The new Mobile Megatrends report

Mobile Megatrends 2012 is a 96-page research report – available for free download from our website or SlideShare – dissecting nine key themes:

- Handset DELL-ification and the emerging pyramid of handset OEM
- Web as the new walled garden and why the web is going back to the AOL days.
- Cross-platform tools as the next challenge to the Apple/Google duopoly
- The Kindelization of tablets – how Kindle is setting the rules of the tablet market
- Ecosystems battle across 4 screens and how experience roaming drives user lock-in, cross-sales and engagement
- Accessories as the next frontier for platform differentiation
- Tools for gold seekers and how the developer gold-rush has led to a gold rush for developer tools
- Reinventing the telco and how unbundling the telco is needed to compete in the software era
- The future of voice, from telephony to diversity of use cases

We’ll dig into two of these trends in this article – Handset DELL-ificationn and Cross-platform tools. To read the full analysis of all the trends, download the full report – feedback welcome.

The DELL-ification of the handset market

In late 2010, it was reported that Symbian had been toppled from the smartphone throne by Android. Back then, the difference in market share between Symbian and Android was just 2%. During 2011, the gap grew much larger, with Android claiming more than half of the shipments in the smartphone market, and Symbian dropping to single digits of market share. Android’s dominance in 2011 can be summarized in just one phrase: One in two smartphones shipped in 2011 was an Android handset.

The driver to Android’s success was the eagerness of many handset manufacturers to build cheap smartphones that can compete against the iPhone. Google, too, used Android to commoditize the smartphone market, indirectly reducing handset price points well below $100 and causing a loss of OEM differentiation, thus homogenizing smartphones into a single form factor.

While many handset rode the Android train into the smartphone market, it’s actually very few that are making real profits. Aside from Apple, Samsung is the only company of the Android court that’s achieving profitability. Together, Apple and Samsung accounted for 99% of all handset profits in Q1 2012. That means that 10s of Android handset makers will have to fight over the crumbs of the smartphone pie, i.e. the remaining 1% of the market profits.

The success of Apple and Samsung rests on their ability to add value across the entire value chain, from silicon to the cloud. Apple owns the iOS platform, hardware IP, handset design, content delivery and services, all the way to retail, combining these into a unique product experience.

Samsung also derives its competitive advantage from exerting control over the entire value chain, producing the components with the highest cost, notably screens and application chipsets. This allows the company to capture profits across the value chain, while its competitors can only capture the value of assembly. Ownership of the key components within the value chain allows Samsung to reap not only profit benefits, but also availability and time-to-market benefits. Samsung also leads Android makers by being the first to market with new Android releases and next-gen screens, which allows it to capture even more profits arising from early adopter sales.

Does all this mean that the smartphone market is entirely dominated by Samsung and Apple? While this might be true for the time being, there’s still room for new types of players, like Amazon, who could enter the smartphone market with a unique business model of subsidizing (self-branded) phones to drive a content and retailing ecosystem. Nokia continues to innovate in low-end handsets, notably with the release of the 110 phone running on S40 platform, and featuring a 1.8’’ screen at only 38 EUR before taxes and subsidy. To read more on the opportunities of the smartphone market, download the full report.

Cross-Platform Tools and the challenge to the Apple/Google duopoly

In order to maximize their reach, developers need to have apps running across multiple platforms. The challenge with that is that developers have to learn a variety of different programming languages, vastly different to each other, as well as use various app stores. The situation is especially difficult for developers who are just entering mobile – and there are millions of those!

Cross-platform tools are a solution to increasing reach without accruing costs, by simplifying the porting of an app across different platforms. There’s a plethora of different tools available (see our comprehensive Cross-Platform Tools 2012 report for the full list), which cover diverse technologies and solutions, from source code translators to hybrid web tools. Impeded by teething issues, the CPT market has not come into full swing yet, but it’s quickly gaining acceptance with leading tools like PhoneGap and Sencha that have made it into the mainstream.

What CPTs bring to the table is the democratization of development, by extending the reach of masses of web developers beyond the browser. Despite performance disadvantages and fragmentation across different browser versions, HTML5 has emerged as the most widely supported authoring technology for cross-platform apps. Cross-platform tools are taking HTML further than web browsers can, by allowing web developers to create native smartphone apps, using for example PhoneGap. CPTs are accomplishing this by unifying the authoring side- rather than the runtime side – of the app across platforms.

In addition, cross-platform tools are threatening the Apple/Google duopoly. 2012 marks an inflexion point in the war of mobile ecosystems where the network effects built by Apple and Google are being challenged by an unsuspected new entrant – CPTs make it easier, for example, for an iPhone developer to reach Android and Windows Phone 7 users. CPTs dilute network effects by allowing other ecosystems to compete not just in terms of the number of apps listed, but also the availability of top apps, the time-to- market (an app rarely appears at the same time across all platform app stores) and the overall app quality.

We expect web developers to be at least ten times as many as native mobile developers, which means that the still-nascent CPT market will quickly grow in the near future. Although not necessarily a replacement for native development, cross-platform tools will become more prominent, easing the way for 100s of thousands of developers who are just entering the mobile market.

Read more on the growth of the CPT space and the top vendors in the full report.

The Megatrends report series

Now in its 5th edition, our annual Mobile Megatrends report identifies the major trends in mobile – from the accessories market to the Kindel-ization of tablets and the battle of ecosystems across 4 screens.

