Over the years, certain mobile phones and services have thoroughly shaken up the wireless market in the United States -- think the rise of text messaging, the corporate popularization of RIMM's BlackBerry and its accompanying services, the iPhone and its App Store, and and perhaps even the wildly successful Motorola RAZR (on second though, maybe not).
These events come along every couple of years or so, and this fall is starting to look like it will be another major turning point for the mobile marketplace in the United States. But, unlike in the past, when one device or service turned the marketplace in a whole new direction, many things are happening this fall. And that's why we're going to go out on a limb and say that this fall is another one of those turning points. Let's review:
Android 2.0, The Droid, & Verizon
Google has been pushing hard with its Android platform, but up until now, the software and the devices running it have been lackluster at best. Still, Android and the myTouch 3G picked up some loud proponents (see TechCrunch's Michael Arrington), not because the device/platform was so great, but out of frustration with Apple and AT&T...more on that later. Momentum has been building, and now a game-changer has arrived in Android 2.0 and the Motorola Droid, running on Verizon's (well regarded) 3G network. Backed by a memorable iDon't do this that and the other ad campaign, the iPhone seems to be facing, finally, a worthy competitor (apologies to the Palm Pre, but it just didn't live up to the hype). Engadget, among others, gave the device a glowing review:
So, is the DROID a good smartphone? Yes, the DROID is an excellent
smartphone with many (if not all) of the features that a modern user
would expect, and if you're a Verizon customer, there probably isn't a
more action packed device on the network. That's not to say the device
doesn't have its faults; the camera was unpleasant to use, the
application selection feels thin in both quantity and quality (despite
the claim of 10,000 options), and the phone has bits of basic,
non-intuitive functionality that might chafe on some users after a
while. But even still, it's hard not to recommend the DROID to
potential buyers eager to do more with their devices. It's
easily the best Android phone to date, and when you couple the revamped
OS, Verizon's killer network, and an industrial design straight from a
gadget enthusiast's fever-dream, it makes for a powerful concoction.
Ultimately, the DROID won't usurp the iPhone from the public's
collective mindshare or convince casual users that they must switch to Android, but it will make a lot of serious geeks seriously happy -- and that's good enough for us.
Apple's Ups & Downs.
Apple with its market-leading/defining iPhone is in no danger of losing its commanding lead for the time being. Just today, the App Store hit 100,000 apps. The other App Stores have a long, long way to go (check this helpful graphic to see how wide the gulf is, as well as compare all the major smartphones feature by feature). Apple recently reported sales of 7.4 million iPhones in just the last quarter alone.
Still, all is not well in the land of Apple, relatively speaking. They, along with AT&T, lived through a summer of discontent. They dealt with everything from AT&T's 3G network going from bad to useless in cities like New York and San Francisco (30% dropped calls in NYC is considered 'normal') to App Store approval process embarrassments, and then of course there was the under-FCC-investigation Google Voice debacle. Lies, misleading statements, and rants from prominent tech writers followed (see here, here, and here at TechCrunch). The bottom line is, Apple still has the best product, and they are, far and away, the market leader. For now, no one is overthrowing Apple, but the competition is coming on strong.
Microsoft Keeps Stumbling
How bad has this fall been for Microsoft when it comes to mobile? First up, we have the Sidekick data center disaster:
Here’s an almost incomprehensible data disaster: T-Mobile is telling
all users of its popular Sidekick mobile that all of their data has
been lost, and is blaming a server failure at Microsoft’s
Danger subsidiary. T-Mobile is advising Sidekick users not to reset
their device or let the battery drain completely, which would result
in a loss of the data on their device.
In the end, Microsoft recovered a lot of the data, but the damage to their reputation has been done. You can read an extensive overview of how this all happened at AppleInsider. As if this wasn't bad enough, we have the lackluster arrival of Windows Mobile 6.5. You can check the reviews if you want, but let's just go straight to Microsoft CEO Steve Ballmer: "Ballmer says they screwed up with Windows Mobile. Wishes they had already launched [Windows Mobile 7]."
