Mobile Market Wrap-up for Aug 21, 2009

In the past two months, we reported that the FCC is investigating wireless carriers and their exclusivity practices.  Well, this week the FCC officially launched a larger, wider probe of the wireless industry to investigate several issues from handset exclusivity to consumer protection.  Their ultimate goal is to ensure the landscape remains competitive and fair for all.  I don’t think the investigation will lead to any major formal regulations, but I do think consumers will garner more awareness and force the US carriers to focus on what they are supposed to be … a SERVICE provider (not hardware, not applications, not gimmicks).  The carriers should be judged on the service they provide, meaning call quality, data speeds, customer service and pricing.

On a more positive note, smartphones continue gaining volume growth and market share.  The NPD group reported that 28% of all new phones purchased are smartphones which is an increase of 47% since last year.  According to Ross Rubin, director of industry analysis at the NPD Group, “despite the depressed economy, consumers are continuing to invest not only in the handsets themselves, but in pricy data plans.”  Recently Forbes named RIM the fastest growing company in the world with its profits rising 84% and revenues 77%.  The Forbes report just goes to show how fast and popular smartphones really are becoming worldwide.  Although RIM is the fast growing, who is the dominant smartphone vendor in the world?  That honor goes to Nokia who still has 44.3% of the global market share of smartphonesWith all this news of growth, market share, Apple, RIM, etc… will any handset vendor really be able to keep their market share long-term?  I don’t think so and predict that no vendor will have more than 20% market share long-term.  The market is only going to get more fragmented as Android and Microsoft continue their push and marketing campaigns.

With all this noise about smartphone growth and consumer spending on mobile, I’m not surprised when I find new articles on new, exciting app store features or how developers can monetize apps.  Here are just a few I found this week:

It’s no surprise that these kinds of articles frustrate me, especially if you read our blog often.  Repeating myself, I recommend all developers should just revolt against the app stores and create browser-based versions of their apps and charge a license fee to consumers directly and keep all the revenue.  One of the funniest articles I found in a while seems to reinforce my sentiments in a very comical, yet convincing manner.  The article titled “Steve Jobs hates the App Store” is definitely worth a read.  Great stuff!

Here are this week’s other articles, stories or report I thought you would find interesting:

That’s all for this week.  As always, please share your opinion below with our other readers.

The App Store model is broken

There continues to be lots of media attention and hype surrounding mobile apps. In fact, I can’t sit through one quiet day of Sunday sports without seeing at least a half dozen commercials touting how much better apps make the iPhone. What they are failing to show you is that the App Store model is broken, and not just for the iPhone. While the App Store may have been a good idea when it launched, it has lost its way, despite all of the hype. Where has the App Store gone wrong? Let’s count the ways.

1. The Price of Protection
In order to keep the phone safe from things like viruses, crashing, and resource contention, all the apps in the App Store have to go through a stringent approval process. During this same approval process, content is also reviewed to make sure it is appropriate for the phone. The problem is a very subjective approval process. For example, Google Voice and an app for a book with proceeds going to charity get rejected, yet a “booty-shaking” app is approved. Go figure.

2. A Needle in a Haystack
Think 65,000 apps is a good thing? Then think again. If you release an app, how does anyone find it. This has led to people writing stories on what you have to do to promote your app in order to get noticed. People often put it on their website so one can find it. Hmm, that makes sense – I’ll put the app on my website so people can find and download it. Shouldn’t I just create a mobile website to begin with? At least your mobile website will benefit from any SEO efforts that you use on your online website. For an app, you’re on your own. An app has to have its own promotion strategy since the search engines don’t index the App Stores.

3. Everyone has an iPhone, don’t they?
Based on the hype, you would think that everyone has an iPhone. The answer is that around 3% of the mobile users in the US have an iPhone – that’s how much exposure you get with an iPhone app, provided people can find it AND download it. What? You want to increase the reach of your app? Then you need to redesign it for BlackBerry, Android, Windows Mobile, Palm, Nokia, and Samsung, with more App Stores planned. Or you can design a web-based app once and cover every platform all at once. It’s not hard to figure out which model is more efficient.

