Mobile Solutions CI

Nielsen US mobile devices market share--I don't believe the numbers

I am really missing something in the report Nielsen published on their blog which lists the "top mobile phones, sites, and brands for 2009". The numbers simply don't make any sense.

First, the iPhone is listed as the #1 out of the "Top 10 Mobile Phones in Use (U.S.) – January -October 2009". It does seem straightforward to say the iPhone, which has 10-11M subscribers on AT&T, has just over 4% market share given there are about 270M US subscribers in 2009 . But it also seems impossible for the iPhone to have more device share than legacy feature phones. The RAZR is still listed as the third most used phone out there so we are supposed to believe there almost twice the iPhones than RAZRs right now? Really? And the iPhone has over twice the share of any LG phone and more than 3 times the share of any Samsung across the entire US?

Digging further into the list this shows more Blackberry Storms in use (with 1.4% penetration) than Pearls (1.2%). That is also seems impossible. The Pearl has been shipping for years and enjoys wide distribution and super low price points across all carriers. The Storm is a recent device, expensive, and had a really rocky launch. You can argue how good of a device and experience it is now but you can't argue it has seen broader uptake than the Pearl.

I must be reading this chart wrong. What am I missing?

RIM still can't get software updates right

Wow, what a shock--RIM had another end of year outage. Here is a link to coverage and the RIM press release on the outage and suspected cause.

The interesting parts to me are that 1) RIM still has systemic outages each year when they roll out updates. Time for a new test and deploy strategy? And 2) why is there still no coordinated media, customer, and social media/internet communications response from RIM to handle subscriber expectations?

Why in the world they are willing to damage their brand like this is beyond me. It appears to me that RIM's customers are operators and what happens downstream to customer's customers is less and less important to RIM.

Don't believe me? Wait until Feb, when you get your next outage and RIM handles it exactly the same way.

Blackberry profit surprises on Dec 17th (Fiscal Q3 '10 for RIM)

RIM posted some solid earnings after a rough quarter last time. Here is the earnings call transcript. Note that for some reason they have labeled it Fiscal quarter 2 for RIM but this is Q3 FY10 for RIM.

Some key stats: RIM shipped 10.1 million devices and added4.4 million new subscribers, claiming 16% QoQ growth.

80% of new subscribers were "consumer", meaning they were not associated with a BES server.

There continue to be some worrying trends for RIM within these numbers. 

First, their net new adds relative to devices shipped is quite low. That looks like only 44% of devices shipped went to new customers? On the one hand it's great to show customer retention and upsell but on the other hand with the biggest channel partners heavily marketing 2-for-1 deals I think it's a real problem if this has indeed slipped below the 50% threshold. Everyone will be comparing Blackberries shipped to iPhones but the huge difference to keep in mind is that RIM is bringing 4.4M new subs in while Apple is doubling that.

And just to really nitpick, RIM didn't sell 10.1M devices. They shipped that many and sold about 9M data-enabled devices and less than half of those to new subscribers. It's a very healthy quarter but that is not kicking Apple's ass. 

Secondly, RIM's Edel Ebbs  stated that they "don't break out" international subscribers. Well, they did across all quarters in 2006, 2007, and 2008. Suddenly last quarter they stopped. There are few reasons to stop reporting that and none of them are positive ones for RIM. The WSJ is reporting international growth "at 37% of overall revenue, up from 30% the previous quarter". RIM's share of subs who were international had been slowly climbing from 25% to 35% so if the WSJ is right in their numbers they are wrong in their assessment that WW growth is driving RIM. I think Verizon, AT&T, Sprint, and the two big UK operators are driving RIM growth and the rest is ticking over at the same rate. Still upward, and still good, but at a flat rate of growth.

Third, the Flip Pearl sure seems MIA. For a company rapidly reaching downmarket to lower ASPs and youth/consumer segments it's interesting that their first departure from the standard form factor seems to be a dud.

A really positive factor to watch is RIM's tiered pricing: "As we discussed during RIM's capital market day in May, we are continuing to implement service price tiering strategies to further segment the market for BlackBerry products and services. For example, [Telecom Sao] Indonesia, in addition to its full BIS offering, also offers the lower priced version of BIS that gives the customer a more limited feature set that includes only IM and texting for the equivalent of about $7 a month."

