Lots of interesting stuff in this year's Apple product launch event - iPhones, an iPad 'Pro' and a new version of the Apple TV.Read More
The technology industry is a solar system: the smartphone is the Sun and everything else orbits around it.Read More
Tablet apps, after an explosion of excitement when the iPad was first launched, are in something of a lull. It's hard to make money, the install base is flat (or, more precisely, the base of tablets that are not generic black plastic devices that never install apps is flat) and attention has shifted firmly back to the smartphone.
Yet there is still some great work being done, and great content and experiences to be had. The larger screen can show a full website in a way that a smartphone cannot, yes, but there is also scope for native tablet apps to do things that you would struggle to achieve with either a smartphone app or a website, whether that's content display, interaction design, input methods or even just distribution. So, here's an entirely personal selection of 12 that I'm always glad I have.
(Fiftythree, which makes Paper, is an a16z portfolio company. The app is great.)
More extrapolation from Google IO numbers, this time looking at tablets. Google gave two 'charts' on this topic, shown below.
In addition, Google's developer dashboard gives a breakdown of active Android devices by screen size: in the first week of July they accounted for 12.6%, not including phablets. And since Google also, for the first time, told us the active base, 'over 1bn', we can calculate an active tablet base of at least 126m devices, rising to 138m if we take 'over 1bn' as 1.1bn.
Apple, almost uniquely in the market, reports tablet sales and shipments. In the last 12m (which I presume that "62% in 2014" bubble refers to) iPad shipment were 69.7m and sales were 73m. If Android tablets indeed had 62% of sales (the chart isn't clear if it refer to sales or shipments) then that would equate to a market of 192m units and 119m Android tablets sold in the last 12 months.
This would imply that Android tablets have an average active life of a little under a year. Or, that they have a life of more like two years (say) but half of them are inactive.
Conversely, it's pretty clear that the active life of an iPad is if anything too long, from Apple's point of view - at least two years and probably longer. Apple has sold 143m iPads in the last two years and 196m in the last three.
That, in turn, implies that each iPad unit sale is worth 2x more active devices over time than an Android tablet sale - before looking at actual usage.
There are, though, two problems with this data. The first is that it's not clear if that 'Android tablets market share' includes AOSP tablets in China, where the vast majority Android devices have no Google services and hence do not show up in Google's active user figure or the developer dashboard screen size breakdown. Sundar did say that this doesn't include Kindle and other Android variants, which would add 'a few percentage points'. So it probably doesn't attempt to include China.
The second is that it appears that a very large number of cheap Android tablets are used mostly or entirely offline, consuming video via SD card and playing games. So those might not be in Google's MAU data either.
A year ago, Google gave a more explicit set of numbers for Android tablet sales, in the chart below. If you eyeball the numbers, that equates to 50m tablet activations (i.e. not AOSP) in the 12m to July 2013.
(I'm not sure, incidentally, why this sources Gartner and IDC as well as 'Google internal data' - shouldn't Google know activations?)
50m tablet activations in that 12m period compares to 70m iPad sales in the same period (more or less), giving a total market (excluding AOSP) of 120m units and Android a market share of 41%, which is probably close enough to the cited 46%. Activations in the previous 12m look like about 15m: Apple did 53m, giving Google Android a market share of 22%, though, not 39%. Something has got lost in those numbers somewhere along the way.
One more thing. Google's internal data on tablets activations and device screen sizes is self-reported by the devices when they access play, using the Android screen profiles described here. But devices that are on the margin between two buckets can and do change what category they report from region to region and from one software update to another. This is a particular issue for phablets, where it's really a matter of opinion whether you should tell an app this is a normal or large screen, and whether it's xhdpi or xxhdpi.
This, incidentally, is one reason why I sometimes mark shares of tablet sales with terms like 'approximate'.
Finally, of course, all the available usage data of tablets shows iPads with around three quarters of total use, even in China.
Apple's revenue has pretty much stopped growing. This chart shows the quarterly revenue the company has reported - a series of ever larger spikes upward around new product launches, but with a flattening trajectory.
If you look at this on a a trailing 12 months basis, to smooth out the spikes and see the underlying trend, you see a very clear 'S' curve.