4. The Elephant in the Room
Ah, the thing no one wants to talk about: upgrading. What happens when the iPhone gets upgraded? Is Apple testing each of the 65,000 apps to make sure they still work – I don’t think so. What about BlackBerry, Android and Windows Mobile? Yes, the hardware and operating systems of the phones change, and there is no guarantee that your app will still work when it does. Plus, when users change their handset, there is no guarantee that they will redownload your app. Given that the average user upgrade cycle is 18-24 months, there is a pretty good chance that your app will not survive the user upgrade cycle., resulting in a very short-term effect.

So what is one to do. Well, as I’ve discussed before, apps won’t die, but they will get relegated to specialized functions. If I have a cool app that takes advantages of specific features on a particular phone, such as advanced graphics for a game, or shaking to transfer content from one device to another, sure I’d do an app, and I’d even charge for it. On the other hand, if I’m a business trying to promote my brand and product or have an app that does not access to specialized phone resources or features, then I am doing a mobile website, or what I would call a web-app (an application that runs over the web for all mobile phones). Why should I limit myself to one platform, submit to the unknown powers that control its App Store, and risk not surviving the upgrade cycle?

Ultimately, the misgivings of the App Store will cause apps to lose their glow, resulting in a lot less hype. It can’t happen soon enough so I can go back to watching Sunday sports in peace.

The future of the mobile web and apps

This article is the conclusion of a five-part series on the mobile web vs app debate. In it, I look at which of the two technologies will prevail over the long-term.

The biggest question in the mobile web vs app debate is who will win?

Based on the items that I have discussed throughout this series, the winner will be the mobile web. The power of flexibility, the ability to design once for multiple handsets, the open nature of the web, the control over content, and the reduced costs of maintenance and promotion will lead developers to push more and more functionality to the mobile web. For users, the ability to freely move between handsets and carriers, as well as to have a seamless experience between their desktop and mobile device, will also lead users to favor the mobile web over apps.

However, the road to mobile web victory will not occur without a few hiccups. Clearly, there are issues with the mobile internet today that have enabled mobile apps to take the early lead in this contest. A recent study on mobile web usability highlighted the issues with the current state of the mobile internet. It was no surprise that small screens, awkward input, download delays, and poorly designed sites are the primary issues. All of these things, though, are being addressed. Download delays are being addressed by improvements in the carriers’ networks. Awkward input is being addressed by new handsets with user interfaces that simplify navigation. Small screens and poorly designed sites are being addressed by companies optimizing their sites for mobile – either on their own or with the help of outside products and services. As these issues with the mobile internet fade, the mobile web will gain momentum and move ahead of apps as the primary means of mobile interaction.

I do not expect apps to go quietly though. As pointed out in an earlier article in the series, the manufacturers and carriers do not want the app gravy train to end. Apps provide an income source for these groups as well as reduce their burden of building new, faster networks or better, more usable handsets. They will fight the inevitable, putting more resources into marketing programs that sing the praises of apps and play down the mobile internet.

But history has taught us a valuable lesson, and all one has to do is look at the desktop PC market to see it. Web-based apps have clearly won against local apps on the desktop. Sure many companies fought the transition, but the lower costs of web-based applications, the ability to access your data wherever you need it, the security of data back-up on enterprise-class servers, and the flexibility to change hardware without impacting data and apps won out. The consumer chose the better option, and the companies that fought it were forced to follow. I don’t see any reasons why the mobile environment won’t play out the same way – the consumers will speak and the companies will need to follow.

So does this means that apps are dead? No, it does not. Apps will still have a role in the mobile environment. Just as on the desktop, there is certain functionality in the mobile environment that is best served through an app. For example, to do intensive gaming, where the capabilities and specifications of the hardware matter, an app makes more sense. Apps will fill a niche in the mobile environment going forward, and one that could be a potentially lucrative niche as gaming has proven on the PC. However, for the vast majority of interactions in the mobile environment, the mobile web will dominate.