Carriers and service providers should notice and learn from this. In the Q&A portion the meaning of tiered pricing was misinterpreted, which Balsille didn't correct, showing that this is really going under the radar.

RIM also promised to "deliver a web kit browser during calendar 2010". Amen!

RIM email down--Eight years running for EOY outages

RIM's email service is down.

Every year as the calendar turns over, RIM experiences service outages. At first I didn't mind this so much. Cloud services such as Gmail have their outages too. But RIM's NOC is supposed to be super reliable. And what really frosts me more than anything is this happens every single year and every single year there is no "maintenance being performed" notice or other notification. 

Blackberry outages are a signal that RIM is expanding its BIS capabilities and preparing for new device launches. But why at the expense of existing customers?

The voice signal still works on the device so what about an SMS or PIN message RIM? Why not pre-install a device side client which can give user notification if it loses IP push for more than 15 or 30 or 60 minutes? How f***g hard can this horrible customer service experience be to solve?

The long term solution for me wasn't that hard. After having switched from a first-gen iPhone back to a Blackberry I'm going back again, having just ordered a 3Gs online. 

Google Pulls a Zune; Operators Launching Stores

*Update* Phonescoop and others reporting Google will not sell the phone directly. Main points of post don't change though.

The mobile world just keeps accelerating. Last Friday and over the weekend the leaked news of Google's "Nexus One" Google phone lit up the internet. The rumors of a Google phone have been around as long as the Apple Tablet rumors and I had discredited them thinking Google would see little need to compete directly against OHA partners--but apparently I was wrong. 

And as Google becomes more of a vertically integrated service provider, operators are also moving further into cloud based services and desktop clients in order to extend the social address book and mobile services. 

Verizon is launching a desktop service to sideload content, called V Cast Media Manager (catchy name!). Motorola appears to be launching a web based android storefront. And what is most interesting to me is that AT&T appears to be launching a cross-platform storefront and app publication platform. This would be a hugely ambitious leap--kind of a combination of MediaMall, devCentral, and off portal all in one. 

I base this guess off of an AT&T press release I stumbled upon by accident and a quick look at their open job listings.

Look at the value chain rearrange itself. Operators are scrambling to offer services on top of their networks to maintain relevancy. Nokia and Microsoft will find themselves late to the party and left out of the game as Google squeezes them from above and operators from below. OHA partners, and all manufacturers who have gone with the Android platform, suddenly find themselves competing directly with Google. How great is an "open" ecosystem if the OS manufacturer is bundling custom ODM offers to sell against them?

Google will sell its phone directly. It would be no surprise if they heavily subsidized it. What will it do to operator models in the US when Google offers a great iPhone competitor at $100 completely unlocked? Or $50? Or giving it away to with ad-supported data plans? I don't think that hurts Apple much but it sure lays bare the challenges operators face.

Carriers will continue to attempt their own ecosystems surrounding content, from developer programs to application stores and publication platforms and web merchandizing. Expect even more aggressive moves from them over the next year. They will be forced into it as 4G migration costs become real and data uptake requires accelerating that investment.

CES is suddenly looking like a very interesting show, and 2010 like a crazy year.

iSuppli Predicts WM Resurgence--What am I missing?

Analyst firm iSuppli has a new report out which is getting a fair amount of attention. It has WM at twice the current market share of most analysts and then predicts Windows Mobile rapidly gaining even more market share with the number of WM devices tripling over the next three years, leading to a #2 market share. Huh?

There are several things about this view I find puzzling:

• The chart shows total smartphones shipped in 2008 as being around 25 million. What? RIM alone ships over 8 million devices each quarter. They sold more than 25 million devices in 2008. What can this chart possibly mean? Most analysts call current shipments as being around 100M.
• Symbian is projected to hold 47.6% market share. Really? How will that happen? Apple disappears? Android craters? Coming the same quarter where Nokia launches its flagship smartphone on Maemo and only two days after Nokia publicly started walking away from S60 you have to be very bold or just crazy to make this call. Gartner has Symbian falling to 45% last quarter--never mind in one or two years. Other projections are similar. 
• What is the point of making projections into the future with ".6" and other specious indications of accuracy? What a joke! How about rounding or, if you want to actually be useful, showing a 10-90 range?

