The Next Wave

The mobile space is innovating at breakneck speeds and it’s easy to fall behind on all the activities and trends.   Here’s a roundup of some of the major thrusts going into 2011.   If your non-mobile business is not yet thinking about mobile offerings, it’s probably time to get it on the roadmap.   If you’re already in mobile, well, you’re probably just trying to keep up.  

The data and info used in this article comes from a variety of online sources, some of which are listed at the end.   The intent of this article is to provide you commentary with some supported context, and spare you most of the gory stats regurgitated verbatim.     The perspective will be primarily US, with some global stats thrown in for reference.    The sections covered in this article are:

Globally, there are over 5B mobile subscribers with a growth rate greater than 10% annually, mostly driven by China and India.    While voice is still king, SMS accounts for over 6 Trillion messages and mobile internet access is growing rapidly.

In the US, there are nearly 300M mobile subscribers (many multiple device owners) accounting for over $150B in revenues.    Approximately 25% of US households are wireless-only (no wireline phones).     There are over 170B SMS messages per month, driven by an average teenager sending about 2500.    The US has both the highest minutes of use (over 800 per month) and highest 3G subscriptions (41% of subscribers) in the world. 

Networks & Devices

The State of 3G Networks

All US mobile operators now offer 3G data services across their coverage regions and some claiming 4G capabilities.    Before going more into this discussion, we’ll provide a quick background on what these mean. I’ll throw a lot of acronyms at you, which you can gloss over as there won’t be a test at the end. 

The first 3G (3^rd Generation) network appeared in the US in 2003 on Verizon, using the CDMA protocol EV-DO and having download speeds of 12Mbps and upload of 1.8Mbps.   AT&T deployed their 3G network in 2006 using the GSM protocol HSPA with possible download speeds at about 14Mbps and upload at 5Mbps.    These speeds were a dramatic improvement over the existing 2.5G networks by 10x or greater.  

The bigger impact resulting in sluggish performance is the latency, meaning how long it takes for a packet to travel across the network.   For my WiFi connection, a round trip Ping takes 48 milliseconds on the iPhone, but on the 3G service takes about 450ms or almost 10X longer.   This has a huge impact on perceived performance, especially in a browser as loading a page could take multiple round trips depending on the layout.   

Moving to 4G

Our first trend for 2011 will be the 4G evolution. While 4G has already been claimed for a year or so by Clearwire for its WiMAX network and sold by Sprint, it technically is not part of the official 4G roadmap by mobile operators and is a separate data network. Additionally, T-Mobile recently started touting its HSPA+ service as 4G claiming real download speeds of 5-8Mbps.  

Verizon looks to be the first out of the gate with true 4G with a recent announcement of LTE in 38 cities. Verizon is claiming it will be 5-12Mbps download speed and with 2x better latency than its 3G network.   The interesting thing about the new 4G protocols is they are converging between the GSM and CDMA standards.   Thus AT&T has already announced it will also be deploying LTE later in 2011 after it upgrades its current HSPA 3G network to HSPA+ (like T-Mobile). 

An early test of the Verizon service was conducted by PCWorld to see if truly performs using a USB modem on a laptop.   Results showed about 7Mbps both up and down, with a Ping time of 44msec.   This is indeed impressive and matches WiFi performance. If it persists as more devices come on the network it will be a major game changer.  

So what does this all mean?   For the most part, it will be a marketing battle in 2011 as to whose network is faster and has the broadest coverage. The reality is it will take time for the handset base to catch up, and the primary beneficiaries in 2011 will be laptop users with new broadband modems and the new upper end smart phones with an expensive data plan. Most folks will be on 3G for the foreseeable future.  

Smartphones & the Rise of Android

The smartphone market has been undergoing upheaval since iPhone was introduced in 2007.   The major distinguishing characteristics of a smartphone over lower end offerings the ability to add native apps and better capabilities for data-oriented services like browsing and email. The iPhone finally cracked the consumer market for smartphones, where business users and some heavy text-ors had previously been the market.   Smartphones had about 11% market share of new phone sales in 2007 and at the end of 2010 represent more than 50% of all new phone sales in the US.   They also account for nearly 30% of the installed base of subscribers.   There is also a blurring of the distinction between phones used primarily for business versus personal as companies are increasingly allowing personal phones to be used to access corporate resources, such as email.    

