardware. This is also true even if the API does actually work as advertised - there's not much point trying to do a mass-market Android NFC deployment when you have no idea how many of your users even have NFC Androids (and the users themselves don't know).

One result of this, as I've said before, is that Apple and Google are focusing their innovation in different areas. Apple is moving down the stack with integrated hardware/software experiences (iBeacon, fingerprints, M7 etc) that are hard for Android to match, and Google is moving Android up the stack with Google Play Services, the cloud and machine learning, which is hard for Apple to match. 

The paradox for developers, meanwhile is that the more open and extensible platform can actually be harder to hack on. When you buy two Samsung phones of the same model and brand in two different countries and find they have different camera drivers and your app will crash on one or the other (or both), where do you focus your seed funding? You have limited resources and limited time and you need to hit milestones to get your next round, after all. Plus, the users who want to install your cool new apps are still concentrated on the iPhone. Again, this is a paradox: Android is the platform best for early adopters and iOS the one best for late adopters who just want something that works, but the market adoption is the other way around. That's one of the reasons this chart is both unfair but relevant.

Which type of innovation is crucial to a platform? With the current dynamics, people like Game Oven are going to keep doing iOS first and Android second (if at all), and that keeps the majority of the best users on iOS and Apple's machine turning over - the classic ecosystem virtuous cycle. But if, as many people suggest (Fred Wilson most recently) the most interesting and important innovation will happen in the cloud, then Google's tradeoff might win over Apple's trade-off - Google's comfort zone beats Apple's.

There's another paradox here, though: if all the best stuff is happening in the cloud, then you'll buy the device based not on apps and developer support but on design, quality, fit and finish... that is, all the things Apple always leads on. The web saved Apple 20 years ago, because with the web you could choose the best hardware and UX regardless of the ecosystem - you could buy an iMac and not worry about the software. So if everything goes to the cloud again, is that really an existential problem for Apple?

(As an aside, note this post I wrote a year ago about the different issues facing iPhone and Android.)

Notes on TV

One of the reasons it's difficult to talk about the future of TV is there are really several separate sets of issues that are in play, which are pretty much self-contained, and depend on quite different factors, and all of which need to move before things can change. 

The US problem

First, the USA is a massively over-served Pay TV market. Pay penetration is very high (90%+), ARPUs are very high by international standards, bundling is very rigid, and so there are lots of people who feel obliged to buy much more than they really want.

Hence, there is a lot of pent-up demand for some sort of unbundled approach - to be able to get just the channels that you want and pay less. But the bundling model is very deeply embedded in the structure of the US TV market, at multiple levels of the value chain, and there are some very strong incentives for a lot of industry participants to continue with the status quo. In other words, everyone hates the way the US TV industry works, except for the US TV industry. This makes the current model very rigid, but also of course potentially very brittle. 

Tech industry attacks on this model have tended to come from the distribution side - they put together a new distribution platform and then go and ask content owners to give them the content to offer an unbundled service. But they very quickly discover that coming to Hollywood with a distribution platform doesn't get you a cup of coffee - you need to propose a more profitable economic model, and back that up with cash on the nail. A physical distribution platform itself is not where the value is - it's the possession of a huge audience or valuable content that gives you power. And it's tough for a platform with no customers to offer better economics than a platform with tens of millions. 

More broadly (i.e. beyond just the US bundling issues) it's helpful to think about TV as a virtuous circle. Audience gives revenue, revenue lets you buy great content, and great content gets you more audience. This is self-sustaining at each level. A big TV channel is big because it's big, not because it has access to a linear distribution path. 

This is a little like orbital mechanics: if you want to go to orbit you need to burn a lot of fuel, and the higher you want to go the more you need to burn - and having a better-looking rocket doesn't make much difference. Money for content is the fuel of the TV business. 

Hence, the interesting thing about Netflix is not so much the physical distribution platform as the use of data to attack the cost of content - if you can make hits more reliably you can get the same audience for less money spent, since you waste less of it. To the TV industry Netflix would look like just another TV channel without the use of data.  

Finally, if the US TV market is over-served, most others are not. The UK is arguably a 'goldilocks' market - half of households have pay TV and are broadly happy with it, and half don't and are broadly happy with that. Meanwhile some European markets are probably underserved for pay TV - more people might like a pay TV product than are currently being given one. So the whole US 'cord cutting is the future' discussion is not necessarily broadly applicable. But the size of the US market (and the physical location of most of the tech industry) tends to shape the debate. It may also focus attention on the wrong problems.

The user experience problem

Next, there is the user experience. It seems pretty clear we're in a 'pre-iPod' phase at the moment. That is, all of the technology is in place, more or less, but no-one has quite managed to package it up in the right way to give the right user experience. There isn't yet a totally fluid way to browse, choose and display what you want on your TV. Lots of people are poking around it (including Apple and Google) but it doesn't seem like we have that magical 'aha' moment just yet.