And the US revenue is pretty much flat, though China is certainly growing.
Apple has three main buckets of revenue - iPhone, iPad and everything else. If you split these out, you can see that the really dramatic slowdown is actually in the iPad business, not iPhone.
This is something of a change - a year ago the general narrative was around the rather obvious ceiling on iPhone sales and the possibly huge but unknowable potential of the iPad. Now things have turned around.
Part of this slowdown in revenue is due to a decline in ASP as Apple rolled out cheaper iPad models...
But if you look at unit sales you see pretty much the same trend: flat for the last year.
Shifting back to the raw quarterly numbers, you can see the same trend.
When asked about this on the conference call earlier this week, Tim Cook talked a bit about changes in inventory. But actually, that isn't the point - the underlying trend looks the same whether you look at sell-in or sell-through.
(Note, incidentally, that no other mobile device company provides anything like this much this data)
So iPad sales are slowing. Why? Is it competitive pressure from Android? Not really.
This chart, and dozens of others from every possible source, makes it very clear that the iPad dominates tablet web traffic in a way that it does not dominate smartphone web traffic. This particular chart shows the USA, but I hear the same story from companies everywhere from the UK to China. The same is seen for app use. People are not substituting iPad use for Android use, not at anything like the scale needed to explain the slowdown. And Android tablets that try to offer the same 'post-PC vision' as the iPad are not selling especially well - the real global volume is in the generic black plastic devices at much lower prices - and they don't even show up in usage stats.
The classic negative view on iPads was that they couldn't compete with PCs because they lacked multitasking, keyboards, Office (until now) etc, etc. But that' s an incomplete response, because PC sales are suddenly weak too (and only part of that is Windows 8).
So what IS going on? Perhaps one answer is in this chart.
On one hand, as I wrote here and Steven Sinofsky discussed in this podcast, moving to new devices and form factors involves new software experiences, and new software also often both creates and requires new business processes. It's hard to spend a day creating a 20-slide sales report on an iPad, even now that MS Office is available for iPad. But actually, that sales report should be a SAAS dashboard that takes 10 minutes to annotate. It will take time for those business processes to shift to enable more corporate tablet use.
On the other hand, the smartphone explosion is putting the internet into the hands of far more people than ever before, and it's alway there. If you're watching TV and want to know about an actor or a product, do you go upstairs and turn on your PC, walk across the room to pick up a tablet, or just pull a smartphone out of your pocket? The declining relative utility of the PC is reflected in a slowing replacement cycle (you don't replace the one you have) - the tablet has yet to make the sale in the first place, outside the initial wave of adopters.
Compounding this, the smartphone explosion is accompanied by an apps explosion. There are thousands of amazing apps on iPad (and very few on Android tablets, which is why the balance of use between the two is so skewed), but the smartphone opportunity is so much bigger that it attracts much more attention: there are more of these devices, some use cases make much more sense on them (such as Instagram) and some only make sense on them (such as Uber, Hailo or Lyft). So the smartphone experience now is very rich.
(A complicating factor, of course, is that these categories can't be neatly divided - phablets blur the boundary between phones and tablets and 'convertibles' blur the laptop/tablet boundary. But sales of both these are relatively small for now - even phablets)
A good illustration of this shift from the PC to mobile was Facebook's results this week: it now has more mobile-only than desktop-only MAUs and 79% of MAUs are mobile.
So, looking at tablets and smartphones as mobile devices in a new category that competes with PCs may be the wrong comparison - in fact, it may be better to think of tablets, laptops and desktops as one 'big screen' segment, all of which compete with smartphones, and for which the opportunity is just smaller than that for smartphones. And so tablets will over time eat away at laptop and desktop sales just as laptops ate away at desktop sales, but the truly transformative new category is the smartphone. Maybe.
The whole ‘tablets and PCs’ discussion today reminds me a great deal of similar conversations we used to have a decade ago about ‘laptop or desktop’.
That is, someone would ask a vaguely technical friend whether they should buy a laptop or a desktop. And the answer would be “well, how much money do you have and what do you want to do with it?” Laptops were portable but had smaller screens, less power and were more expensive. Which trade-off depended on how you planned to use it.