The US vendor market share has also undergone major changes in this timeframe.    At the end of 2007, BlackBerry lead with 41% share, while iPhone had already grabbed 2^nd place at 28% and ahead of Windows Mobile at 21%.    Palm rounded up the top 4 at 9% and Symbian was nowhere in sight in the US despite having 67% share of the worldwide smartphone market. 

The picture has changed markedly in just 3 years.    Android came from nowhere to grab over 40% of new smartphone sales in Q3 2010, with iPhone at 26% and BlackBerry at 24%.   For installed base, they are now all at about 25-30% each, with Android expected to run away in 2011.   Windows Mobile slipped to 14% and Palm is out of sight and mind. 

Conclusion?   If you’re an app developer or business considering a mobile app, it’s really a two horse race for now between iPhone and Android.    Note that Verizon finally gets the iPhone in the next few months (on 4G?) and could give it a significant bump, and Google is rumored to try its own branded version of Android again.   Depending on what you want to put on the phone, you’ll have to start considering segmentation data of who’s buying which phones.   Android users have less of a tendency than iPhone users to pay for apps.   If you’re looking for a marketing platform, it again comes down to which segment you want to target.   You’ll probably also have higher development and testing costs on Android due to a more diverse set of screen sizes and API versions to address.

For the remaining phones, BlackBerry is still a contender and will be the one to beat in enterprise for a while, but it needs something fresh to remain relevant in the growing consumer market.   And what about Windows Mobile 7?   Some think this may pick up the market share that BlackBerry is losing.  We’ll have to wait and see, but this puppy has a very steep hill to climb to make a dent in the current market trajectory in 2011.  

Year of the Tablet

Apple released in the iPad in January and instantly created a new device category with approximately 10M devices expected to be sold in 2010 producing north of $7B in revenue for Apple. This compares to over 50M iPhones with over $30B revenue. That’s not too shabby for a new category device.    Since then, dozens of companies have announced their own versions in the works and mostly based on Android. Given the hype, the expectation was someone was going to make a big splash by the end of 2010.    Well, it didn’t quite happen.  

At this point, a plethora of no-name cheap devices exist but only a few of the major brands have joined the fray, specifically Samsung and Dell.   The Samsung Galaxy family mirrors iPhone and iPad with the Galaxy S and Galaxy Tab. (Watch the guy pull this whole thing from his suit coat pocket)   The Tab is a 7” Android device on Sprint competing head to head with the 10” iPad 3G on AT&T.   Price is about $600 ($400 with 2 year plan) versus iPad at $629 starting price.    The iPad Wifi starts at $499 and no data plan.     The Dell Streak is a 5” Android device also on AT&T 3G and retails for $549 ($200 with 2 year plan) and actually is a smartphone that also supports voice.

•  Dell – Streak 7” & 10” models
•  Motorola – Android 10” device
•  HTC – both Android and Windows Mobile 7, multiple screen sizes
• HP – ‘PalmPad’ 10” based on Palm WebOS
• Asus - multiple devices at 10” & 12” on multiple OS’s including Win7
• MSI – WindPad multiple sizes running Android and Win7

E-book devices have not been considered here, as they currently do not offer the ability for downloaded apps and the browsers are pretty rudimentary, so we’ll see where they go in another generation.    Also, many of the tablets discussed here are not technically mobile, but rather WiFi. Even the iPad sells the vast majority as WiFi devices versus those on mobile carrier networks, and arguably for most of the applications you don’t need full mobility. 

So 2011 will be shake-out time for the tablets, both to see if anyone can even come close to the iPad.    Regardless, it will provide many opportunities for developers to innovate on apps and content.   

Feature Phones – Hanging in There

Feature phones are the simpler predecessors of the smartphone that dominated the landscape just a few years ago.    The have cameras, support texting, data connectivity and can have applications installed.   Some have large touch screens and some have keyboards.   Some support playing music.    The lower end versions have very limited browsers that can only access specially-designed, mostly text-oriented web sites. The apps are either written in Java or BREW and are also pretty limited. 

What feature phones do have going for them is price.   Many are free or very cheap when you sign up for a service and you don’t have to subscribe to a pricey data plan.   You might have to subscribe to a higher text messaging plan if it has a keyboard or a light data plan if it has an HTML browser, but both are still cheaper than a smartphone. The phones are also usually smaller, have longer battery life and are simpler to operate. 