There are also a bunch of route-to-market problems here. Integration inside a TV is great but TVs are only replaced every 5+ years. Pay TV tech, unlike mobile, is a balkanized mess of standards, with no GSM/UMTS that you can implement and sell globally. Pay TV operators are the gatekeeper to any other equipment in the living room (at least in markets where pay has a large share) unless you can make it really cheap - a couple of weeks before the Chromecast launched I suggested that the next Apple TV should be a $50 HDMI dongle, and the tech for that is moving forward in interesting ways. And of course we also have tablets themselves, which are certainly replacing second TV sets and may take a real share of primary set viewing too.

At the moment there are a lot of rumours that Apple has a new product - but the rumours mainly focus on how it would deal with the unique US content ownership and distribution structures, not the user experience, which is actually the real question. That is, in the US a big part of the user experience gap is the simple availability of content per se, but elsewhere that is much less of an issue. In the UK, for example, all the main broadcasters put the last 7 or 30 days of content online for free, on any device, with no restrictions or messing around. iPad, iPhone, Android, Smart TV, games console - anywhere, any device, any time. And yet peak streams on the BBC's iPlayer service are 600k or so, where peak linear TV viewing is over 20m, and linear TV viewing shows no sign at all of declining. 

How do people really want to watch?

This in turn points to another question, and perhaps a slightly subversive one: how do people actually want to watch 'TV' (or whatever we call it)? Hundreds of millions of normal people really do just come home, turn on the TV and watch whatever's on - if you offered something less passive, do we really know how many would do it? That is, the idea that no-one would watch linear broadcast TV if on-demand worked 'properly' (whatever that might mean) is really just an assumption. 

The really big question here is how TV viewing would change if you did move from the current model of TV as a largely undirected, passive experience, to one that required (/'allowed') you to make choices. If you come home and turn on a random piece of generic light entertainment you'll watch it, but you might never choose to watch it, much less search for it. So is that a bundling problem or a recommendation problem? Should we think of TV viewing hours as propped up by filler shows in the same way that CD albums were full of filler tracks, and that if we go to a fluid on-demand environment people might just stop watching that filler? Or would the right passive programming system - 'Pandora for TV' replace one passive experience with another, more tailored and targeted one, with the greater accessibility of long-tail content taking up the slack? Of course, a lot of TV channel branding and programming is about just this - in effect a lot of TV is 'Pandora for TV'. Either way, this is really about unbundling shows from TV channels, not unbundling channels (or on-demand channel brands) from cable TV subscriptions. And (looking back to Netflix) how would that cascade back though the TV production system? How many fewer shows might be made? How would they be funded? And what would happen to the 'golden age of TV'?

Cards, code and wearables

Google has announced 'Android Wear', a new extension of Android to power smart watches (it also realised some teaser renders of Motorola smart watches that are due for this summer). The Wear concept is that smart watches are remote touch displays for an Android smartphone. They will show the time, accept touch and voice input, display the Google Now feed and they will display all the notifications that apps on your phone produce. Developers have options (which will be enhanced in future) to customise how the notifications their phone apps produce behave on the watch. But they don't get native code at all - the developer isn't running code on the watch, really. The device is really an extension of the phone's Android OS itself, not an extension of your app. 

In effect, the watch is a device for using Google Now and cards that apps on the phone send to it. 

Now contrast this with the rumours of a new Apple 'Healthbook' app. I hate speculating upon Apple rumours, because they could come true next week, next year or never, but they provoke an interesting idea. 

Suppose, for the sake of argument, that Apple does indeed plan a health app that's card-based, somewhat like Passbook. What would happen when you buy and turn on a blood pressure monitor that is certified for 'Healthbook'? Well, one would expect that Apple would use the Bluetooth LE auto discovery that's already in iOS7 to detect it automatically and tell you. And then, suppose it offers to install the Healthbook card to manage it (either from iTunes or from the device itself) - an HTML/Javascript package that runs in the Healthbook sandbox in some way. Suppose it does the same for any sensor you might buy? Then Apple has created a zero-setup platform for personal health devices. No apps, no native code, no app store, no configuration at all.  

This would be one answer to why Apple's recent hires of 'wearables experts' sound a bit like a team for a hospital device rather than a watch, measuring various quite technical things - because Apple plans to enable such devices, not try to pack every single one into its own device. That is, the straightforward sensors should live in the phone (like the pedometer that's already in the iPhone 5S) and the complex and demanding ones should be enabled by an Apple platform, not become part of an Apple device.

