"Mobile Innovation Economics", Andreas Constantinou, VisionMobile @ Tallinn 21.11.11

VisionMobile
Mobile Innovation Economics selected excerpts
selected excerpts for AppCircus event, Mobile Monday Estonia, 21 November 2011

Knowledge. Passion. Innovation.

selected excerpts November 2011

Mobile Innovation Economics

Andreas Constantinou
Managing Director

2 Copyright VisionMobile 2011

VisionMobile
Distilling market noise into market sense
Research Training Market maps Strategy definition
competitive analysis, open source economics, Competitive landscape maps strategy design, ecosystem
commissioned research, Android commercials, of the mobile industry positioning, product
company due diligence mobile industry dynamics definition

Developer
Economics 2011:
How developers and
brands are making
money in the mobile
app economy

Software Economics in a
HTML5 Telecoms World Mobile Megatrends series
Mobile Industry Atlas, 3rd ed.
and its impact how Internet business models are
1,100+ companies, 69 market sectors
to the mobile impacting telecoms and how to
industry innovate in the age of software
Top-100 analyst blog
4,000+ subscribers
20,000+ monthly uniques
90% mobile industry insiders
Active Idle Screen
Who will own the
screen?
The Android Game Plan
the commercial mechanics 100 million club
behind Android and how tracking successful businesses
Google runs the show in mobile


Trusted by industry brands
Clients

selected
VisionMobile clients
2008-2011


One
Winners and losers in the handset value chain


Top-5 OEM market share takes a nose dive
OEM market is quickly fragmenting

Top-5 OEMs

Market share of top-5 OEMs

80%
59%

Copyright VisionMobile 2011

What is leading to the growth of smartphones?

smartphone share of total handset shipments
Global market share

and by operator demand
to differentiate against Apple

Smartphone ramp up
led by Apple, RIM
and HTC in 2009


Smartphone sales vary greatly by region


Smartphones are realising their promise

% of global sales

Apps and content create new empires
Apple Q1’2011: 5% volumes, 20% revenues, 55% profits


Android and iOS lead the way

source: Asymco


Android: OEM winners and losers

The winners: The losers:
fast followers ‘old guard’ OEMs
Efficient cost structure and ability to differentiate Cost structure requires high-margins
on top of Android or in hardware Android or Windows Phone is a short-term life
support

low cost assemblers
Cost structure optimised for razor-thin margins
Android is a long-term opportunity for global reach

No Name source: VisionMobile


DELLification in 2015
closely modeling the PC business

Profit pyramid Revenue pyramid

Innovators
Role model: Apple
$50B 5% @ $500

Fast followers
$100B Role model: Samsung
20% @ $250

Assemblers
Role model: Dell
$48B
30% @ $80

Mass producers
Role model: Nokia ?
$27B 45% @ $30 No Name

$225B

Two
Smartphone platform competitive landscape


Mobile platforms status (Q3 2011)

Three types of platforms

Platform type Purpose Audience Economies of scale Examples

Software Sharing of software Device makers None Symbian, BREW,
platform dev costs and risks Flash Lite

Application Connecting app Developers - Users to devs Android, iOS,
platform developers and - Users to users Windows Phone
users - Devs to devs

Communication Facilitating Users - Users to users Telephone, Fax,
platform communication BlackBerry
between users Messenger

Android, iOS dominate thanks to network effects

Measuring network effects: growing users & developers

Three
Openness strategies


What is Google’s strategy?

1. Flatten
Flatten everything that stands between eyeballs and Google inventory. This is based on the economics of
complements; to increase the value of your product you need to reduce the value of your complements. It
explains the Android and Chrome strategies

2. Expand
Expand the footprint of Google inventory (e.g. search-based text ads) across the user journey by introducing
new Google services like Gmail, GMaps, Google Voice as well as Android handsets.

3. Mine
Mine the information available on every user of that inventory. Mining information helps Google to better
micro-target users which directly increases the value of its inventory.

How does Android help Google?

1. Android drives eyeballs to Google apps
Drives eyeballs to Google Maps, Gtalk, and other apps bundled on Android handsets and include ads
Google is also the default (and most easy to integrate) ad network for Android apps

2. Android drives a reduction in handset retail price points
..as price becomes the last remaining differentiation option for handset vendors. The cheaper the handsets,
the more people will buy, and the more eyeballs for Google ads

3. Android drives more telcos to adopt flat data rates
Therefore more people using smartphones, therefore more eyeballs for Google ads


Closed governance is used to control Android

license type

dual license
Foundation (commercial + copyleft)
Qt (58%)
(58%)

strong copyleft
Linux kernel (GPL)
(71%)

weak copyleft
MeeGo WebKit Foundation (LGPL, MPL, EPL,..)
(61%) Mozilla (68%) (84%)
(65%)

permissive
Android (APL, BSD, MIT, ...)
(23%)

Closed governance open governance

open governance index

Source: Google-internal presentation disclosed as a result of Oracle's patent and copyright infringement lawsuit against Google


Four
HTML5 and the impact of web apps


Where are we with HTML5?
…and how long will it take to fulfill its promise?


…but what is HTML5, really?
brings capabilities of web apps closer to those of native apps

Emerging next generation of HTML web language
–  Collection of drafts by WHAT WG that merge into W3C specifications
WHAT WG - Web Hypertext Application Technologies
–  W3C standard will be completed no sooner than 2013

Driven by leading web and platform players

Main enhancements
–  UI tools –  plugin-free video/audio
–  off-line storage –  geo location
–  2D graphics –  speed and communication


High fragmentation in HTML5 support


HTML5 has many benefactors
all pushing HTML5 and web apps for their own unrelated reasons

Apple looking to move the web away from Flash
– 
Google searching for more ways to commoditize complements
– 
Facebook aiming to break-down Apple/Google silos and distance Adobe
– 
Microsoft to leverage web innovation to Windows 8
– 
Mobile operators hoping to regain control lost to native platforms
– 
Qualcomm working to create competitive advantage for its chips
– 
Brands looking use web as a low-cost way to go cross-screen
– 
Tool makers facilitating web-to-native hybrid development
– 


Can HTML5 compete with platforms?
HTML5 is a complementary technology, not yet a full-fledged platform

App platform ingredients

Software Developer
Monetisation Distribution Retailing
foundations ecosystem

HTML5 ✔

= ✖

✖

✖

fragmented platform
always a step behind native will depend on app store

complex tool-chain waiting for a leader
Facebook? Google? Microsoft? Other?

most appealing to those who do not yet develop for mobile
complimentary tech to those who develops native apps


“We don’t expect developers to choose between HTML5 and native
apps. We expect they will choose both, just as we did. We view
HTML5 as a technology, not a platform.”

June 2011
http://www.insidemobileapps.com/2011/06/17/facebook-html5-mobile-platform-project-spartan/



want more?

Updated: 12 November 2010

www.visionmobile.com/workshops



Contact

andreas@visionmobile.com
Andreas Constantinou | Managing Director | +44 2033 844163

Updated: 12 November 2010


"Mobile Innovation Economics", Andreas Constantinou, VisionMobile @ Tallinn 21.11.11

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"Mobile Innovation Economics", Andreas Constantinou, VisionMobile @ Tallinn 21.11.11