The full report is available as a free download. You can also view the whole report on SlideShare (see embedded window at top of article)
If you’re interested in a 1-day on-site strategy workshop – with more in-depth insights into these trends, contact matos@visionmobile.com

Feedback welcome, as always

- Matos
@visionmobile

Imagine for a moment a world of apps where there are more than 10 platforms to choose from – and where most of these platforms are closed to developers. A world where only a few applications have been developed. A world where no one is using these apps anyway.

Of course this is describing the current state of the connect TV market. The description could equally apply to the mobile world pre-iPhone, when the focus of app development was on a frustratingly diverse set of platforms.

I spent a few years building businesses which operated in the mobile space pre- and post- iPhone, and lately I’ve been building a business attempting to disrupt web and connected TV. I am constantly struck by the similarity of both environments and believe that the TV industry should spend some quality time looking at the evolution of apps on the mobile from the feature phone to smart phone to avoid re-learning some painful lessons.

TV is a world apart from mobile apps

The word “app” can mean something subtly different on TV. In many cases a TV app is an access point for a set of content – for example, the YouTube, Netflix or LoveFilm apps. In other cases an app refers to functionality just as the Facebook or the eBay app.

In my more cynical moments I sometimes think we’ve ended up with apps on TV because nobody could think of anything better to do. “It worked for phones, so lets try it on TV! The right apps will be useful on TV, but at the same time it is important to recognise what the TV experience is:

- TV is often a shared experience. Mobile phones are personal.

- TV is lean back. Various attempts to get consumers to interact with TV have fallen away

- Consumers hate complex remote controls

Many developers crossing over from web development to TV development aren’t recognising these nuances. This may end in apps just not getting used. Do you really want to be allowing your personal information on a shared screen? Will the other people sharing the TV screen really want it to be used for you scrolling through your Facebook messages?

Three Ways to Develop Apps for TV

There are roughly three different categories for TV app development;

1. TV-only apps

Apps for the TV screen or set-top box are usually your favourite web services extended to the TV screen. Examples are Spotify, Flickr and of course Twitter and Facebook. The apps need to be modified in order to work with a TV remote as well and with limited text input – which is easier said than done. Some will be more suitable for crossing over to TV than others. CNet has a comprehensive listing of mainstream music, video and communication apps that have been launched by TV manufacturers.

2. Mobile-only apps

These are mobile or tablet apps that complement the TV but don’t interact with it. Examples here are Zeebox (which recently secured an interesting investment from Sky), Flip.tv, GetGlu, and Miso. These apps focus on providing a concurrent experience to watching the TV, allowing you to interact on your personal device while watching the TV. In this category you can add apps that provide listings content and so on. Consumer surveys show tablets are a natural companion to TV – according to Forrester, 85% of US tablet owners use their tablets while watching TV, and according to Nielsen, 30% of total tablet time is spent while watching TV.

3. Closed loop apps

These are apps that close the loop between mobile and TV experience. Some examples here use DLNA and AirPlay to allow the selection and control of streamed content to the TV screen. The simplest example here would be Apple’s AirPlay allowing you to play movies stored on your MacBook on your TV screen via the Apple TV. Closed loop apps allow you to stream content from one device to the TV screen, for instance. Harder to find are apps which interact with the broadcast TV functions as opposed to using the TV as a monitor, such as allowing you to set recordings on your STB from your smartphone. However, discovering content or channels on one device and using that same device to bring up the content on TV is a more difficult proposition because of the integration required with the TV or STB. This is where innovation starts to break down.

The TV fragmentation nightmare

Developing for TV or STB platforms is challenging, whether you are developing TV/STB apps, attempting to ‘close the loop’ or develop a standalone app. Why is that?

- There are a 10+ target platforms. Everyone is pushing some kind of application environment for their TV or set-top box. Examples are, Samsung, Panasonic, Sharp, LG, Sony, Yahoo, Google TV, Boxee, InView, WyPlay, YouView (eventually) and HBBTV – not to mention Android spin-offs. Some of these are closed systems and some have developers programs. For a comprehensive list it is worth looking at this Wikipedia page.

No developer can target all of these platforms, so how do you pick the right one for success?

- How many connected TV screens are there going to be? According to the CEA (www.cea.org), about 260m TV’s were sold in 2011, and around 27% of these were connected (FutureSource). The percentage of TVs that come with Internet connectivity as standard will increase rapidly. Assuming the all connected TVs that are sold are actually plugged into the Internet, the addressable market is still way lower than for mobile phones. In reality, the picture is much more complex.

- Many ‘Connected TVs’ are TVs which happen to be ready for connection. Just because it’s Internet ready, it doesn’t mean that the TV will be actually plugged into the Internet and used.

- Not enough of these devices have been bought yet for consumers to realise how poor some of the experiences are. Good products evolve from feedback and there are simply not enough devices in the market for manufacturers to learn from consumer feedback yet. Moreover, there is no compelling reason for consumers to give feedback when they can just go the TV content they want with their existing systems such as traditional set top box services, or use catch-up TV services on PCs and tablets.

Will TV have its ‘iPhone Moment’?

Having worked through the iPhone disruption in the mobile space I can safely say that this has not yet occurred in the TV market. However, when it comes it will decisively change the dynamics of development. This is important for start-ups working in the TV space and the investors, VC or Angels who back them.

Consider the dynamics of app development pre-iPhone. Often you would have to work with an operator or with a handset manufacturer and would have to pay close attention to the changes in the target platform. Dealing with handset manufacturers and operators is notoriously tricky and time-consuming – and while can make you a superstar if you get it right, more often it wastes time and precious resources.