Today you can manage a bunch of heath sensors with a bunch of apps, but that seems less... obvious, to use an 'Ivism'. If I have a wearable sleep sensor, a pedometer in my phone and a wifi scale (without even getting into glucose metres and more specialised things) should that be three apps that I install separately and open separately? If I buy a small computer I wear on my wrist, should it run apps (especially given that with the current state of technology it'll need to use your phone to go online anyway)?  If you have multiple devices, where should the code live, and how do you shape the user flow based on what makes sense rather than on where you put the code? Does a sensor need a screen? Does a screen or a sensor need to be smart? Is the right UI something totally custom that's installed from a store, or something more standardised?

This question of where the code lives also of course applies to TVs and to cars as much as to wearables. With AppleTV and Chromecast and Carplay, Apple and Google are saying that though everything is becoming a computer, actually the 'smart' part should be concentrated in the smartphone or tablet - something that's easy to update, that's replaced every couple of years, and that has a rich touch interface, and everything else should be a dumb sensor or dumb glass or both. And so the apps should only be in one place, and whether it should be an 'app' in a strictly technical sense is also up for debate. 

During the 'apps versus HTML' argument of a year to two ago, someone said that the issue is not what coding language you use but how you get an icon onto the user's home screen and whether indeed they want  your icon on their home screen. The conversation more or less crystallised around the position that apps are for the head of the tail and the web is for the rest. But Android Wear is not the web or an app. Neither is Google Now, and neither is the Healthbook I just described. 

Now, suppose you hesitate outside a restaurant and look at your phone, and iBeacon has already activated a Yelp review card on your phone or watch, or Google Now has put a scraped review up, or Facebook tells you 10 of your friends liked it? Is that the web? Or apps? How do you do SEO for that? What's the acquisition channel? Some of that might be HTML, but you'll never see a URL. 

It seems to me that the key question this year is that now that the platform war is over, and Apple and Google won, what happens on top of those platforms? How do Apple and Google but also a bunch of other companies drive interaction models forward? I've said quite often that on mobile the internet is in a pre-Pagerank phase, lacking the 'one good' discovery mechanism that the desktop web had, but it's also in a pre-Netscape phase, lacking one interaction model in the way that the web dominated the desktop internet for the last 20 years. Of course that doesn't mean there'll be one, but right now everything is wide open. 

This thought, incidentally, is one of the things that prompted this tweet. 

Ways of thinking about Google

There's a fairly obvious and straightforward way to think about Google - it's an ad company and a search company, and it cares about reach. The purpose of all its web projects is reach, and the purpose of Android and any other mobile projects is the same - more reach, more search, more advertising. 

This is certainly true up to a point, but it doesn't seem to capture all of the things that Google does and all the plans it might have. Now, for example, is not really search or advertising (arguably it might become both, but it doesn't really need to). It seems to me that a better model is to see Google as a vast machine learning project, that's been fed with information for a decade or so. The text box that you enter a search into, that we're all familiar with, is really just an output (and of course input) for this underlying project, as is advertising. Now, Maps and Books are others, Glass and many future projects are others. It's all about ingesting the world's information and learning from it.

Hence, one could suggest that plain old web search is just the first expression of the Google vision in the same way that books were just the first expression of Jeff Bezos's vision for Amazon (which at one point he planned to call 'Relentless.com'). 

This may also be a good lens for looking at the countless abandoned Google projects. Some types of sharks apparently bite things to see if they're edible - they bite surfers to see if they're actually seals. If not, you get spat out (this may not be much comfort for the surfer). In the same way, Google tests segments to see if they fit the automation + machine learning implementation model. The dMarc acquisition is a good case study - once Google worked out that making local radio advertising work would require lots of local sales forces, and would change the character and operating model of Google, it got out out of the space. 

Nest, though, is a puzzle. One could see it (and indeed self-driving cars) as a data collection story - reach, in other words. But there isn't really a very strong information story here. There's nothing here that you could eventually search for, or to help understand what a search might mean. 

Hence, an interesting parallel pointed out by Michael Mace here after the Nest deal and John Gapper at the FT (account required) here last summer is with GE.  As John put it: 

"The best comparison for Google seems to me not Microsoft in the 1980s but General Electric in the late 19th century – the age of electrification. Like GE, Google is a multifaceted industrial enterprise riding a wave of technology with an uncanny ability not only to invent far-reaching products but also to produce them commercially.

Hence, one could argue that Nest or self-driving cars (and the next big hardware move that Google does) are not really about understanding 'information' in any sense, and certainly not about advertising, but about finding ways to deploy being very good at machine learning and, say, connected systems, just as GE's business is to be very good at making big complicated precision-engineered pieces of capital equipment. In that sense, Tony Fadell's vision is very apt - to 'take unloved things' and connect them to the software revolution than my new boss Marc Andreessen talks about. If software is eating the world, then much of what is eaten is probably running software that's at least partly in the cloud (especially if it doesn't really have a screen), and that can benefit from machine intelligence and big data, and isn't that what Google does? 