Over time that break point shifted: laptops got less expensive and much more powerful - today there are very few tasks that need the power a desktop can give, but the screen size point remains (though of course external screens are cheap). And so laptops grew to roughly half the PC market by volume. The desktop market didn’t go away - mostly for screen size or cost reasons (if you’re outfitting an office of 10k people, none of whom take their work out of the office, why buy laptops?)
Much the same analysis applies to tablets today - "what are you going to do with it?" Are you going to do sophisticated, complex, multi-app computing? Lots of keyboard work and detailed manipulation that a mouse is better for? Apps that are only ON a PC? Then get one (whether desktop or laptop). Mostly web, email, games, video, social networks and you’re walking around all the time? A tablet might suit you very well. You probably have a PC too - there’s very little actual substitution right now, but there is an impact on the PC replacement cycle (as well as expanding the pie massively, especially in emerging markets, which is another conversation).
And of course this break point will move as well, just as the laptop/desktop break point did - tablets will get faster and more sophisticated and capable of substituting more tasks. And so we should expect to see tablets taking a growing chunk out of the PC market.
(The other way to slice this is that the PC market is split very roughly half and half between consumer and corporate - corporate boxes will remain longer than consumer PCs, but there’ll be erosion in both.)
Another very important lens to look at this through, though, is Microsoft Office. Office is extremely good (tautologically) at the things it’s good at - there is no credible alternative to Excel for making large financial models and no credible alternative to Powerpoint for making 150-page pitch books, for example. Free alternatives nibble around the edges, and specialised use cases such as statistics have been carved out long ago, but the real threats come from use cases where you shouldn’t really be using Office at all.
This ‘shouldn’t use’ comes from both above and below. Someone said to me on Twitter (I now can’t find who) that their consulting business spent half its time telling people to stop using Excel and use a database and the other half telling people to to stop using a database and use Excel. That is, Excel is used as a business information system in a huge number of companies. It’s a powerful and flexible IDE on its own terms, and this is sometimes a good use, but it often isn’t, and specialized SAAS services will probably carve out an increasing number of these use cases. When I worked at Orange there was a multi-megabyte Excel file on the network drive called, I believe, ‘sum_of_x.xls’ containing complex macros and every major operating metric for the entire company, there for anyone who needed to analyze high-level data. That should probably not, really, be in Excel today.
The same applies to Powerpoint - it’s a very good tool for that 150 slide deck, but what if you’re making a 10-slide deck each week that consists entirely of operating metrics pulled out of a back-end system, manipulated in Excel and pasted into slides, plus commentary, that are emailed to 25 people? Shouldn’t that change from a 2 hour task to a SAAS dashboard and a 30-second task? And would it still need a mouse and keyboard?
(This point also bears on the future of email itself, but that's another topic.)
This carving out comes from below, too. One of these is the Google Docs story, about there can be much debate, but to me the interesting challenge is embodied by this screenshot - the ‘new file’ menu in Excel.
This is, of course, all about unbundling and specialisation. Office apps (generically) are very broad and deep and general purpose. Critics tend to focus on the depth and talk about how few people need all those features, but miss the breadth - of how many things a general purpose ‘table’ app or ‘make pages’ app can be used for (including what look to technical people like misuses - the classic example being the person who pastes a screenshot into a Word document and emails that). I'd suggest that a meaningful proportion of Excel use doesn't involve formulas, for example, just lists and tables and page layout - IDE as DTP. New routes to market and new interaction models provide new ways to challenge that hegemonic interaction model, just as smartphones allow the unbundling of Facebook's interaction models - SAAS changes Office and so do app stores.
This brings us back to the mouse and keyboard that you ‘need for real work’, as the phrase goes. Yes, you really do need them to make a financial model. And you need them to make an operating metrics summary - in Excel and Powerpoint. But is that, really, what you need to be doing to achieve the underlying business purpose? Very few people's job is literally 'make Excel files'. And what if you spend the other 90% of your time on the road meeting clients and replying to emails? Do you need a laptop, or a tablet? Do you need a tablet as well as a smartphone? Or a laptop, or phablet? Or both?
Well, what do you want do with it? it’s all just glass - the only real different is the size and the input mechanism that suits your task.