Post-iPhone, the way of reaching users and making money with apps has radically changed. No need for deep relationships with operators or handset manufacturers – you can just target the obvious winners in the platform space and push your app to the store. This environment does not exist yet in TV.

There are candidates for an ‘iPhone moment’ in TV. Obviously Apple are rumoured to be launching a proper TV. The current Apple TV box is a great device but is not yet an open app platform.

Google TV is a slow burn project but is making steady progress and could be a candidate.

Xbox is also a dark horse, especially with the recent reports (http://t.co/DrM7mu1t) which show that more time is now spent watching content through and Xbox than gaming on it.

And don’t forget the TV incumbents who have been working on this for a while. TiVo, Sky+, YouView in the UK, HBB TV in Europe are all active in TV platform development and Roku has been providing Over The Top (OTT) boxes for a couple of years now.

Where should you place your bets?

TV is a confusing place to be working at the moment, in an industry that could be going through an inflexion point in the next couple of years. Its very hard to place the right bet when it comes to TV app development platforms. That said, if you want a list of places to focus on I would list:

TV Manufacturers: Samsung and Sony because of their volume

STB Companies: Boxee, Roku for as thought leaders so far

Platforms: Google TV is the most open platform, and are doing a great deal to encourage development, including signing up major tier-1 services like Hulu. They have low volumes at the moment though so keep an eye on product announcements (http://www.google.com/tv/)

And of course, watch Apple. The next significant step may be the opening up of the current Apple TV product to app development (it is currently closed). The announcement many are waiting for though is of an actual TV set.

TV will have its iPhone Moment, but it might not be Apple that creates it.

- Ben (@benhookway)

[Ben Hookway has 15 years experience in the US, Europe and Asia in technology companies. He has been CEO of Next Device, a mobile phone UI company, and Vidiactive, a web video systems provider. He is currently working with a variety of tech companies and can be contacted at ben@etherow.com]

Now in its third year, Developer Economics is back for a new research on some of the hottest trends of the developer ecosystem. Once again sponsored by BlueVia, our seminal report series is about to launch, investigating key themes, such as developer mindshare, app monetization and marketing, as well as regional app economics.

So – take 10 minutes to complete our online survey – and win great prizes (we have a $1,000 Amazon voucher, a new iPad, and a Kindle Fire up for grabs). The results of this survey will be published as a free report in Q2, courtesy of the sponsorship by BlueVia.

Developer Economics 2012 – Key themes

This research revolves around five main themes:

-       Developer Mindshare

-       App Store Fragmentation

-       Making money from apps

-       App Marketing

-       Apps supply vs. demand per region

 Why are these themes important? Let’s take them, one at a time:

Developer Mindshare – which are the top platforms for developers?

Our previous two Developer Economics reports have shown clear trends in terms of the migration of developer MindShare (i.e. the average % of developers using each platform) away from traditional platforms, such as Java, Flash Lite and BlackBerry and onto newer platforms – mainly Android and iOS. One of the biggest surprises in last year’s report was the emergence of mobile web as the third most widely used platform in mobile – as the app economy is shifting the balance of power among key players of the mobile industry, software developers flock to mobile, claiming their own piece of the pie. The increasing usage of cross-platform tools (see our full report on Cross-Platform Tools here) reduces the barriers to entry and allows developers of all inklings to create apps that have the potential to be downloaded thousands, if not millions, of times.

App Store Fragmentation – how many app stores do developers use concurrently?

At the same time, all and sundry are attempting to tap into the app economy, creating new app stores left and right. There are currently over 70 app stores – and that’s just for Android! Traditional players, like Telcos and handset manufacturers, have also created app stores and are allowing access behind their proverbial walled gardens, leaving developers lost in a sea of app stores. Since the choice of app stores is largely dependent on the platform used to create their apps, developers need to carefully target the stores they will use. The majority of these app stores have a limited range and scope – join our survey and let us know which ones you think are the most important.

Revenues vs. costs – which developers are making money?

As the number of apps available in the big stores has reached immense heights, discoverability has become a thorny issue for developers. An app that has taken time and money to be developed might be lost amidst the crowd of similar apps, providing very low revenues to the developer who created it. Despite an abundance of opportunities and the fact that many companies, both from within and outside the mobile industry, view developers as an asset, there’s a long tail of developers who don’t manage to break even.

There are many parameters that govern monetization. Choosing a revenue model is extremely important, as the trend is moving away from the traditional pay-per-download model and into in-app purchases and premium features. Moreover, choice of platform seems to be equally important, since not all platforms are created equal, at least in terms of monetization. For example, several reports indicate that iOS users are the most avid app fans, downloading more than Android or Windows Phone users.

Monetizing a great app is more than actually creating it – it’s a mixture of several parameters, such as selecting the right audience, the right platform and the right distribution channel. Which brings us to our next theme; marketing.

App marketing – what’s the best way of marketing your apps?

It’s not enough just to create a great app; most of the time, you have to spend money in order to make money, which means developers need to invest in marketing. There are numerous of ways of marketing an app – through the usual suspects (social media, own website/blog etc.) to paying for Google AdWords, Facebook ads or even premium placement in app stores.  As with everything marketing-related it not just a matter of throwing money at your problem, but of tailoring your message to the right audience and selecting the best channel to reach them. Which means that marketing goes even further back in the app supply chain – i.e. the design board. It’s imperative that developers know whom they’re making their apps for, how large their audience is and what is the best way to reach them.