Today there is a great debate between the mobile web and apps, but as the mobile web matures, the next  couple of years will be the transition period when the mobile web overtakes apps as the dominant method of interation in the mobile environment.

Content matters: static or dynamic

This is part 4 of a five-part series covering the issues in the mobile web vs app debate. In this article I talk about how the type of content, either static or dynamic, can influence your mobile presence choice.

When planning your mobile presence, the type of content is something that needs to be considered, at least today. An app can have significant advantages when using dynamic content – things like video, audio and motion graphics. When using content that is static in nature, like photos and text, the mobile web shines. Let’s take a deeper look at how the content affects the mobile web and apps.

Dynamic content video, audio, and motion graphics
Apps have the advantage when it comes to dynamic content. In fact, one of the key reasons apps were developed was to enable dynamic content on mobile devices. Here are the three key reasons why apps beat the mobile web on dynamic content:

1. Access to local resources
The graphics and imaging used in games is a great example of dynamic content that needs access to the local resources. Furthermore, when designing graphic intensive apps like games, the developer often needs to know the specific hardware specifications and designs the content (and app) around them. Generally, it is not possible, or very difficult, to pull-off these types of games on a desktop PC connected to the web, let alone a mobile device connected to the mobile internet.

2. Instant response
Games are another great example of an app that needs instant response. If user interaction is subject to the delays of the mobile internet, the game may be unplayable. Content where instant response to user input is required are better served with an app than the mobile web, although upcoming improvements in mobile network speeds will effectively negate this advantage.

3. Browser technology
Unlike the internet, browser technology in the mobile internet is far from standard. Some browsers are great at displaying dynamic content, some are not. This issue will pass as mobile browsers become more standard, but for now, apps permit the developer to make sure the user can view dynamic content properly.

Static content – text and images
While both the mobile web and an app can handle static content such as text and images, the mobile web is the better choice. Since static content does not require heavy interaction with local resources on the mobile device and the bandwidth requirements are low, the mobile web is more than capable of providing a robust experience to the user. The three key benefits of using the mobile web to display static content:

1. Flexibility
The mobile web allows you to update content in real-time with no restrictions placed on your content (i.e. approval requirements). Updating an app requires going through the release and approval process, creating delays in access to new content. Plus, apps are subject to approval criteria, and it is not unheard of for apps to be removed from a store after they have been approved.

2. Simplified support and maintenance
The mobile web does not require you to support multiple versions of content since users always access the latest content when using your site. With an app, when you change or update content, you have to support multiple versions of the app as not all users will upgrade.

3. Availability
The mobile web extends to all phones that have access to the mobile internet, which is not limited to smartphones. Apps only reach those phones where the app is installed and those phones for which you have designed an app. For example, if you design your app only for the iPhone, you will reach less than 10% of the US mobile audience. Even if you design for every smartphone platform, you will only reach about a third of the mobile user population, and that requires that every smartphone user download your app.

 

In summary, an app is a better choice if the mobile presence you are designing requires dedicated, direct access to specific system resources, such as specialized graphics resources on the device. Otherwise, the mobile web is a better choice regardless of the content. Granted, there are some limitations with browser standards and bandwidth speeds today, but these issues are being addressed meaning dynamic content will only get better on the mobile web. So while there are clear advantages to each type of mobile presence based on content type today, the mobile web will win out in the long run making it the choice for a mobile presence for all but a few select applications.

Tomorrow, I will wrap-up the series by taking a look at what the future holds for the mobile web and apps.

Where the burden lies: consumer, developer, manufacturer, or carrier

This is part 3 of a five-part series covering the issues in the mobile web vs app debate. In this article I look at where the burden lies with each technology – the consumer, developer, manufacturer or carrier.