The two major feature phone providers in the US are Samsung and LG.   Samsung’s Intensity phone is the 2^nd best seller after iPhone and is darn close to being a smartphone.   It has a slide-out keyboard, HTML browser, WiFi and just lacks native app capability.   The Intensity 2 even has an infrared (night vision) camera!   LG has the EnV3, which has a clam-shell keyboard, dual LCD screens and an HTML browser.    You can get these for **FREE** with a new 2 year contract and a light data plan (about $10/month). 

So don’t sound the death knell just yet for feature phones.   With the addition of built-in apps for Facebook, instant messaging and other popular services, they’ll be around for a few more years, at least.   

Applications & Services

App vs Browser

One of the biggest drivers of the adoption of the smartphones has been the availability of applications.   As of the end of 2010, there about 300,000 apps in the iTunes App store and about 100,000 in the Android Market. On top of these two platforms are BlackBerry and Windows Mobile 7, so the choice is becoming increasingly complex as to which platforms you should try to support. Most developers will to have to specialize, or at least prioritize the apps due to need to recreate on each platform.   You cannot easily port applications between the various platforms.  

This makes a browser application look very attractive.    Given the new HTML5 features that are available in both the mobile Safari on iPhone and Chrome browser on Android, you could conceptually write a nice mobile browser version for both platforms and save yourself a lot of pain.   You could also dumb it down and pick up many non-smartphone browsers to boot.   According to comScore earlier this year, 60% of smartphone users accessed online content via an app versus 56% from a browser.    That’s pretty even. 

So it really comes down to what type of app you’re doing. If it’s a game, you’re probably going the app route, just due to performance gains.   Other utility and tools that don’t need updates or online content probably also favor an app so you don’t have to host anything.   Once you delve into the world of online content in some form, then it’s not so clear cut.   Given the current 3G speeds and latencies, there is a very noticeable performance degradation using a browser versus a similar app.   4G may fix this, but we’ll have to wait for more devices in the installed base before the majority of users will benefit.  

Our recommendation: If your goal is maximum device coverage, have a relatively simple application, and don’t worry so much about the user experience, then go for the browser. If you really are trying to provide a more complex application and user experience is important to you, go for the app.    If you’ve got the resources, try both app and web and compare. 

Location-based Services

One of the top applications on the new smartphones is location-based services, specifically Google Maps (now in 3D on Android). The integration of GPS in these units with location-aware apps has finally realized one of the unique benefits of mobile devices.    From maps and directions to navigation to real estate, finding information from where you are or where you want to be is spawning new uses.

Some current apps utilizing mapping include Zillow for house prices, foodspotting and urbanspoon for finding places to eat and yelp to finding general businesses. 

Another emerging use of location is Social Media, where “check-in” services allow you to indicate where you currently are to your network, potentially creating a spontaneous get-together.    Services already providing this capability are Facebook Places, Foursquare, Loopt, Gowalla, and Whrrl.   Some of these services allow business proprietors to reward loyal users who check-in. Usage of these services is still very low and 2011 will likely be more exploratory than big bang.

One of the most interesting categories is called augmented reality and provides information through the combination of location and the camera. Apps can overlay data onto the actual view you see around you. This goes beyond info overlaid on a map. Some of these apps include GolfScape rangefinder that shows you distances to objects on a golf course, AR Compass that shows a compass and distance to nearby sites, Cyclopedia which shows you Wikipedia info about your location as you move the camera around, and Star Chart that tells you what stars you’re looking at through the camera. 

Location will also become embedded in mobile advertising and m-commerce initiatives, as will be discussed below.    Location is one of the major applications to be leveraged for mobile initiatives in 2011. 

Mobile Advertising

2010 laid some major groundwork for the future of mobile advertising.     First, Google acquired AdMob, the largest mobile advertising platform supporting multiple types of mobile ads. Then, Apple announced its plans to allow developer advertising within apps, calling it iAds.     At the end of 2010, Google announced $1B in revenue from mobile ads globally, and the US Mobile Advertising market is expected to be $1B in 2011. This is still quite small, though, and only an estimated 1% of US ad spending. 

In 2010 mobile ad formats were dominated by messaging (44% of total ad spend), then display ads (27%) and search (25%), and lastly video (<5%).   In addition to AdMob and iAds, some companies to watch in this space in the US are inMobi, Mojiva, Millennial Media, and JumpTap.   Location will also become a major driver of ads – see xtify.  