Have more ideas on app marketing? Take our survey and give us your views.

Regional vs. global demand – what is the balance between developer supply vs. app demand across regions?

Gone are the days when the entire mobile industry revolved around North America, Europe and East Asia. The app economy has allowed players from all around the globe to join in and make a killing. Countries like China, India or Brazil have huge developer communities, of increasing importance. In previous Developer Economics reports we found that platform use varies with region – for example, there’s a large concentration of iOS developers in North America, while Asia holds a higher-than-average percentage of Java developers.

At the same time, users are looking for more localized content – local apps in their own language. As Flurry reported a while back, China is now the second largest market in terms of app downloads – and is expected to grow even more, as China has now overtaken the US in Android and iOS activations.  As app markets are growing all around the globe, the importance of localized content becomes paramount – which is the next app heaven?

Developer Economics 2012 survey is now live

So – if you’re interested as much as we are to know the answer to all these questions and the themes presented here – Take the online survey and let us know what you think.

If you’re not a developer you can always help us spread the word!

Feedback welcome, as always.

- Matos

“People say that I’m a dreamer, but I am not the only one.”
John Lennon

Mozilla, the company behind Firefox (until recently the number two desktop browser) and top-5 mobile operator Telefonica are co-developing a new mobile operating system. The project is codenamed Boot2Gecko by Mozilla and devices running the OS are dubbed “Open Web Devices” by Telefonica. The goal is a phone that relies entirely on web technology and where all applications, from the dialler to games, are developed with HTML5.

At the MWC 2012 conference in Barcelona, Mozilla ran a demo of Boot2Gecko on a Samsung Galaxy II, a high-end smartphone. At the same conference, Telefonica showed the new operating system on a low-end reference design from Qualcomm, which will become available on low-cost smartphones at a sub-Android price point. Mozilla also announced the Mozilla Marketplace, an app store for web apps.

On the surface, this joint move by a major telco and a major Internet player makes a lot of sense. Mozilla and Telefonica are trying to disrupt the Apple/Google duopoly, starting from the low-end. By focusing on providing a good user experience on very low-end devices, Telefonica hopes to capture the emerging markets first. The telco plans to introduce direct-to-bill payments for mobile app purchases, as credit cards are not common in the emerging markets that the initiative targets.

As explained in Christensen’s Innovator’s Dilemma, starting at the low end of the market is smart: the easiest way for Android device makers to protect their profitability is to leave the low margin devices to Open Web Devices and focus Android on higher-end devices, targeted at people who do have credit cards. This is the best way to disrupt Android. Google’s reaction will likely be lukewarm, as their interest is only in driving eyeballs to Google ads, which can be done perfectly from either platform.

A disruptive strategy like this provides Telefonica with the opportunity to give Google a taste of its own medicine. Telcos are under big pressure from the application ecosystems of Apple and Google, which now own the customer relationship and are pushing down the value of the carriers to dumb bit pipes. If telcos are not full participants in the application ecosystem, then why not commoditize apps entirely? For Telefonica, Open Web Devices are an attempt to reduce the power of the major platforms and their vertical application silos by moving app development and distribution to a more “neutral” web-based environment. If applications are primarily developed in a cross-platform way, the platform’s power weakens. Mozilla is an ideal partner for telcos to achieve this, being a fundamentally not-for-profit organization with a mission to keep the Internet open and free.

Mozilla and Telefonica are a good match in general for realising B2G as a competitor to Apple/Google; Mozilla can add the software foundations (APIs) and the developerecosystem around it, while Telefonica adds the OEM deals, monetisation and app store.

On paper, Boot2Gecko could be the new web-based platform that succeeds where webOS failed; it is open source (unlike what webOS used to be), it has multiple OEM partners interested, it is backed by a top-5 telco and it comes at a time when HTML5 has technically evolved and enjoys widespread industry support. Indeed, B2G could be the champion that leads HTML5 from being an enabling technology to achieving full platform status. The reality is that a lot needs to be done for that to happen.

In essence, the elements behind Telefonica’s Open Web Devices are not enough to win the hearts and wallets of consumers and developers:
- Openness is a way to reduce developer marketing costs, but adds little value for end users.
- Web is not a synonym for better user experience or the platform with which to appeal to games developers.
- Devices running a web-based OS is a valid way to compete with Apple/Google, but a very expensive one, given that billions of dollars will have to be invested by Telefonica and handset OEMs before the OS reaches maturity and has a sizeable addressable market. Note that Microsoft is paying Nokia circa $1 billion a year to buy its way into an addressable market.

For Boot2Gecko to succeed, it needs to compete with the other mobile platforms on all five key ingredients:
1. Software foundations, a rich set of APIs with managed fragmentation. Telefonica has already contributed a lot of the device API glue code to Boot2Gecko (based on the carrier’s earlier work within WAC). However, competing with iOS, Android and WP7 is a major long-term effort.
2. A developer ecosystem, to spur innovation and cater to diverse use cases. There are millions of web developers out there, who need to be “onboarded” onto B2G, i.e. on its specific APIs and app distribution system.
3. Devices & distribution, i.e. a large addressable market of 10s of millions of phones sold each year. As a top-5 telco, Telefonica is a major success factor here, but needs to translate OEM intentions (notably from LG who’s an early partner) into project investments and volume commitments. A positive factor here is that B2G is running on the same reference designs and based on the same kernel and core libraries – and so, quicker to bring to market than Windows Phone.
4. Monetisation. Monetisation is essential to the creation of a healthy developer ecosystem – and Telefonica intends to provide carrier billing.
5. Retailing. It is still unclear which partner will be responsible for providing  the on-device storefront, retailing and merchandising of apps to end users.