Android instability

If you were a PC OEM from, say, 1990 to 2010, you operated in a very clear ecosystem. You outsourced much of the innovation to Microsoft and Intel. You knew exactly what WinTel were doing, both because their roadmaps for the next few years were actually public and because Microsoft and Intel had very clear and widely understood strategies. Moreover, the core, fundamental strategies of OEMs, Intel and Microsoft were pretty much aligned. Everyone wanted more PCs to be bought, and preferably a good number that were high-end and high-margin. Intel, Microsoft and CloneCo all lived for the same things. CloneCo didn't necessarily make great margins (and eventually got killed by Dell, perhaps), but it knew what the game was. 

The Android ecosystem today is superficially similar to the PC ecosystem, but I'd suggest that the clarity and alignment of interests of the PC ecosystem isn't present in anything like the same way. As an Android OEM you have very little idea what Android will be in 3 years - partly because Google itself may not have a fully-formed idea. There certainly aren't public roadmaps stretching out years in advance. 

It's also questionable how much alignment of interest there is. Google certainly wants Webkit everywhere, and arguable Android everywhere (or, more precisely, Google Plus everywhere). But that doesn't translate to a burning hunger for an aggressive phone replacement rate at high prices. Indeed, Google Play Services reduces Google's interest in device replacement as a way to drive service penetration. As an Android OEM, your ecosystem creator doesn't benefit directly from the health of your industry. A healthy PC market was Microsoft's driving objective - 'A computer on every desk and in every home'. That's not quite the case for Google and the sales of Android smartphones - they're reach, and a means to an end, but not the reason why Google exists. 

Next, it's not clear what a sustainable position for an Android OEM looks like. All the brands except Samsung are sub-scale and failing, and while Samsung looks dominant it is clearly feeling paranoid: the growth of the Chinese Android OEMs outside China is a huge question. Lenovo has made its first move by buying Motorola but the real story is whether 2, 10 or 100 others follow it, and if so how. 

Finally, Google's control of Android itself is a question. Amazon forked it, but with limited broader effects. Almost all Android in China lacks Google services but then Google is largely absent from China anyway. The ways that forks of Android might become relevant outside China (and Google's tools for preventing this) are complex and a topic for another post, but we can't rule this out. Indeed, a lot of the most interesting ecosystem innovation is being done on top of Android rather than as a would-be competitor to it. 

On one level, then, the smartphone platforms wars are over - iOS and Android both won. But actually, nothing is finished - we just move onto new questions. 

Interaction, canvases and ecosystems

Suppose that in 5 years or so I send you a Yelp review of a restaurant, from my phone to yours. What will that mean? 

  1. First, I might well use something like Airdrop, or touch my phone to yours to pass it across, or tell Now to give it to you, or indeed Now might decide to give it to you without my even explicitly asking. Or the review might be invoked by a Bluetooth LE beacon as you hold your phone next to the menu on display by the door
  2. But for the sake of simplicity, suppose I send it to you using an internet messaging app - either one built into the OS or a third-party one - Facebook, Whatsapp or more probably one that doesn't exist yet but by then has 15 engineers and 1bn MAUs. 
  3. It seems pretty unlikely that you'll see a dumb URL string on your screen. Rather, you'll get something rich and interactive, within the message.
  4. And you'll be able to go into that experience and tap the number to call the restaurant, or make a live booking, or swipe through photos.
  5. And if you tap 'book', it'll pass them a $10 booking fee in bitcoin, authorised with a fingerprint swipe. 
  6. Now suppose you decide to save this item, as an icon on your home screen, or some other yet-to-be created place. 

Now, what were you using? An app? a widget? Native code? What programming language? Did you install an app or surf the web? I'd suggest that none of those questions would really mean anything, at least not as we think of them right now. The programming language matters much less than the user flow. And some of this example sounds 'webby', but Google is the first to advance interaction models that are not remotely webby (such as Now). 

This is a pretty simple illustration (an expansion of the super-hot card metaphor) of a broader point I've made before: on the desktop internet, the web was by far the dominant model and that didn't actually change very much for well over a decade (before that, the interfaces of Windows and Mac were also very stable for a long time). But on mobile, not only are other models just as important as the web, but they're not remotely stable, settled or mature. The platform war may be over but that doesn't mean things are settling down. 

So I have very little idea what precisely I would mean if, in 5 years, I were to say 'I installed an app on my smartphone'. Further, I'm pretty sure that if it's an Apple smartphone it will run an iteration of iOS but I'm rather less sure what Google will have done with Android and Chrome by then. And of course I might be running a fork of Android from Amazon or, perhaps, Microsoft. 

This is the key reason why the new social messaging apps are so interesting - not because they have users and inventory now, but because they can be vectors for some of this sort of behaviour - a third acquisition, discovery and distribution channel besides Facebook and Google.