Here is a reality check from Gartner: "Microsoft's mobile operating system had 11 percent of the global smartphone market in Q3 2008. A year later, it had 7.9 percent of the market, while the iPhone's share had risen from 12.9 percent to 17.1 percent, and RIM's share had risen from 16 percent to 20.8 percent"

I'm not one one to sing Gartner's praises. But did iSuppli talk to any operators? None of the top four US carrier product teams are super excited about WM 7 and certainly none of them are talking about decreasing Android and other platform launches in favor of WM. It's very hard to understand what this report could possibly be based upon and how it squares with what I hear directly from carrier teams.

Did iSuppli talk to vendors? Microsoft itself has said that 85% of its devices come from HTC, which is now at least equally focused on Android. LG is indeed an important partner win but they are not solely focused on WM and also will not have significant share of the smartphone segment for some years.

This report is very contrary to what I read and what I experience. And I'm not the only one seeing the opposite: Wired: "How Microsoft Blew It". What am I missing?

Reflections on MobileNorthwest 2009 - What Huseby Didn't Say

I spent Monday of this week at Miller Nash's MobileNorthwest conference. It's an interesting, small event which focuses on venture funds, angel investors, and longtime entrepreneurs in the mobile space. As such the conversations have a different angle than most events I attend.

Tricia Duryee of Moconews covered the event mostly from the keynote perspective. Her coverage is very good as always. But it left out a few very interesting things.

First, Tom Huseby didn't talk about two opportunities and challenges in mobile, he talked about three. 

Bandwidth was the first. He predicted that streaming video would be table stakes in the mobile world just as it had become so online. Implications for this are increased carrier needs for consolidated backhaul, offloading bandwidth (WiFi), and compression.

CapEx was the second challenge. How do carriers pay for the 4G buildout when consumers expect decreasing, not increasing cost? As the new price for consumer services is zero where does the money come from? Obviously the pressure of both these trends increases advertising's viability as a business model.

Huseby's third challenge was ownership of the customer relationship. The Moconews article gives that a vague reference thru talking about Huseby's newest venture, GroundTruth. But she doesn't call it out as one of the biggest challenges and opportunities and also doesn't question the premise that this is a carrier question to solve.

I don't think solving any of these challenges from a perspective of serving the end subscriber experience (and thus owning the relationship) has been the forte of carriers.

Huseby, and I'd argue the NW venture community in general, has a very carrier-centric view of this problem. As Tom frequently says carriers are predictable, huge, and consistent. These are excellent customer characteristics.

They are also innovation killers. This is why you see evolutionary services coming out of NW venture funds and not revolutionary ones. I also think it is why you see upheaval coming from Apple, from Google, and other non-carrier components of the mobile ecosystem. A question that did not get raised at the conference is what the above trends mean for VCs and startups. A downstream implication which everyone in web 2.0 lives with is that product cycles are orders of magnitude faster than the platforms they depend upon. But an upstream implication is that long-term, big resource bets with high risk/high reward payouts may be rapidly dying out as a startup phenom.

What does that mean for carriers? For handset makers? For VCs? Apple's answer (it's all about apps and they harvest the service experience value as device margin) breaks the VC model, and at least seriously bends the carrier model. It's off-deck done right. It isn't the only answer but it is changing the game in ways that RIM and others did not.

For a conference that started by highlighting the trends that would drive mobile advertising as a main revenue stream there was not broad agreement as to what "mobile advertising" is, where it is going, or what Google's ridiculous spend on AdMob means for the space (as Gary Roshak pointed out the $750M thrown down for AdMob is larger than the the total mobile ad ecosystem value--ad spend, investment, etc.!).

Are VCs relevant to answering these questions? Are carriers?

Why Droid Is Killing Blackberry -- 29%

When Android was first announced, I thought it was the death blow to Windows Mobile. And it certainly has created huge problems for WM.

But a bigger victim is turning out to be RIM. RIM gambled big with its Storm launch with Verizon last retail season and ultimately it lost. The device wasn't ready, the app store ecosystem wasn't ready, and the overall experience wasn't fully thought through from the perspective of what use cases mattered to Blackberry core audiences and how the touchscreen would address those.

