10+1 Myths About the Mobile Economy is a presentation on the latest trends of the mobile industry, from app revenues and cross-platform development to the waging war between native and web apps
2. Knowledge. Passion. Innovation.
Extracts from Mobile Innovation Economics January 2012
10+1 Myths on the
Mobile App Economy
Andreas Constantinou
Managing Director
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Distilling market noise into market sense
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Developer
Economics 2011:
How developers and
brands are making
money in the mobile
app economy
Mobile Innovation
Clash of Economics Mobile Megatrends
Mobile Industry Atlas, 3rd ed.
ecosystems how Internet business models are series
1,100+ companies, 69 market sectors
mobile platforms and impacting telecoms and how to
the battle for innovate in the age of software
dominance
Top-100 analyst blog
4,000+ subscribers
20,000+ monthly uniques
90% mobile industry insiders
HTML5
and its impact to the
mobile industry
The Android Game Plan 100 million club
the commercial mechanics tracking successful businesses
behind Android and how in mobile
Google runs the show
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Clients
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VisionMobile clients
2009-2011
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6. Reality: Apps drive the platform’s
core business - not content profits
for Apple this is device sales; for Google this is on-line ads
7. Industry focuses on app revenues
but misses the point
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8. The mobile platform landscape
platforms are winning and losing by ecosystem strength
iOS 550 K
BlackBerry OS Symbian
40 K 90 K
Windows Phone Android
50 K 400 K
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9. Apps and content create new empires
Apple Q2’2011: 4.2% of volume, 52% of profits
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10. Apple core business is consumer electronics
Apple’s app revenues are small compared to the core business
Apple revenue by segment Q3 2011 ($ billions).
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11. Apple core business is consumer electronics
Apple’s app revenues are small compared to the core business
“
We run the App Store just a little
over breakeven”
Peter Oppenheimer,
Apple CFO, Feb 2011
Apple revenue by segment Q3 2011 ($ billions).
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12. Apple iOS platform and ecosystem
apps drive hardware sales for Apple
$$$ developers
media sw publishers
buyers content retailers
user
internet players
$$$/users
engagement
applications
$$$ same-side
and services
users and data plans
+ network
effects
subsidies
operators iOS platform
premium premium $$$
product experience
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16. Leading ecosystems battle across 4 screens
Experience roaming becomes the key to future platform competition
Mac computers iPhone iPad Apple TV
Chrome browser Android Android tablets Google TV
amazon.com Kindle
18. Reality: HTML5 is a
complementary technology
needs a leader to deliver a solution for
monetisation, distribution and retailing of HTML5 apps
19. HTML5 has many benefactors, but no clear leader
all pushing HTML5 and web apps for their own unrelated reasons
Apple looks to move the web away from Flash
offers best-in-class support for HTML5 in mobile Safari browser
Google searches for more ways to commoditize complements
offers strong HTML support in Chrome and Android web browsers
Facebook aims to break-down Apple/Google silos and distance Adobe
looks to take over native and web app discovery
Microsoft tries to leverage web innovation to Windows 8
designs strong support for HTML5 into next generation Windows versions
Mobile operators hope to regain control lost to native platforms
promote HTML5 as an alternative to smartphone platforms
Qualcomm works to create competitive advantage for its chips
offers hardware-acceleration for mobile browsers
Brands look use web as a low-cost way to go cross-screen
fund mobile web developers through projects
Tool makers facilitate web-to-native hybrid development
Adobe (PhoneGap), Sencha, The M Project, Red Foundry
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20. HTML5 cannot 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
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21. Platforms differ in level of HTML5 support
HTML5 Test Score
iOS 5 296
MeeGo 272
Opera Mobile 11.10 269
BlackBerry OS 7 260
FirefoxMobile 6 254
Android 3.2 'Honeycomb' 222
Android 2.3 177
Windows Phone 7.5 (Mango) 140
0 50 100 150 200 250 300 350
Source: html5test.com, Nov 2011. See also: http://www.lostinmobile.com/home/for-html5-ios5-wins.html
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23. Reality: Android is the most closed
open source project in mobile
software
..and we have proved it.