This may also have implications for any discussion about what it means for Apple that its ecosystem will have a minority of mobile users. We need to think about what it means to call a ecosystem that might have 800m-900m live devices 'minority', but we also need to think about what 'ecosystem' might mean. What, if any, 'winner takes all' dynamics operate in this environment? One reason the Mac didn't die was because the web changed what it mean to be a computer ecosystem: the mobile ecosystem has lots of changes to come too. 

Ecosystem maths

I'm pondering Apple's results, sitting in a cafe in-between meetings. It's been apparent for years that Apple was camped out at the high end of both tablets and phones, and that Android would take almost all of the rest. But it's worth working out on the back of a (rather large) envelope exactly how that would play out, assuming that Apple's pricing strategy doesn't change and of course that nothing else changes (which of course are rather unsafe assumptions). Hence: 

  • Right now, on the basis of a 24m replacement cycle, there are perhaps 290m iPhones in use on earth. Depending on the second hand market, this might be larger. 
  • Apple has sold 195m iPads - perhaps 180m are still in use. 
  • There are also a fairly small number of iPod Touches in use - perhaps 20m

That adds up to a rough estimate of 490m live devices. For comparison, around 900m Google Android phones were sold in the last 24m, and probably another 110-120m Google Android tablets ('Google Android' = 'not China'). 

Where might this go? Apple now has about 10% of global mobile phone sales, rising steadily. It's important to note that Apple is not losing share of phone sales to Android - it's just not taking as much share as Android. There are between 3.5bn and 4bn people with mobile phones on earth (there are far more connections but many people with multiple connections). This number is also rising slowly, but all the growth is from the very low end. 

So. 

Over the next few years the great majority of that 3.5-4bn will convert to smart (and indeed the more important variable is affordable data plan penetration rather than smart penetration). If Apple continues the current strategy and share growth, it will end up with (say) 15% unit share. 15% of 3.5bn is 525m. (I told you this was a BOTE calculation.)

The great majority of the rest will go to Android (though quite what 'Android' will mean is an open question). That means perhaps 2.5-3bn Android phones in use. There might be some Windows Phone as well (assuming it doesn't become an Android fork) but we can ignore it for these purposes.

No-one has much idea what the total addressable market for tablets really is, let alone premium ones such as the iPad, and the recent sales trajectory is somewhat lumpy. If we assume a four year lifespan for iPads as the tech stabilises and look at the recent run-rate, that suggests a stable base of, say, 300-350m. This gives us a base of perhaps 850m iOS devices, with a lot of ownership overlap.

There will also be an ungodly number of Android tablets, of course, but we know neither quite how many nor what they'll be being used for (right now, mostly TV, it seems). 

What does this mean? What does it mean for Apple to have a platform with a minority of users, indefinitely, in mobile? An minority ecosystem with only 850m devices? Or even 490m?

Certainly, this isn't 'Windows versus Mac all over again'. There are now 490m iOS devices in use, but PCs only hit that number in around 2000, long after Apple lost the last ecosystem battle. Apple sold 51m iPhones last quarter - total PC sales in 1995 were 59.5m. That is, the iOS ecosystem now is much bigger than the winning ecosystem back then.

Even beyond that, all the other dynamics are different - the smartphone market is not driven by corporate buyers who demand commodity product based on bullet points and don't care about design or user interfaces, for example. The relative market share of an ecosystem is relevant, but it's not the only thing that's relevant. We need also to think about value share, engagement share, and all the other dynamics that drive the viability of an ecosystem. The assertion that an ecosystem with close to 500m users now and over 800m in a few years will not be viable because there's another that's bigger seems pretty simplistic. It can't be taken for granted that any 'winner takes all' dynamics will work like that. 

More importantly, though, these questions will probably have become irrelevant by the time we find out the answer. That happens quite often in tech. To me, the platform wars are now much less interesting than what happens on top of the platform. On the desktop internet, we had close to 15 years of stability with almost all online activity going through the web browser, but on mobile it is far more complex already and also far less stable. Nothing is settled on mobile. I have no idea what it will mean in 5 years time to say that I 'installed' an 'app' on an 'Android' 'smartphone'. All of those terms could change completely, and with it what it means to say 'ecosystem' or 'market share'. 

Note: for supporting charts, see this post

Mobile interaction models

The interaction model for the desktop internet was pretty much settled 15 years ago. It turned out that the answer was a web browser. Stand-alone apps such as Pointcast were a mostly blind alley, and while apps persisted for email and IM, and for very specific things like music, the words ‘web’ and ‘internet’ became effectively synonymous to anyone non-technical. Over time we added Ajax and better search and better social, but everything really happened inside the browser.

