Traffic or Device Sales, What Matters Most?

James wrote something yesterday that included this graphic:

admob_feb10_US_share.png

What caught my attention, as was the intention of the graphic, was the Android traffic number climbing from effectively zero to more than 40% in just a year and a couple of months. Obviously this was the intention of the graphic (note the green color of the line… designers use green to symbolize wealth) but given that it is published by Admob, which is being acquired by Google, I think you would have to take this chart with a healthy dose of skeptically driven “show me” before you accept it as fact.

The reason I suggest we have some skepticism about this is not because the data is fabricated but because it suggests something very specific that is different from showing Android is beating Blackberry, Windows Mobile, and Palm (although it is believable on the latter) in one statistic that matters, device sales, but rather that application usage on Android is achieving parity with Apple.

I downloaded the Admob Mobile Metrics Report and it is very clear, this chart is derived from an analysis of Admob’s network traffic, not mobile network traffic by device or by carrier. Admob, which serves ads into 15k websites and apps on iPhone and Android, analyzes their traffic and trends it according to the type of OS and type of handset (smartphone or feature phone), but also internet devices like the iPod Touch and the upcoming iPad.

Admob claims 10 billion monthly impressions, which no doubt provides a snapshot of trend data but one subject to a lot of interpretation as it does not include meaningful traffic from Windows Mobile or Blackberry devices as those markets have demonstrated less tendency to browse websites with their devices. Let’s set aside for a moment the strategic implications of this observation by agreeing that Windows Mobile and Blackberry have squandered a big headstart in this market which enabled Apple to brilliantly exploit web browsing as a core competency of the iPhone… and later apps (although as I have pointed out before, Apple was originally hostile to external developers building apps for the iPhone).

This leads me to the main point of this post, which is to ask the question what matters more, how many devices are sold or how consumers use them? There is no denying that the device sales underpin everything for handset manufacturers because that is what carriers respond to and where the handset manufacturers generate revenue, but there is no denying that despite impressive sales numbers by RIM and Microsoft (which isn’t a handset manufacturer but should be considered one for the purpose of this analysis) but at the same time each of these platforms has become less important in the consumer space as the iPhone and Android have dominated the consumer mindset.

I don’t have hard numbers to back this up but I think anecdotal observation is undeniable, consumers use the iPhones and Android devices in a fundamentally different way than their Blackberries and other smartphones. I do recall a statistic that I read recently which said the average iPhone user has 11 installed applications versus 3.5 for the average Blackberry user, and I suspect the divide is equally stark against Windows Mobile devices, and it’s clear that Android was developed to mimic the iPhone in this regard.

If we accept that the iPhone/Android markets are doing more than just reading their email and making calls, does this reflect better capabilities of the devices or a far more simple process for acquiring and installing apps on the iPhone/Android? The answer is clearly yes because the app marketplaces and extensive third party developer capabilities, as well as the unique aspects of the handsets, have resulted in a massively more extensive and vibrant market for mobile applications than on the Blackberry and Windows Mobile counterparts. No denying this.

Now here is where things get interesting. Carriers price their wireless plans with voice and data components, with data predominately offered as all you can eat pricing so with data consumption growing at over 100% annually the carriers are seeing growth in the one part of their network they can’t monetize while at the same time incurring significant capital expenditures for network build out. That data traffic has been surging creates a range of problems for carriers who by all accounts cannot expand their networks fast enough (or afford to when they can’t charge subscribers $60 or $70 a month for data), including degrading voice capability (which is profitable) to add to data network bandwidth.

The other problem that data presents is that it erodes a business that is super profitable for carriers, SMS which generates about 20% or $200 billion of global telco revenues. As apps increasingly provide notification capability and instant messaging, carriers will be put in a real quandary and I suspect we will see them throttle apps that infringe on their core businesses (like voice and SMS), as well as apps that are bandwidth hogs (like Slingbox for mobile).