24. Source: Google-internal presentation disclosed as a result of Oracle's patent and copyright infringement lawsuit against
Google
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25. How Google runs the show:
Six control points:
- Private codelines (6+ months ahead) available to 2 OEM partners per release
- Exceptionally fast pace of innovation 5 new versions (2 major, 3 minor) released in 1 year
- Gated developer community Android Market is the default channel for 300,000+ apps
- Closed-source apps Android Market, GMail, Google Maps, GTalk, etc under commercial agreement
- Android trademark use of Android trademark subject to commercial terms
- Controlled review process all reviewers work for Google, plus rampant NIH culture
109 Copyright VisionMobile 2011
26. Closed governance is used to control
clever use of governance models can be used to control products based on OSS
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
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28. Reality: Apple, Google and Microsoft
have very different core businesses
They just establish the same complementary assets
across the value chain
29. Key players have very different core businesses
Players old and new expand across value-chain to capture more profits
Apps
Content
Services
Ads Ads
App Stores / Portals
Distribution
Billing
Telephony
Connectivity
Access
Network access
software
Software platform
licensing
Screen
Devices Devices
retailing
Discovery / retailing
User
Customer insights
denotes vendor’s core business Copyright VisionMobile 2011
33. VisionMobile
Developer segments and their motivations
Builds on jobs-based approach, i.e. what developers are trying to get done
Motivations & drivers
Hobbyist developers/students Fun and coolness
Independent software vendors Sales and opportunity
Commissioned developers Probability of winning a project
Marketing agencies Client requests User reach
is the key
factor for
Brands and verticals Brand affinity and user engagement
making
platform
Digital content publishers Large addressable market decisions
Venture-backed startups Attract investment
Corporate IT ROI, information security
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35. Reality: The bar for developer
offerings is very high
You need simple, zero-entry-cost offerings
Programs need to consider entire developer journey
36. Developers need zero barriers
- Developer pays +
2 developer
✖
pays for API use
broken loop
1 user pays for app or service
+ User pays -
1 developer 3 users pay for
gets free APIs telco services
+ ✔
4 gets rev share
positive feedback loop
2 developer deploys app or service
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37. Supply vs demand mismatch in developer programs
most vendor effort goes here opportunities in last mile to user
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39. Reality: ARPU has a ceiling because
it deals with comms needs only
Communications spend needs to be seen in the context of
overall consumer spend by segment
40. Apps tap consumer $$$ beyond telecoms
1990-2010 2011+
Operators targeting comms needs Apps opening mobile to all needs
Source: US consumer expenditure survey, 2009 Copyright VisionMobile 2011
42. Reality: Voice is under pressure
to unbundle
The integrated telco will always by more
expensive/slower/worse than OTT alternatives.
43. The domino effect in mobile value-chain
from handsets, to value-added services, to core services
OTT messaging and voice
platform app stores
iOS Android
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44. The case for voice APIs
Huge spike in developer interest for voice/SMS APIs
Last 14 days All time
(to 4 October 2011)
Telcos need to compete with OTT players on voice APIs
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46. Reality: Telco need new economic
tools to play in the software era
Two such economic tools are demand-side economies of scale;
and economics of complements
47. Google Android ecosystem
drives commoditization of mobile
industry $$$ app developers
verticals media publishers
monetisation same-side
Ad network
& user reach + network
effects
$$$ applications
and services
users and data plans ticket to smartphone market
subsidies devices
operators Android platform Handset OEMs
End-to-end Eyeballs
Product Experience
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48. Networks effects stronger than economies of scale
user value
Platform business
value grows
exponentially due to
increased number
of interconnections
Conventional business
value grows linearly due to
cost saving and decreasing price
scale
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49. The economics of complements
widely used by Internet players in competitive strategies
Core Business Complement
A product consumed
Main product
with the main product
Product demand increases
as complement prices decrease
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50. How Google uses economics of complements
to drive its core business of online advertising
Google Core Business Google Complements
On-line advertising mobile networks handsets browsers
(95% of profits)
Commoditisation of mobile
increases demand
for Google products
Closed net open source Chrome,
ad network neutrality OS WebKit
Closed Open
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52. Reality: Telcos need to unbundle
in order to compete in software era
The integrated telco will always be more expensive/slower than
OTT alternatives.
53. The all in one telco business
..is take all or nothing
Telephony
Messaging
Services
Voice plans
Data plans
Access
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54. Unbundling the telco
into three business layers
Leverage digital channels, retail and OTT
assets plus local presence as a profit
center.
Distribution business
Unbundled voice
Messaging APIs
Billing APIs
Services business Authentication APIs
Customer analytics as a service
Ubiquitous data connectivity
across billions of terminals
Access business
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