John Gruber sums it up best at Daring Fireball: "Microsoft’s irrelevance in today’s mobile space is nothing short of a
spectacular failure. Worse than the mere fact that Windows Mobile 6.5
is a total turd is that no one is surprised, and no one cares."
RIMM and its BlackBerry
When it comes to corporate use, the BlackBerry is still king. Despite Apple's claims that the iPhone is a secure, enterprise quality device for mobile access to Exchange, the vast majority of corporate IT budgets just aren't buying it (some embarrassing and very serious security lapses don't help their cause).
But RIMM wants more than just the corporate market, as evidenced by their BlackBerry loves U2 ad campaign. The first Blackberry Storm, RIMM's first touchscreen device suffered a number of problems and received lackluster reviews. The just out, Storm2, on Verizon, aims to remedy those issues. SlashGear is positive on the device:
Have RIM done enough with the
BlackBerry Storm2 9550 to put the ghost of its predecessor to rest? You
could certainly argue that merely by addressing touchscreen, WiFi and
OS they’ve gone a long way in redeeming themselves. The Storm2 remains
a crossover device for RIM, we feel, stepping away from its purist
messaging heritage to better accommodate internet browsing and media
playback; seen in that light it’s far more successful than the
first-gen handset.
The Storm2 falls short of delivering a knockout blow, but it’s no longer undermined by its own “unique features”. RIM has certainly done enough for the Storm2 to warrant a place on your touchscreen smartphone shortlist.
Overall, the reviews are mixed, but everyone is acknowledging that new touchscreen BlackBerry is a big step forward for RIMM.
Etc. - WebOS, Nokia
The Palm Pre seemed like a worthy contender, but it just hasn't amounted to much (and let's not even talk about the sad cat & mouse game of iTunes syncing). This scathing essay, (which really shows how far ahead of everyone Apple still is) has gotten a lot of attention:
Folks, I couldn't take it any more. Today I wiped my Palm Pre and bought an iPhone.
Believe it or not, this actually has nothing to do with my utterly nightmarish experience of trying to get my applications into Palm's app catalog, and everything to do with the fact that the phone is just a constant pain to use.
So even though I hate Apple's developer-hostility, and even though I hate that now I'm giving money to AT&T, and even though AT&T's network is way less reliable in San Francisco than Sprint's, and even though I absolutely despise the iPhone's on-screen keyboard... at least now I have a phone whose software actually works.
Is there a light at the end of the tunnel for the WebOS powered Pre? We're hearing that the next update will focus on speed improvements to the user interface.
Lastly, we have deeply troubled Nokia, which just reported the double-whammy of a big quarterly loss, and a massive drop in smartphone marketshare:
Nokia, battling aggressively with rivals Apple and RIM, also said its smartphones market share fell to 35 percent in July-September from 41 percent the previous quarter.
"The scale of the smartphone share loss must give the markets pause for thought over the coming days. Dropping six points in three months is pretty stunning," said MKM Partners analyst Tero Kuittinen.
"Nokia is still struggling in the U.S. smartphone market, and with
competition intensifying in China as well, Nokia's battles can only get
tougher in 2010," Mawston said.
Read more about Nokia @ MSNBC, but know this, they are increasingly irrelevant in the United States, and at the same time, facing problems with their low cost, low margin phones around the world.
Conclusions - This Fall Is The Future Of Wireless
As you can see, everyone in the marketplace--from carriers, to manufacturers, to platform providers (Google)--recognizes that touchscreen smartphones will dominate going forward. A recent post on cnet's Digital Home Blog brings us the dramatic results from a recent ComScore report:
Touch-screen phone adoption grew by 159 percent between August 2008 and
August 2009, according to ComScore. The firm also found that by the end
of August 2009, there were 23.8 million users with touch-screen mobile
phones in the United States alone. In August 2008, just over 9.2
million people were using touch-screen phones.
About half of those touchscreen smartphone users are under the age of 25, so we should only see these trends accelerate. And then there are the recently touted, iPhone moms. Smartphones have gone from corporate to gadget lovers to the up-to-date & trendy, and now they're going mainstream in a big way.