There is a fellow by the name of Andrew Odlyzko that you should take the time to read up on if you are interested in these topics. Andrew is a Professor in the School of Mathematics at the University of Minnesota and by all accounts one of the most accomplished researchers who specializes in the economics of network consumption. Odlyzko believes that voice is seriously underrated as a market and carriers are making a strategic error by not improving the quality of voice and seamlessly integrating voice with data, but he also asserts that data traffic rates will fall from their aggressive growth rates to somewhere around 30%.

Where this brings us is full circle, if mobile network traffic does trend down then the lines on the network traffic graph provided by Admob would converge, or put another way, normalize. It’s not to suggest that Admob is wrong, only that you have to look at their data with a complex set of filters that put into perspective the limited solar system they are measuring. The other implication of all this is that all you can eat data is likely a phenomena that consumers will not enjoy in perpetuity, or access to mobile apps will be filtered according to the bandwidth they consume. I think it is also plausible to consider that mobile data pricing plans will be tiered according to the device the consumer is using, as in Blackberry users typically use less data therefore have a cheaper data plan than iPhone users.

Whatever the eventuality, one this is clear and that is the wireless market is getting much more complex.

Satellites

Phoneflix has completely changed my interactions with Netflix. Now, wherever I am I can open it on my iPhone and manage my Netflix queue. It’s as random as while watching television or at the car wash or even sitting is a movie theatre watching previews.

TweetDeck (and Thwirl before it) accelerated my twitter usage. Yammer’s desktop AIR client is universally regarded as compelling within our company, contributing to our usage rates.

The Evernote iPhone app is not only handy for putting my notes on my mobile device, but it also serves as notetaker itself when nothing else is available. My connection to Evernote is stronger than just with web and desktop experiences.

For all of the benefits that web-based applications provide, user experience alone is generally not one of them. Small, high performance, persistent desktop apps can intensify usage which can then lead to broader adoption and with mobile apps, specifically the iPhone but eventually more mobile platforms, this goes to a whole new level.

When I talk with companies, big and small, I am struck by the “we’ll do that eventually” attitude that the majority have. The view that these satellite interfaces are somehow optional or just extra is a miscalculation.

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More on this topic (What's this?) Read more on Netflix, IPhone at Wikinvest

Nokia to Launch Traffic Network

I’ll be curious to see how this is implemented. Being able to syndicate the structural traffic network content (e.g. road sensors) to mobile phones makes a lot of sense but the user generated content piece is more suspect. First of all there is the input mechanism given that SMS is illegal while driving (and for good reason, as opposed to handsfree requirements), but more ominously, there is no way in hell they will get a critical mass of individuals to input data about traffic conditions in real time.

Based in part on the results of an earlier experiment, Nokia believes that a community of users with GPS-equipped mobile devices can help reduce traffic and the amount of time spent on the road. Providing real-time information about traffic congestion helps drivers make more informed decisions – such as whether to take alternative routes, public transport or reschedule their journey.

[From Nokia Research Center Puts Mobile Millennium in Gear to Help Reduce Traffic Congestion]

BTW, this is a Java app so the possibility of an Android version is real, however unlikely, but an iPhone version would be a significant effort. This may sound odd to suggest given that Nokia is the sponsor, but for the content network to flourish it would be essential to have a broad array of handset manufacturers involved, and considering that this project is funded in part by a grant from the Department of Transportation, the notion that it would benefit a single vendor, who is a foreign company nonetheless, is odious.

RIM Promises New Mac Tools, It’s About Frickin Time

It’s been on their radar since 2004 and they won’t have anything until next year? 5 frickin years to enable Mac users with full native support on Mac OSX. I’d buy another Blackberry today were it not for the crappy desktop manager that is PocketMac.

Let’s call this what it is, RIM was perfectly content to let users suffer with third party software that offered limited features when their only competitor was Windows Mobile, but now that the iPhone is making inroads with RIM’s core market well Mac support is suddenly important. Fuckers.

“We know that we don’t have an ideal solution for Mac users,” the RIM source said. “It’s something that’s been on our radar since 2004, at least.”