In mobile this is quite different: nothing is settled. We have the web and apps and of course app stores, and then we have many complications - voice, in-app payments, web apps, hybrid apps, widgets, push notifications, social messaging apps, Google Now and Siri. Then there’s the hardware layer - images, barcodes, NFC, bluetooth, location, motion sensors etc. Innovative and disruptive new interaction models can very often find a route to market, far more easily than they could on the desktop internet. Sometimes, they scale to a hundred million users in a year to two. And we have more and more waves of innovation coming, with things like local wireless from Apple and deep linking to within apps from Android, and a very fast-evolving social messaging space, and more things in 2014 and beyond.

So, we can actually have a pretty limited idea of what the dominant interaction models will be in 5 years. 

(There is a dream, of course, that all these nasty choices and options will go away and we can go back to the nice, simple, limited web, but that doesn’t seem very likely just yet.) 

One of the big changes here is the removal of monopolies. If the web is not the only interaction model then web search loses power as a discovery and acquisition channel. And in parallel Facebook’s desktop monopoly on social has not transferred to mobile and it seemly unlikely that it ever will (I wrote about the reasons for this here). So both of the key channels on the desktop are smaller and less crucial, and also work significantly differently, and are pretty poor at driving some key types of engagement, now that you’re not just looking for a click on a link. This changes lots of things, and creates lots of new opportunities.  

The puzzle for Google is how it brings its vast, decade-old machine learning project to bear on this new complexity of data and behaviour. The obvious problem is that data and behaviour within apps are effectively dark matter that it can’t track (hence the deep-linking initiative in Android). But this is balanced by much richer data collection. Your Android phone feeds it with data all the time - where you are, what you look at, where you go after you search and what you did the day before. The challenge is finding the right ways to collate and present that data - Google Now is one example but probably not the only one. The search box and the page of results is just one possible interface to that machine-learning project - what does Google look like after the search box?

Social faces a different set of challenges. It seems to me that on mobile Facebook will never have the near monopoly that it briefly enjoyed on the desktop - smartphones remove most of the frictional barriers that keep you on one social network. But mobile social more broadly is a vast opportunity. With web search no longer the dominant channel, social, on a far more social device than the PC, has an open door to push at. Tencent announced that the first 5 games that it launched with Wechat integration, starting in August, have had 576m registered users. Mobile social is an engagement, interaction and distribution channel, and it appears to be much richer, and probably much bigger, than social was on the desktop. 

If this is the end to near-monopolies in acquisition and discovery, it’s also interesting to think about it as the end to monocultures. If the interaction model shifts away from web search, that change makes different models and different types of behaviour possible. In turn, one might ask - what models and companies and behaviours were precluded by Google on the web? What good ideas didn’t work because of the way Google did search and the way Facebook did social? How did that monoculture shape things, and how does that change now? 

Mobile is eating the world, autumn 2013 edition

I've been giving versions of this deck in London and San Francisco, and I though it worth sharing here. It's the basis of a (roughly) hour-long client presentation, with Q&A.  

A version I gave in the summer got about 350k views - after 3 weeks this one has had 200k views - curious to see where it tops out. 

Scale and polarisation in mobile

There are lots of ways to look at the global handset industry, but the polarisation evident in this chart is pretty compelling. Not shown - the hundreds of 'other' manufacturers, mostly in China.

The CFO of Qualcomm recently described the industry as a barbell - Apple and Samsung at one end, then the smaller and mostly sub-scale players (though some, such as Sony, are showing signs of increased health, albeit from a low base), and then at the other end, invisible, the Chinese. 

As an aside, this also illustrates the way that Apple has become so cyclical that it's really only the December quarter that gives a good directional steer.  

Simplicity

Unlike most other industries, tech companies are often very secretive about their product plans. Apple is the obvious example, but rivals like Google or Amazon are often even more closed-mouthed. And in parallel, there is often somewhat frantic speculation about what they’ll announce next.

Yet at the same time, these are often fairly simple companies with pretty predictable strategies.

Apple sells devices - circuit boards in boxes at a 30-50% gross margin. It makes them with a certain kind of experience, where it can add significant value in the software and hardware integration. It wants to control as much of the experience as is possible. It will not sell devices below a certain quality of experience just to hit a price point.

Amazon is an ecommerce platform - a warehouse with a search engine. As every new category goes online - as buyers and sellers become willing to buy and sell that product online - Amazon is there with the best logistics and the best selling platform. Meanwhile, it continually reinvests profits in infrastructure and new businesses to drive further growth - taking profit now is just wasted investment.

Google is a search engine and an advertising business, powered by a a decade-old machine learning engine that it feeds with as much data as possible, and it needs reach, in every sense - to feed the machine with data and to deliver search results (and advertising).

One could certainly quibble about how I’ve phrased these, and perhaps add or subtract things. Nor is any of it especially insightful. But that’s the point. These companies do actually tell you what they’re trying do to. Apple and Amazon in particular are very public and explicit about their strategies: Tim Cook (and Steve Jobs before him) and Jeff Bezos say variations of these things over and over again.