Now three major factors are boomeranging back on RIM from this gamble.

First, RIM became even more highly dependent upon AT&T, Verizon, and T-Mobile. "One customer comprised 29%" of shipments for RIM. Almost 30%!! RIM's hidden achilles heel is that it has never succeeded at the same rate with smaller carriers who can't invest the demand generation. Over the past year this trend has been increasing, not decreasing.

From their annual report: "RIM is dependent on an increasing number of significant global carrier partner customers with respect to the sales of its products both in termsof the numbers of devices sold and the aggregate value of its sales. While the Company sells its products and services to a variety of customers, one customer comprised 29% of trade receivables as at February 28, 2009 (at March 1, 2008 three customers comprised 19%, 14% and 10% of trade receivables). Additionally, three customers comprised 23%, 14% and 10% of the Company’s revenue in fiscal 2009 (at March 1, 2008 three customers comprised 21%, 15% and 12% of the Company’s revenue)."

So RIM is even more dependent upon the big three. And what happens this year? Verizon makes it holiday bet on Droid, investing $100 million with Moto in the ad blitz. That is money that came straight from RIM. The impact of this switch during RIM's crucial holiday season cannot be overstated.

RIM needs this holiday season. But more than anything it needs it's big three US carriers to market it. Without their resources and attention Android will begin to steal meaningful share from RIM.

RIM adds in-app purchase & advertising

Moconews has great coverage of day one from RIM's developer conference. There is also good live blog coverage over at Mobile Entertainment.

The most important takeaways are:  In-app Advertising, in app purchasing, push notifications for apps. 

"RIM said it will start offering a new advertising service in the first half of next year that will allow developers to monetize their applications using advertising. RIM has partnered with a number of mobile ad networks, including Jumptap, Lat49, Millennial Media, Navteq, 1020 Placecast, Quattro Wireless and Sympatico.ca. The ads will let advertisers initiate a call from an ad, add a calendar entry or contact entry from an ad, and directly link to a BlackBerry app. The service will also report advertising metrics across the ad networks, including impressions, clicks, conversions and earnings.

New payment services: By mid-2010, RIM says it will enable in-app purchases in the App World. That means developers will be able to sell virtual goods, monthly subscriptions, additional game levels or other items from within the app. The purchases will be tied to the payment system, which for now is mostly PayPal.  

Push Services: This is one of BlackBerry’s flagship services that allows information, like emails, to be pushed down to phones. Now developers and content providers can deliver alerts and up to 8 KB of data to applications this way."

These elements bring important capabilities for developers and content partners to plan and use different revenue models. But it does not go as far as I had hoped in merchant friendliness. Either RIM, or Amazon, or some other player will introduce an affiliate type model which enables merchants to embed upsell and cross-sell opportunities across merchants and share back on a click or conversion basis. That is the step change this market is waiting for.

Google buys AdMob, VOIP player; turning mobile ecosystem upside down

Google's purchase of AdMob is dominating headlines today: "The company said Nov. 9 that it agreed to acquire AdMob, a mobile display ad technology provider, for $750 million in stock. Google said the purchase would move the company forward in its efforts to develop more effective tools for creating, serving and analyzing emerging mobile ads formats."

Not generating much news is that Google also snapped up a VOIP player today. 

Google is very close to having an end-to-end “unified inbox” service which completely commoditizes carriers. The initial lure for service providers is a cut of shared ad revenue in return for services which otherwise are costly for them to implement and maintain (voicemail, sms, IM, voice-to-text across these mediums, mapping, location enabled messaging).

However within a year you will be able to port your current phone number to Google and manage your voice calls, email, IM, chat, mapping, calendaring, etc. from the web or an android device which uses no voice and nothing but a prepaid, flat rate data plan and sim card. Your inbox can port seamlessly across mobile and PC devices as the data is all could based.

The AdMob acquisition isn’t as impactful as Google offering mapping for free and thereby destroying the value of the only two players who had managed to provide mobile mapping, Navteq (Nokia purchased for $8bn) and Telenav (IPO just announced).

For all the change that Apple wrought in consumer behavior on mobile devices, Google is driving at least as much change from the technology systems side. Truly an amazing time to be in the industry. And perhaps the most dangerous time to be a carrier as the risks for once are equal to the opportunities.