One of the big puzzles in trying to understand the tablet market is data. Apple is pretty much the only large manufacturer giving unit sales, and not only are Samsung and Amazon saying nothing, but there are hundred of Chinese companies making Android tablets, and few if any say anything publicly. In the phone business the story is rather easier, since Google says roughly how many Android devices are being activated outside China, and give a screen size breakdown, and the Chinese mobile operators have a good sense of smartphone sales inside China. But in tablets there is no-one with an overall view of sales.
This means that analysts have to fall back on component makers. Though there are hundreds of companies making tablets, they almost all use more or less off-the-shelf chipsets from a handful of companies. These companies have a good sense of the overall number of tablet chips that are being sold into the manufacturers. So too do the screen markers - they have a good sense how many 7” panels are being sold. So you take an estimate of tablet chip sales and an estimate of tablet screen sales (and take into account people using ‘phone’ chips in tablets) and you estimate tablet sales, both inside and outside China.
The obvious problem with this is that these devices are being used in very different ways. It seems clear that most of the huge numbers of sub-$150 Android tablets now being sold do not have anything like the web or app usage that is seen on an iPad, Nexus or Galaxy Tab, and that many are mainly used as substitutes for TV sets, with maybe some gaming on the side.
The deeper issue, though, is that estimating tablet sales in this way is a little like trying to estimate global car sales by working out how many internal combustion engines are being made, and how many tyres, but not adjusting for motorbikes, cranes, outdoor generators or 18 wheelers. Lots of ‘tablet' chips and ‘tablet' screens do not actually end up in tablets.
Consider this device, one of thousands of similar products on offer on Alibaba - an in-car video player running Android, complete (if the screenshot is to be believed) with the phone app. This probably doesn’t activate with Google, but it certainly looks like a ‘tablet’ to LG or Rockchip.
Then there’s this TV dongle - no screen, but does it have a ‘tablet’ chip? A ‘phone’ chip? If you used it to watch Youtube, what would Google think it was? (Note also the memory card slot, used for side-loading pirate movies.)
Now what about this, from Steelcase? An meeting room door with a 7” capacitive touch screen. To a component maker, this is also a tablet. I have no idea if it runs Android today, but if it doesn’t, it probably should. And if Nest doesn’t, the copies of it will.
The important dynamic here is that a combination of very cheap off-the-shelf chips and free off-the-shelf software means that Android/ARM has become a new de facto platform for any piece of smart connected electronics. It might have a screen and it might connect to the internet, but it’s really a little computer doing something useful and specialised, and it probably has nothing to do with Google.
As should be obvious, this makes counting total ‘Android' devices as though they tell you something about Google or Apple’s competitive position increasingly problematic. But to me, pointing out that ‘Android’ doesn’t necessarily competed with iPad is rather boring - what’s really interesting are the possibilities that these new economics might unlock.
A good example is this - a 2G Android phone wholesaling for $35 (just one of hundreds).
Now, stop thinking about it as a phone. How do the economics of product design and consumer electronics change when you can deliver a real computer running a real Unix operating system with an internet connection and a colour touch screen for $35? How about when that price falls further? Today, anyone who can make a pocket calculator can make something like this, and for not far off the same cost. The cost of putting a real computer with an internet connection into a product is collapsing. What does that set of economics enable?
There are other interesting hardware trends that overlap with this as well. Bluetooth LE is the obvious one - you can make a widget that broadcasts a location ID for $50 or less, stick it on a wall, and the battery will last for years. EInk is also interesting here: it needs no power to show something, only to change, and you can pass enough power over an induction touch point to cycle the screen. The problem here is cost, but why doesn’t my Oyster card show the remaining balance? Why wouldn't Coin (a product I'm rather skeptical of, mind) show the cards loaded onto it on one side with an eink display? How do these trends interact with cheap Android computing?
Marc Andreessen famously coined the phrase 'software is eating the world’ to describe the way that functions that used to be served by dedicated hardware are now being subsumed by general purpose devices - mostly smartphones. But there’s also the beginnings of a trend in the other direction - devices that weren’t smart and didn’t get merged into the phone gaining a digital presence of their own, and creating a new set of opportunities.