To their credit, Telefonica and Mozilla are progressing fast with Boot2Gecko. The first experiments started in October 2010 and the project really kicked off in March 2011. The phone demonstrated in February 2012 wore all the key core apps (dialler, phonebook, inbox, etc.) and a UI experience that is claimed to be better than the lowest-end Android handsets. The handset demonstrated by Telefonica runs on the same hardware as the original iPhone 3G, but can be sold at 1/10th of the price according to our sources.

This said, other contenders to the HTML5 platform crown, like Facebook Platform and Google Chrome, are already far more advanced in creating a viable ecosystem. Both Facebook and Chrome (the browser, the OS, but especially the web store) have already amassed substantial traction across screens and have solved at least some of the distribution, retailing and monetization challenges. The Mozilla Marketplace is a step in the right direction, but the organization has a lot of catching up to do.

Moreover, there is an obvious and much cheaper substitute to these attempts to create web-app platforms that Telefonica and other telcos need to consider, if their goal is to disrupt the Apple/Google duopoly. Cross-platform development tools [see our full report - www.CrossPlatformTools.com] make it much easier for developers to reach multiple platforms and flatten the competitive landscape of Apple and Google’s ecosystems.

In summary, Telefonica and Mozilla are making a very serious attempt at disrupting the current iOS/Android duopoly of application platforms. They do well to focus on low-end devices and to attack the link between apps and the platforms they run on. But using HTML5 technology or being open is not enough. Mozilla, in particular, has to prove that it can draw in web developers to this new platform and create a vibrant ecosystem. Telefonica not only needs to get OEMs enthusiastic, but also committed to produce phones in volume. Finally, it is unclear how this initiative can outrun the competition, Facebook and Chrome or whether Telefonica and Mozilla should instead invest in the alternative approach of cross-platform development tools.

- Stijn

Want to know more? VisionMobile offers deep insights into the HTML5 ecosystem and how it stands to disrupt the Apple/Google duopoly. Check out the latest research note in our CEO Trendwatch service (send an email to stijn@visionmobile.com for access), or our Mobile Innovation Economics workshop.

Our report is based on a 6-month project, comprising a large-scale online developer survey (nearly 2,500 respondents) combined with meticulous research, vendor interviews and analysis of this complex market of over 100 tools vendors. This report would not have been possible without the support of Marmalade, RunRev, Verizon Developer Communities, Xamarin and the many other companies behind this multi-sponsored project.

Cross-platform tools (CPTs) solve real challenges today; they allow developers to create applications for multiple platforms – usually mobile, but increasingly tablets or TV screens – from almost the same codebase or from within the same design tool. CPTs reduce the cost of platform fragmentation and allow developers to target new platforms at a small incremental cost. More importantly, cross-platform tools allow software companies targeting multiple platforms to reuse developer skills, share codebases, synchronise releases and reduce support costs.

Early leaders in the cross-platform tools space

Our survey revealed that PhoneGap and Sencha lead in terms of mindshare, as they are currently used by 32% and 30% of cross-platform developers, irrespective of their primary tools. Completing the top-5 ranking of our Mindshare Index are Xamarin’s MonoTouch / Mono for Android, Appcelerator and Adobe (Flex). The second half of the top-10 CPTs in terms of current use are Unity, Corona, AppMobi, RunRev and MoSync.

PhoneGap (23%), Xamarin Mono (22%) and Unity (22%) are the tools most developers plan to adopt, irrespective of their primary tool. This market is in constant flux, with developers experimenting and trying out new tools – for example PhoneGap is a stepping stone to cross-platform development as it leads Mindshare, IntentShare, but also comes third in the tools being abandoned. The most widely used CPT accounts for just half of the Mindshare seen in the iOS and Android platforms in our Developer Economics 2011 report.

Cross-platform tools challenge the Apple/Google duopoly

The real impact of cross-platform tools is strategic. Just as the Apple/Google duopoly began to look impenetrable in 2011, a major disruption is flattening the playing field for competitors like Microsoft’s WP7, RIM’s BlackBerry OS and Samsung’s Bada: cross-platform tools are letting developers target multiple platforms with low incremental costs and high levels of code reuse.

2012 marks an inflexion point in the war of mobile ecosystems where the network effects built by Apple and Google are being challenged by an unsuspected new entrant. Cross-platform tools (CPTs) make it easier for example for an iPhone developer to reach Android and Windows Phone 7 users. CPTs dilute network effects by allowing other ecosystems to compete not just in terms of the number of apps listed, but also the availability of top apps, the time-to- market (an app rarely appears at the same time across all platform app stores) and the overall app quality.

Moreover, cross-platform tools reduce barriers to entry and democratise app development, by allowing developers from any language (HTML, Java, C++), any background (hobbyist, pros, agencies, corporates) and any skill level (visual designer to hard-core developer) to build mobile apps. The dozens of CPTs available cater to every developer segment, from creative designers to C++ gurus to hobbyist website enthusiasts to Fortune-500 CIOs. The result could be termed a “democratisation” of software development (in the words of Unity’s Dan Adams), in that mobile platforms may be opened up to all types of developers.