Using new technologies to promote a brand provides it with a trendy, cutting edge image. The new technology today is mobile, and mobile apps are clearly the trendiest way to go mobile. While a well thought out and well designed mobile web presence can achieve the same effect, it doesn’t nearly have the same sex appeal of an app. So if both means lead to the same ends, why are apps the hot ticket, and who bears the burden of each technology?

To be clear, apps are more popular because manufacturers and carriers are pushing them through advertising and marketing messages. Why? Because apps place no burden on them whatsoever, but place all the work squarely on the shoulders of developers and consumers. The only thing the manufacturers are doing is hosting a store for the apps, and for that service, many are skimming up to 30% of the proceeds that go through their stores. Carriers, if they are not hosting an app store, carry no burden whatsoever. Furthermore, apps have the effect of locking a consumer to a handset and carrier. If a consumer changes handsets, or changes carriers, access to apps are lost. By buying into apps, consumers are implicitly locking themselves into a handset and carrier solution.

On the other hand, there is significant burden on manufacturers and carriers to support the mobile web. Manufacturers have to design handsets that can handle the varying demands of the web since they cannot control the design and functionality of the sites as they do with apps. Carriers have to design networks that can handle the mobile traffic generated from the mobile web. To top it off, a mobile web presence does not lock a consumer to a manufacturer/carrier solution. With the mobile web, consumers are free to switch among handsets and carriers without a penalty in functionality. This flexibility puts the power in the hands of the consumer and does not benefit the carriers or manufacturers.

The fact of the matter is that manufacturers and carriers love apps because they lock us, the consumers, in. Why would they want to promote a device and carrier/handset agnostic solution so when something better comes along, you can up and leave and move to the next best deal. Carriers and manufacturers makes apps look appealing, because they benefit.

For developers, an analysis of the iPhone App Store reveals the high risk they face when creating a mobile app. There are currently around 60,000 apps available, and recent reports indicate that there have been over 1.5 billion downloads. A quick analysis reveals that the average download number for an app is around 25,000. So for every app that has 250,000 or more downloads, there are at least 10 apps that have few, if any, downloads to maintain the average. In other words, less than 10% of the apps in the store see any significant success. Even then, no one is reporting how many apps are deleted or forgotten about after the initial download, or how many apps fail to make the upgrade transition across handsets and carriers. A developer has the huge burden of developing an engaging, long-lasting app in order to get the most exposure for the brand and return on investment from their app development cost. The mobile web places a similar burden on the developer of creating an engaging site, but with a mobile web presence, a developer can quickly incorporate feedback from users to change content, update functionality, and change messaging to maintain an engaging site. In summary, a mobile web presence gives a developer room to maneuver and react to feedback and change, whereas an app has very little margin for error.

In addition to placing burden on the developer, apps place a great deal of burden on the consumer. Consumers are responsible for sifting through the app stores to find apps they want, making sure apps are compatible with their handset, evaluating apps, and staying current with the latest versions. Should a consumer decide to switch handsets or, worse yet, lose or break an existing handset, they are responsible for remembering which apps were on their phone, finding them (again), and reloading them. Does having a mobile web presence relieve all the burden from the consumer? No, not all of it, but it definitely reduces it significantly since the developer, handset manufacturer and carrier are responsible for providing the user with a great experience, rather than pushing that responsibility to the consumer. In an era where consumers are expecting more from their technology and looking to brands that provide outstanding service, making consumers rely on apps to interact with your brand in the mobile environment seems to be a risky endeavor and more regression rather than progression in marketing.

Bottom line, beware the lure of apps. Sure, a well designed app can have a huge impact on the power of your brand. However, a mediocre or poorly designed app can have an equally damaging effect on your brand. On the other hand, while a mobile web presence is a safer choice by relieving burden from the developer and consumer, the rewards may not be as high. Your choice of mobile presence is definitely a game of risk/reward. So the real question becomes, how much of your brand’s image are you willing to risk in the mobile environment?

Tomorrow I will look at how the type of content, static or dynamic, affects the decision to choose the mobile web or an app for your mobile presence.