The iPhone is the undisputed leader of the pack, and by virtue, AT&T benefits (though some would disagree). After this summer's Google Voice--AT&T--Apple iPhone fiasco, and Google CEO Eric Schmidt's resulting resignation from the Apple Board, there finally seems to be an opening in this rapidly expanding marketplace. The Boy Genius Report notes that Verizon is making its move:
One of our really solid connects just had some information for us and
we think you’re going to love it. With the Motorola DROID being
Verizon’s hot handset at the moment, you’d figure that the Moto would
be it for a while, right? Well, if our guy is right, we could soon be
bombarded with a lot more handsets. Apparently if the DROID
launch/sales go really well, (is probably will) Verizon will push up
handset releases and practically aim for the smartphone crown. Were
talking HTC Passion, Motorola Calgary, Curve2, etc.
We’ve also been told that Verizon will release 15 new phones, mostly
smartphones, starting with the BlackBerry Storm2 and continuing into
the end of December.
Google, for its part, made one big move, and another big non-move (See Update). First, they bestowed Android 2.0 with free turn-by-turn navigation. Talk about market disruption:
Google Maps Navigation does two very important things for Google: it makes it a competitor to established GPS firms like TomTom and Garmin, which should make this space a lot more interesting, and it suddenly makes Android – the only platform this app is currently available on – a lot more desirable. And – you guessed it – the first Android 2.0 phone to support this app is the upcoming Motorola Droid.
$99 dollar iPhone nav apps and the even more expensive dedicated nav devices are suddenly operating in an entirely different marketplace. Why would Google offer for free what others offer at a great cost? Why not just undercut them on price, even significantly? More on that in a moment.
The second non-move? Shooting down the rumors, again, that they're going to build their own Android-powered phone. Why doesn't Google want to build their own device? It's not so much that they have no interest in getting into the hardware business; the fact is, Google only cares about expanding access to the mobile web, where it can serve mobile advertisements. Just last month Google announced further refinements to AdSense for mobile. Google is a lot of things, but the bottom line is, they are a company that earns 97% percent of their revenues from advertising. Android is a means to an end--increasing the smartphone marketplace, as those phones come with full-featured browsers. In the 1990s, you didn't want to bet against Microsoft. Now, you don't want to bet against Google, and Google sees mobile advertising as an even bigger revenue generator than search advertising going forward.
...
Apple redefined the smartphone marketplace with the iPhone, in the
process shaking up the entire US wireless industry. As a result, they're finally seeing some worthy competition. At least for now, its hard to
see them being knocked down from their throne. So why is this fall the future? To use a political analogy, we may be seeing the end of a unipolar world, where the iPhone is the lone superpower.
UPDATE - 11-09-2009 - It's all about mobile advertising - Google Buys AdMob for $750 Million Dollars
On November 9, 2009 Google announced an agreement to acquire AdMob, a
mobile display ad technology provider, for $750 million. This
acquisition will enhance Google's existing expertise and technology in
mobile advertising, while also giving advertisers and publishers more
choice in this growing new area.
UPDATE - January 2010 - Google defied expectations and jumped into the handset business, introducing the Nexus One, to great reviews. The phone is being sold directly at http://www.google.com/phone, in an attempt to turn the sales model for wireless phones in the US on its head.
So why did Google get into the handset business? Are they really straying from their core mission of increasing access (and ads served on) the mobile web? No. First, HTC is manufacturing the phone, and providing technical support. So Google isn't getting into the manufacturing business; nor do they want to deal with customers past the point of sale (something many in the marketing community are well aware of). So what is Google up to? They looked at the current state of the mobile web, and having already concluded that mobile advertising is the future, they made a decision to push consumers and the carriers down that road faster. The BBC wraps it all together nicely:
Google has said it is defending its online advertising empire with the launch of its own brand mobile phone.
It is the first time Google has designed and sold its own consumer hardware device.
Google
said the Nexus One represented the next frontier in the company's $20bn
(£12.4bn) core business - selling advertising through search.
"It's all about the mobile web, and advertising is their bread and butter," said analyst Michael Gartenberg.
We stand by our prediction. The Nexus One is just a different means to the same end - increasing access to the mobile web, so Google can serve up more ads to more consumers, wherever they are.