Mergers, financings and the survival of the strongest

We have identified over 100 cross-platform developer tools, in a market that’s booming with new players in 2011. Cross-platform tools have passed the “early adopter” phase, and are now moving into mainstream. For example vendor Sencha counts 1.6 million SDK downloads, Corona apps have reportedly been downloaded 35 million times in 2011, Unity reports 200,000 developers active each month, while Appcelerator boasts 35,000 apps published using the tool and deployed on 40 million devices.

Since 2011, cross-platform tool vendors have raised major VC funding, have been acquired, or achieved major releases. In the CPT space we have tracked 10 acquisitions, and over US$ 200 million in funding rounds. This is a market that takes cash to survive: CPT vendors are subsidizing their entry to market with free products, based on ample VC funding. For example OpenPlug ceased operations as it failed to find a monetisation model, with its key challenge being the conversion of freemium users into paying customers for its support and professional services. CPT vendors without a compelling free product will be washed out by the competition.

Cross-platform tools are taking HTML further than browsers can

The purpose of HTML5 has been to extend the capabilities of web apps (those developed using HTML and JavaScript) to more closely match the capabilities of native apps. Despite performance disadvantages and fragmentation across different browser versions, HTML5 has emerged as the most widely supported authoring technology for cross-platform apps. Cross-platform tools are taking HTML further than web browsers can, by allowing web developers to create native smartphone apps. In other words, CPTs are taking HTML5 much further by unifying the authoring side- rather than the runtime side – of the app across platforms.

Moreover, CPTs are paving the way for HTML5 to become not a platform, but the mainstream development technology for smartphone apps. Cross-platform tools are already triggering an influx of web developers; We found that 60% of CPT users, irrespective of their primary tool, have more than five years experience in web development. Indeed, cross-platform tools have triggered an influx of web developers into mobile.

Android and Windows Phone have been constantly evolving, adding hundreds of new APIs from each major version to the next. Due to the rapid advancement of platforms, tools vendors will always be one or two steps behind in terms of features and access to the complete set of device capabilities. Developers that create demanding applications like 3D games or apps requiring intense user interaction, exceptionally deep user experience, or apps relying on specific features not available on all platforms will need to be developed using the native SDK. Cross-platform tools will therefore be complementary to native SDKs.

Cross platform tools will become “business as usual”

As the platform landscape remains fragmented for the foreseeable future, cross-platform tools will become “business as usual” The future of mobile development is multi-platform – fewer and fewer developers will be able to afford to be confined to a single platform with the limited user reach and monetisation opportunities that implies. The adoption of cross-platform tools is driven by the ability to reach masses of users, which is the primary consideration for most developer segments. Cross-platform tools are indeed the only cost-effective vehicle for these developers to reach a wide mass of users, and we expect CPT usage to become commonplace a result.

Multi-screen and the evolving points of competition

At the onset of 2012, CPT developer selection criteria are heavily skewed towards the breadth of platforms supported by each tool. This picture will change considerably as cross-platform tools vendors advance their products to cover all the major mobile platforms. We expect that by mid-2013, the platforms covered by a CPT will move from a point of differentiation to a point of parity. In that timeframe, we expect the points of competition to move to later stages of the app lifecycle, with vendors offering component marketplaces, end-to-end workflow tools, device adaptation tools, app publishing services and post-download services.

In the sea of 100+ cross-platform tools, vendors are beginning to differentiate by targeting three distinct developer segments: those working on games, enterprise or media apps. Developers in these three segments face distinctly different challenges, work in distinctly different environments and as such need very different CPT solutions. As tool vendors try to survive in the “red ocean” of dozens of cross-platform tools, we expect CPTs to emerge for the financial sector, media publishers and the healthcare/medical sector.

Multi-screen is the next frontier. The battle of the software ecosystems is raging across many screens – mobile, tablet, PC and soon smart TV devices – and multi-screen will be the next frontier for cross-platform tools. Already in our survey, 27% of respondents noted that they also target Windows PC and 24% target Mac desktops with their main cross-platform tool. However, the complexities of cross-platform development in a multi-screen environment are growing exponentially and beyond the simple sharing of the code between multiple platforms. Different screen types have different interaction models, input methods, screen sizes, go-to-market channels and pricing models, while developers working on different screens have use varying tool-chains, development cycles and collaboration processes. With the proliferation of users who own more than one connect screen, the next frontier for cross-platform tools will be multi-screen.

Lessons to be learned

Cross platform tools have previously faced criticism, most notably from Steve Jobs in his infamous open letter “Thoughts on Flash”. The next generation of tools are however rapidly coming to market or maturing with abundant backing from the financial and developer community. The cross-platform tools market is in a state of abundant volatility and we see continual flux, as developers try a tool, and then churn to a different one. This is a market with no clear winners or losers. It’s a market where there is little developer loyalty, and perceptions are still being formed. Now is the time for well-funded vendors with great tools to prove themselves and establish a firm beachhead.

- Seth
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Quick facts on the rise of Android

Android is the undisputed king of smartphone platforms, at least in terms of shipments. While this was true even at the end of 2010, Android grew even further in 2011, grabbing a highly impressive 49% share in the smartphone market – this can easily be translated as follows: 1 in 2 smartphones sold in 2011 was an Android device.

Moreover, Android’s share keeps growing, rising from 42% share in the first half of 2011 to a crushing 54% share in H2 2011. This level of pervasiveness has not been seen since Symbian’s heyday, but let’s not forget that Symbian didn’t have to face such stifling competition back then.