Advertising can also take multiple forms, and a survey of Fortune 50 companies indicated 43% have mobile-specific web sites or apps and 22% are using QR codes in printed ads to offer more content or information to mobile users.   QR codes (Quick Response) is the new 2D barcode that allows embedding text information or URIs that can be acted on by “scanning” the code using the device camera and a QR app on the phone.   

2011 will see major retail brands expanding their mobile efforts, with some providing very innovative mash-ups driven from location, shopping and or social networking in conjunction with their primary web properties.   Speaking of web properties - is your main corporate or commerce site seeing increasing mobile browser traffic?   If the percentage of traffic is important, say 10% or more, it may be time to upgrade your main site to be more mobile-friendly. Navigating a standard complex site on a small screen can be quite taxing.     

Mobile Commerce

Mobile commerce is expected be a huge deal globally, and indeed, sites like Amazon and Ebay are seeing significant purchases being made from mobile devices, though still a small percentage and mostly from overseas.    In the US, purchases from the phone are not really where the activity is at this point.    The largest m-commerce application is mobile banking and is more about convenience than revenue generation. For example, Chase allows depositing checks by taking a picture and submitting it from the device. 

The phone for most is primarily a shopping companion, providing directions to the store, product research with reviews, pricing from nearby locations, etc. That’s not to say that some companies aren’t trying to move forward.   In order for product info to get into a searchable database, someone has to get it there, and companies such as Checkpoints and shopkick allow “checking-in” to a store on arrival and earning discount points for scanning the product info using their phones.    Location information is used to also give comparisons of price and availability at stores near the shopper.   

And there’s Walgreens, which allows refilling prescriptions by taking a picture of the barcode on the bottle and getting a text message when it’s ready to pick up.    You can also order photo prints directly from the phone.    Or Pizza Hut, that allows you to create your pizza or order other items from a virtual refrigerator.  

Mobile coupons are also already a reality from some of the mobile advertising companies listed above.   Target was just named 2010 Mobile Retailer of the Year and provides scannable coupons delivered as you walk into one of their stores via text message.   They also provide their weekly deal’s flyer directly to the phone app.

Mobile payments are probably still a ways off. While it’s possible to use your mobile phone today linked to an account with your credit card info or PayPal, this is not the same scenario as using your phone as the actual payment card.   This is the vision that will be enabled by embedding a NFC chip (Near Field Communication) into the phone that can be detected by a sensor and include encrypted account information, just like a debit card.   Phones with this capability are rumored to be coming in 2011 and Google and mobile operators are all looking to get a piece of the action.   However, the infrastructure required at retail to support this will take time well beyond 2011, so sit tight for a while unless you want to be part of the early adopter crowd.    

Mobile Video

Despite the low penetration of advertising yet on mobile video, there is no doubt about its inevitable growth.   Larger phone screens and tablets coupled with 4G and WiFi connections will spur usage.    Already in 2010, more than 20M mobile users in the US (<10% of the total) watched mobile videos for an average of about 3.5 hours per month.   YouTube videos are the vast majority of this content, with news and broadcasters following.    

Interestingly, the CEO of Netflix recently indicated that the demand for streaming mobile movies on iPhone and iPad was insignificant despite the large demand on larger display devices. His conclusion is that users are not interested in longer forms of video media on their mobile devices.    So while there is apparent demand for short clips (YouTube-like) longer streams have far less demand.   Could it be due to the low quality of 3G streams and the cost of the data plans to support them? These devices also operate on WiFi, so that’s a partial argument against that reason.  

Another question is “where’s the money?”   The last thing a mobile operator wants is millions of users filling up their new 4G networks watching continuous videos or TV without paying some price premium for the large amount of data required.   The current trend for capped data plans with overage charges is really meant to keep things under control. 

By the end of 2011, we may begin to see how this is shaping up with what content is really used on what devices and how both the operators and suppliers can make a business out of it.  

Wrap Up

So there you have it - our version of the coming year. It’s an exciting time in mobile and we’re finally seeing the culmination of data and location capabilities that have been envisioned for 10-15 years if you’re a veteran, with innovation far beyond even those thoughts.   2011 will mark a major turning point of mobile apps and web being used by a majority of major brands as part of their comprehensive marketing and commerce efforts.    Here’s “Cheers” to the mobile industry and all of those new innovators pushing it forward in 2011.  

Below is a short list of additional reading that provided some of the information in this article. My thanks to the authors for their thoughts and data:

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