[From Mac BlackBerry Users Rejoice: RIM Promises New Mac Tools - CIO.com - Business Technology Leadership]

Car Internet

I can see something like this being a big draw for families, just like in vehicle entertainment systems (DVDs and games) have proven to be. However, for $600 plus another $30 a month it is pretty spendy, for a computer based EVDO card you would pay less than $100 plus $60 a month for Verizon’s service, or put another way, almost 2 years of service before the Chrysler system becomes more economical.

However, one big plus is that the Uconnect service is converting EVDO to wifi, which means that wifi equipped portable devices, like iPhones and PSPs, will benefit from the connection.

This is a big opportunity for aftermarket suppliers given that there is nothing that exceptional about the integration of these systems into the vehicle’s onboard bus, basically they take a power connection, much like how aftermarket satellite radios are installed. The integration of onboard electronics to the network appears to be exceptionally limited with no vehicle functions yet taking advantage of the network.

It’s clear that the performance era for mass market automobiles is sidelined while technology solutions move to the forefront to power next generation clean tech innovations, many not exotic at all like variable displacement engines, and passenger compartment conveniences.

Chrysler’s Uconnect Web creates an EV-DO cellular connection that is then converted to Wi-Fi so that many passengers in the car can get secure Web access on their laptops, video game devices and other equipment, simultaneously, without wires, said Sterling Pratz, CEO of Autonet Mobile, which supplies the device to Chrysler.

[From Car Internet Debuts From Chrysler - 8/12/2008 11:55:00 AM - TWICE]

Bust a Deal, Face the Wheel

Sprint lost a pretty significant case involving the early termination fees (ETFs) here in California. A contract is a contract and I’m not inclined to cheer the court action nullifying a valid contract between two parties, however it’s also clear that cell phone companies have profitably abused ETFs (e.g. attaching an ETF to a renewal contract even when the consumer didn’t get a new handset) and something needs to be done.

Verizon has a proposal to the FCC that is pretty reasonable. Basically what they are calling for is a national policy on ETFs that allows an opt-out period (similar to a cooling off clause), pro-rated ETFs, and lastly, no ETFs for contract renewals unless the consumer receives a new handset.

While I think this is an issue that needs to be dealt with at a regulatory level, I am not inclined to support judicially inspired chaos that will result from each state regulating the issue independently. What will be a natural consequence of such a market would be handsets that are rendered inoperable on carriers other than the one originally sold on and that can’t be a good thing.

Bonus link, the NY Times has a good piece on ETFs.

200807291129.jpg Sprint Nextel Corp. (S) was dealt a major blow in its early-termination-fee case when a California judge ruled it would have to pay $ 73 million.

[From Sprint Loses Early Termination Fee Case, May Pay $73 Million]

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Clearwire promises a fully-open, “third pipe” WiMAX network

I remain a fan of WiMax despite it never quite achieving the promise held out in the early phases. While fully expecting to be a Clearwire customer by now, if it takes a few more years to ramp this to the mass market, I won’t complain.

A lengthy document filed this week with the FCC asks for permission to merge the 2.5GHz spectrum assets of Sprint and Clearwire into “New Clearwire,” the company backed by Sprint, Clearwire, Intel, Time Warner, Google, and Bright House. In the filing, Clearwire makes the case that it will provide true “third pipe” Internet access to home and mobile users at speeds of 6Mbps (and 3Mbps uplink).

[From Clearwire promises a fully-open, "third pipe" WiMAX network]

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Mobile Web Dead?

Former Yahoo! Mobile evangelist turned startup entrepreneur Russell Beattie announced today that he’s calling it quits for his company Mowser because the market for mobile browsing is taking a fast turn for the worse. “The mobile traffic just isn’t there,” Beattie says, “It’s not there now, and it won’t be.”