In terms of ecosystems, while Android’s 350K apps are still lagging behind Apple’s 540+K available apps, there’s been an upset in the volume of downloads, bringing Android to the pole position. Due to a much larger installed base, Android’s downloads are growing exponentially and the Market will catch up to Apple’s number of cumulative downloads within a couple of years. Granted, a lot of these apps are Viber, Shazam and Angry Birds, but in any case Google’s business model is all about ads and an addressable audience, not device sales and downloads.

Furthermore, the Android brand name is being bolstered by large marketing budgets that provide numerous ads, news items and mentions across all printed and digital media. Android has now become a household name, mainly thanks to the support and promotion of telcos and handset OEMs, who have managed to position the platform as the new and exciting operating system for users.

Rivals to the smartphone throne

Android’s number one rival right now, iOS, also enjoyed a very good year. In 2011, Apple climbed to the second position as a smartphone vendor behind Samsung with 19% share, although it’s a very close call between the two companies. In the fourth quarter, Apple exceeded all expectations and sold 37 million iPhones, claiming nearly 24% share in that quarter. It’s quite telling that in Q4, Apple sold 80% more handsets than its previous record of 20 million, in the second quarter of 2011.

Although they’re still behind Samsung as a smartphone vendor, Apple is the clear winner in terms of both revenues and profits. Aided by the high sales of all iOS devices, including iPods and iPads, Apple raked in a 32 billion USD profit during 2011 – a figure comparable to the GDP of a small country. The question remains whether Apple will be able to repeat such a feat and continue this trend, taking market share away from platforms leaking market share, like Symbian and BlackBerry.

The third mobile platform in terms of shipments for 2011 was Symbian. There’s not much to discuss on Symbian – its expiration date is coming soon and Nokia has to convert as many Symbian sales as possible to Windows Phone sales, as quickly as possible. However, Nokia had announced four new Symbian models in 2012, but they’re only releasing one.

BlackBerry also finds itself in a quagmire, with declining market share, a decrease in share value from around $60 in Jan 2011 to as low as $16 in early 2012 underwhelming revenues and an underused ecosystem. Although RIM’s co-CEOs have stepped down and the company is under new leadership, this is a difficult boat to turn around and RIM is going to have to follow the simplest rule of all in mobile: innovate or die.

Bada snatched the 5th position of the smartphone platform market away from Windows Phone, outselling Microsoft’s platform by nearly two to one. Samsung’s platform for low-end smartphone continues to turn heads and the company seems to have even bigger plans for bada. However, both bada and Tizen (Samsung’s new open source project) are unable to compete in terms of developer mindshare. But that’s fine, as the primary use for bada or Tizen to Samsung is as a negotiating leverage against Google’s Android.

Last, but not least, we have Windows Phone as the sixth smartphone platform, with approximately 2% market share. Despite the fact that Windows Phone has been out for over a year now, Microsoft’s new mobile OS has so far met with lukewarm results – a fact commented upon by Microsoft’s Stephen Ballmer himself. Nokia’s new Lumia line has the potential to install Windows Phone in the upper echelons of the platform market, tapping the vibrant developer community that has sprung up around the platform, but there are still many risks and difficulties ahead. The fact of the matter is that WP’s chief rivals, Android and iOS, have the high ground in this battle of ecosystems and it’s never easy fighting uphill.

The Android court

The top 5 smartphone vendors in 2011, accounting for 42% of the total shipments [UPDATE: accounting for 75% of total smartphone shipments,] were Samsung, Apple, Nokia, RIM and HTC – out of these, two are (mostly) Android vendors.

Although many Android vendors enjoyed a good year in 2011, it was Samsung that took the lion’s share. Samsung doubled their smartphone shipments in just six months, going from 32 million in H1 2011 to over 60 million in H2. Nearly 80% of those were Android shipments leaving Samsung as the single most important Android vendor in 2011. Samsung seems to have sold approximately one in three Android devices in 2011.

HTC did reach many milestones during 2011, such as becoming the no1 smartphone vendor in the US during Q3, but its shipments declined in Q4 and are expected to decline even further in the first quarter of 2012.

Other vendors who mainly ship Android smartphones, like Sony Ericsson, LG, Huawei and ZTE are indeed reporting an increased number of handset shipments, but they still have a lot of catching up to do. The big question for 2012 is how Google will play the Motorola card, with the deal having been green-lighted by authorities on both sides of the Atlantic. While some analysts have put forward the theory that Motorola will become a benchmark for Android handsets and will be used to keep in check other Android vendors, it’s quite likely that Google will choose a different path. Motorola’s acquisition is more closely linked to its patents, with the company’s 17 thousand patents more likely to be used as an insurance policy against Apple’s relentless legal onslaught.

Android’s expansion continues

Smartphone penetration continues to grow at an impressive pace; the smartphone market grew by 43% in 2011, from nearly 300 million shipments in 2010 to over 480 million in 2011. Penetration is expected to continue to increase and reach well into the 40% range during 2012.

It’s highly likely that, at least for the time being, Android is going to continue expanding and maintaining its current high market share. What’s more important to Google, though, is getting Android on as many screens as possible. Android is already making an impact on the tablet market, rising from 29% market share at the end of 2010 to 39% at the end of 2011. While Android has a lot of ground to cover in this particular market, it’s slowly stealing market share away from the dominant iPad, while keeping other competing platforms, like QNX and Windows, at bay. Another big bet for Google is TV; Google goal is to get as many users as possible hooked on Android, across as many screens as possible.