Yet somehow, people don’t hear them, and come up with ideas about what these companies will do that are totally at odds with their actual strategies. For example, Google wants Motorola to be a rival to Samsung. Apple will build a global pay TV network or a mobile operator, or an MVNO. Apple will make a mind-blowing new product every six months. Amazon will never be profitable. And so on, and so on.

In truth, though, the best way to understand these companies is to listen to what they say.

Android's route to 1bn

This week Google announced that it has now passed 1bn cumulative activations. This is what that trend looks like. 

Screen Shot 2013-09-08 at 7.12.16 pm.png

Google generally releases these numbers at scheduled events, and they're pretty round, so we can't take them as exact. My model makes some allowances for the overall trend rather than trying to hit the exact number on the exact day of the announcement (since the figure might actually have been passed a week earlier anyway). 

If we aggregate this by quarter and split out tablets (also provided by Google recently), we get this chart, showing rapid but slowing growth and tablets as a pretty small share of the total. 

Screen Shot 2013-09-08 at 7.17.53 pm.png

This base, as everyone knows, is somewhat fragmented, with a wide mix of versions in use. 

Screen Shot 2013-09-08 at 7.33.49 pm.png

The interesting thing is that if you apply these percentages to the active base (on the assumption that trailing 24m activations are active), it appears that there is very little upgrading of existing devices: the growth of new versions of the OS seems to come solely from new devices.  

Screen Shot 2013-09-08 at 7.25.02 pm.png

Of course, what's missing from this data are the devices that are used in China and do not have any Google services on them, and hence do not activate with Google. There is, obviously, no good data on this, but most people in the Chinese market think that only, say, 20% of Chinese Android devices have Google on them. That means the overall Android market is rather bigger than 1bn, with well over 200m extra devices in China, and run-rate 'unactivated' Android making up perhaps a quarter of total Android sales. 

Meanwhile, as Ars Technica points out, Google is starting to get around fragmentation by putting all its services into a software layer on top of Android that it can update remotely. This solves the fragmentation problem for Google (their services are on every Android device outside Amazon and China), but doesn't help Android developers trying to work out why their app crashes on one Samsung model but not another. 

Is Google fighting a platform war?

The smartphone business tends to be cast in terms of a simple ‘platform war’ between Apple and Android, with market share and profit share tracked and compared. However, this does not really capture what Google or Apple are trying to achieve. It should be obvious Apple is uninterested in being the biggest manufacturer of phones per se, but the raw market share of Android is also several steps away from Google's objectives.

Google's fundamental strategic needs are to extend reach and gather data. Google needs to be on as many screens as possible, delivering as many searches* (and ads) as possible, and it also wants to have access to as much data as possible to index, understand and serve up in ever-improving search results.

The growth of the mobile internet intensifies these imperatives in two ways:

  • Reach: search happens on more devices in more places with greater frequency
  • Data: mobile devices can provide far more information about behaviour and intent that can help Google deliver more relevant search results

Hence, Google uses Android as a tool to extend its reach, both as a generic access platform that can go to Google.com and by embedding more and more ways to use Google Search within it. But the objective is reach itself, which it will take anywhere it can get it, including on the iPhone – and Google tries hard to put its services onto the iPhone.

In parallel, Google uses Google Plus to collect and understand usage. Talking about the low rate of social sharing on Plus misses the point. Rather, while the history of Google so far has been about understanding the web and the interactions and links within it, the future of Google is about understanding and learning from how people use the web. Plus is the mechanism to do that - it's PageRank for the users. This is why Plus is being stuffed into all manner of Google products - not to get you to share stuff with your friends, but to be able to draw conclusions from all of your activity in the same way that PageRank draws conclusions from all web links. 

This means that a helpful way to look at Google is as a vast, decade-old machine learning project: mobile will feed the machine with far more data, making the barriers to entry in search and adjacent fields even higher, while Plus is the database that ties that data to individual behaviour. The combination of the two strategies is (hopefully) self-reinforcing – reach and data collection produces better results, more reach and more data collection. The more control Google has of the mobile device, the more it feeds the machine: on an Android phone you will always be signed into Plus, even if you never think you're using it. But all devices on all platforms (outside China) are feeding the machine. 

(* Of course, things like Now and Glass point to changing future definitions of what 'search' means) 

Nexus phones are ringers

"The [GM] execs would fly into Phoenix’s Sky Harbor airport, limo out to the Desert Proving Grounds and drive the company’s latest models.
Our agent says that all the vehicles the execs drove were “ringers.” More specifically, the engineers would tweak the test vehicles to remove any hint of imperfection. “They use a rolling radius machine to choose the best tires, fix the headliner, tighten panel and interior gaps, remove shakes and rattles, repair bodywork—everything and anything.
Did the execs know this? “Nope. And nobody was going to tell them . . . As far as they knew, the cars were exactly as they would be coming off the line. That’s why Bob Lutz thinks GM’s products are world-class. The ones he’s driven are.
-The truth about cars

I read this piece (from 2009, the time of the US auto bankruptcies) at the time and filed it in the back of my mind. But I was reminded of it this week, because I've been trying to use a Sony Xperia as my main phone. I won't bore you with my impressions - this isn't a gadget review blog - but what I found interesting was the gap between the experience offered and that on my Nexus 7, or indeed that described by Paul Stamatiou's great piece on the best aspects of Android. 