[From Is the Mobile Web Dead? Some Mobile Entrepreneurs Say Yes - ReadWriteWeb]

Carriers have destructive power, mobile devices are restrictive, diversity of devices force considerable porting cost on developers, and lastly, users want a richer experience. Is mobile web dead? That question suggests that it was once alive.

The mobile browser on my iPhone is about as good as they come but on EDGE it’s slooooowwwwww. Even on wifi I rarely use it because I just don’t get enough of a bang out of mobile web apps and typing on the virtual keyboard is laborious.

Stop the insanity! The mass market does not use the mobile web as a regular mode of interacting with the bigger web! If they did we would be seeing traffic numbers growing and application developers moving to the mobile web.

M:Metrics reports that an impressive number of iPhone users have used mobile web features, but what is the sample size polled and did they distinguish between “have used” and “use regularly”? I’ve used my iPhone for all of the reasons M:Metrics reports but only occasionally, usually for looking up phone numbers and addresses (Google maps is rather handy). Obviously my experience is not unique, Gabe Rivera is reporting that mobile Techmeme is less than 1% of his traffic.

200804141827.jpg

Apple’s 45 Million iPhones in 2008

Piper Jaffray analyst Gene Munster took a lot of heat back in June 2007 when he predicted, three weeks before Apple even began selling the iPhone, that the company would be shipping them at the rate of 45 million a year by 2009.

[From FORTUNE: Apple 2.0 Analyst: How Apple sells 45 million iPhones in 2009 «]

It’s not entirely outrageous but the handset market is super competitive and it’s certain that Apple’s leverage will diminish in the absence of another Jesus-phone, and 3G alone ain’t gonna be that. I’ve used my iPhone since last September and am generally pretty loyal to Apple products, but I’m lusting for the Nokia N95. I might even go back to a Blackberry.

Apple is clearly a player in the handset market but to go from where they are to 45 million is beyond aggressive (mind you, as I read this article, Munster was talking run rates and not absolute shipments.) The carriers clearly want this handset and the association with Apple, but the price points are pretty steep and with no subsidies they are capping their market.

Blackberry is the most serious threat to Apple’s ambitions, but they really phoned it in (no pun intended) with the Blackberry 9000. It’s basically the same ‘ol crappy BB with rounded corners and a pretty background image. This surely can’t be the best Blackberry can do, can it? And don’t call me Shirley.

Here’s why I wouldn’t buy another iPhone even though I generally like the one I have:

1) No copy/paste. It’s a small point but incredibly frustrating that Apple didn’t include this cuz it would have screwed up their UI.

2) Battery life. Keep that wifi turned off. In all fairness, most of these uber-handsets have crappy battery life.

3) No video from the camera. The camera is okay, but just okay.

4) Clunky email interface, slow as well. I do like the virtual keyboard much more than I would have thought.

5) It’s heavy and kinda large.

One final note, the SDK will be a big step in the right direction but I suspect that Steve Jobs is only going to go the full distance on openness while being dragged kicking and screaming along the way. I want apps on my iphone and it kinda pisses me off that I can’t have them right now.

EVDO

I finally bought an EVDO card for my Mac. So far it’s been a great experience, the expresscard driver software is already in Leopard so I didn’t have to load anything, basically it was as simple as taking the card out of the box, inserting it in the slot, and clicking on the “connect” menu item that displayed in the menu bar icon that showed up when I inserted the card.

It’s fast, definitely the best wireless experience I’ve had through a non-wifi network. Verizon’s EVDO costs $60 a month, in addition to the cost of the card, but that’s a small price to pay for widely available fast wireless connectivity.

I work from a lot of different places and hoping to find a wifi connection just wasn’t cutting it. Also, I am finding that wifi is increasingly not free in many public places therefore EVDO is a good hedge against wifi inflation. While my favorite hotel in Denver, The Monaco, offers free in room wifi, a significant number of hotels still don’t so when I’m traveling I no longer have to subject myself to the irritation of paying $10 or more for a 24 hour wifi connection.

The only thing that is kind of annoying is the blinking green light on the card, I may put a piece of tape over it.