This is hardly a new observation: the experience you get on most OEM Androids is not the same as that you get from a Nexus phone running 'stock Android', or one of the aftermarket ROMs (which however remain very fiddly to install). Google even sells phones like the Galaxy S4 in special 'Google' versions. It's rather like Microsoft selling 'stock Windows'.

It's unfair (or perhaps incomplete) to blame  Google for this - this is all part of the fragmentation that's inherent in the open model that drives Android's 40% share of global phone sales. If you want to see a phone OS with none of these issues, look at how well Windows Phone is doing. 

But the reason I'm reminded of the GM story is the old computing term about 'eating your own dog food'. Nexus devices and 'official Google' devices are not Google's dog food. They're not what actual customers use. 

The Nexus 7 sold only 7m units in almost a year and was only 10% of 'activated' Android tablets, on Google's numbers.  The Nexus 10 appears to have sold under 1m units. There's no strong indication that the Nexus handsets sell in large volumes, and rumours from Korea are for just 4m (global) unit sales of the most recent model in six months (it sold out at launch, but we don't know the order size). One can argue about why this is - distribution, branding, sales commissions, consumer awareness etc - but the Nexus phones aren't on anyone's list of top-selling or top-used Android phones that I've seen. This is device manufacturing as vanity publishing.

Hence, for a Google employee to use a Nexus is like a GM exec test-driving a ringer. They're using 'Android'. It's great. But that's not the phones the customers are getting. They're not eating their own dog food. 

The irony is that if you buy a $125 generic Chinese Android you're actually more likely to get a 'stock Android' experience with no preinstalled 'crapware' than if you spend $400 or $500. Except, of course, that if you're in China there's a more than even chance you'll have no Google apps preloaded either. 

Glass, Home and solipsism

One of the things you're supposed to work out some time in your adolescence is that though you're the star of your own life, you're not the star of anyone else's.  Some companies never work this out.

A few years ago I worked on a project to make a video-on-demand service for a big UK supermarket chain. All of the supermarket execs kept saying things like 'our customer' or 'the Sainsco customer'. After a while, I worked out what bothered me about this. I do indeed go to one of their shops - or at least I think I do. I'm actually not 100% sure if it's a Tesco or a Sainsbury. I buy food there every week, but I don't consider myself their customer - at least not in the sense they meant it. Rather, it's one of 10 shops I go to in a week, and one of 20 errands I might run. 

In other words, your customers' relationships with you are the only relationships you have as a business and you think a lot about them. But you're one of a thousand things your customer thinks about in a week, and one of dozens of businesses. And they probably have their own ideas about how they want to engage with you (though they wouldn't put it in those words) - assuming they think about you at all

This applies even to Google or Facebook (which brings me to the title of this post). There's lots of data showing the high proportion of online time that people spend using Facebook, and the high volume of web searches that they do using Google. Facebook and Google are important. But that doesn't mean they're everything. 

When I was watching the launch event for Facebook Home, a loud alarm bell started ringing for me when Mark Zuckerberg said words to the effect that "phones should be about more than apps - they should be about people" - by which of course he meant "about Facebook". The problem with this is that actually, we've spent the last 6 years making phones about more than just people. People use Facebook on their phones a LOT, yes, but they do a lot of other things as well. If all I wanted was a phone about people I'd be using a $20 Nokia with a battery that lasts a month. 

The same point, I think, applies to Google Glass. If you spend all day in the Googleplex, thinking googly thoughts about data ingestion and Now and the interest graph, then having 'Google' hovering in front of your eyes instead of rubbing on a phone seems like a really obvious progression. If everyone you know owns a Tesla and is deeply engrossed in new technology, then the idea that there might be social problems with Glass doesn't come up - everyone's too busy saying 'AWESOME!'. In much the same way, no-one on the Facebook Home team seems to have realised that most people's news feed isn't full of perfectly composed photos of attractive friends on the beach. 

Jack Dorsey wrote a blog post a while ago saying that 'users' is the wrong word to describe people who, well, use your service.  He was perfectly right in the sense that the word elides the obligation you should feel to a customer. However, an equal problem is the use of the possessive itself. You can think of people as users or customers - but they're not yours. They don't belong to you, and they may barely even care that you exist. The old Google rejoiced in sending people away from the site as fast as possible, because the result mattered, not the search. Glass points to a risk of forgetting that.