Feedback welcome, as always.
- Matos (@visionmobile)

[updated] Nokia and Microsoft are fighting two very different battles: Microsoft is trying to protect its aging PC software licensing business. Nokia, on the other hand, fights to survive as a as a handset manufacturer, hoping to see profits of the smartphone business. There is one thing in common, though: Both were disrupted by fundamental shifts in the mobile industry.

The basis for competition in software and mobile has changed – the once-successful business models of Microsoft and Nokia can no longer ensure profitable growth. The partnership between the two companies cannot change that. Vic Gundotra of Google once cynically said that two turkeys don’t make an eagle. Or do they?

Microsoft: A PC company in the mobile age

Reports about “Microsoft making more money on Android than on Windows Phone”, make for a catchy headline, but miss the point. Microsoft’s mobile strategy is about reducing ecosystem churn, i.e. protecting revenues from Windows and Office licensing. Every iPhone or iPad sold, represents a user who might choose to move away from a PC or Office license. Every iPhone developer represents a developer who adds value to Apple ecosystem and not Microsoft’s.

As of January of 2012, Microsoft Windows & Windows Live, Server & Tools and Business divisions were responsible for over 75% of the revenues, but, more importantly, practically all of the operating income. The company reported weaker than-expected PC demand in the last quarter of 2011. Revenue of Windows & Windows Live Division fell 6 percent year over year (and this is during the lucrative holiday quarter!), and yet worse – operating income declined by 11 percent.

The company’s core business is challenged at multiple levels. iPhone and iPad users are increasingly choosing Mac as their next computer – Mac success means less Windows licensing revenues. Moreover, tablets are displacing netbooks and laptops, which were the hope of the PC industry until recently. Google and a slew of Internet startups are opening cracks in Microsoft Office defenses by pushing migration of productivity tools into the cloud.  The end result is ecosystem churn, which means less and less Windows and Office licenses sold.

Microsoft badly needs to renew its growth. See this excellent analysis by Adam Hartung, Forbes. But, Windows Phone is a “loss leader”, not a growth engine. It’s daydreaming to expect that Windows Phone license revenues will be able to pay back all the investment that was made and is being made into the platform. Even at a $20 license fee. As reported in March 2010, the Windows Mobile R&D team headcount back in FY 2009 was 2,000 staff with a total OPEX of $900 Million. The numbers could only have grown since then.

Partnering with a fast-declining Nokia buys Microsoft neither market share nor new revenue engines. First and foremost, Microsoft needs to establish significant market share for Windows Phone in North America — the hotbed of mobile innovation.

However, Nokia is traditionally weak in North America in both market share and brand awareness. Plus the European reception of Lumia was lukewarm with slight above one million devices sold during the Christmas launch season. Instead of placing so much faith in the partnership with Nokia, Microsoft could have focused their efforts on a close alliance with the faster-moving Samsung as the key OEM for the Windows Phone platform.

Microsoft will be challenged to find new growth engines. Up until now, Microsoft has been losing money in Internet and mobile. In the last quarter of 2011 alone, the company’s Online Services Division lost $458 Million adding to mounting multi-billion loses in the last six years (see this revealing Business Insider chart).

Throwing boat-loads of money at mobile and Internet without a winning business model can only work for limited time for Microsoft. Mounting costs will inevitably raise the concerns of impatient investors over the viability of its mobile strategy.

Nokia: a handset maker in the software age

Apple has outpaced Nokia not only because of better products, but because it changed the basis of competition. The competition has changed from a competition of devices to a competition of software ecosystems. Nokia understood the challenge back in 2007, but in a classic case of Christensen’s Innovator’s Dilemma, was late to respond.

Today, the mobile handset market is driven by owners of software ecosystems, companies like Apple, Google and Microsoft. The role of handset OEMs has been reduced to that of a foot solder in the broader battle between ecosystems. OEM business has become a commodity business, where OEMs have little room for differentiation, besides price.

Since Nokia was slow in fostering its own software ecosystem, the company had little choice but to join Motorola, Sony-Ericsson, Samsung, LG, ZTE, Huawei and a host of smaller OEMs in the fierce “competition to the best”. Michael Porter calls competition to the best “the granddaddy of all strategy mistakes”.

The partnership with Microsoft might not be able to save Nokia from the perils of commoditisation. Windows Phone is a very attractive product, but it arrived to the market two years late. Apple and Google had enough time to establish strong network effects for their iOS and Android platforms. These network effects between users and app developers ensure explosive growth, user lock-in and multi-billion dollar investments by developers (see our recent post on how platforms are not created equal). In these hyper competitive conditions, Windows Phone devices will be challenged to command premium prices – like it it not, Nokia will have to compete on price with Android devices.

In retrospect, Nokia associated itself with a fledgling software ecosystem that is yet to build strong network effects. With both profitability and volumes in question, Nokia finds itself in a one-way street, depending on Microsoft to help support its smartphone business (see how Microsoft paid $250 Million to Nokia in Q4 2011).

Given the new market conditions, Nokia’s real competition is not iPhone or Android, but Samsung.  Samsung is not only the largest, but also the most profitable Android OEM. Its true competitive advantage lies in its vertical integration across the most expensive smartphone hardware components: the display, application and baseband processors and memory. Samsung even owns the fabs that manufacture many of these components. Samsung’s superior business model has launched the company to the second place of the industry in terms of profit share, second only to Apple.

Nokia’s business model of high-margin, branded OEM is in question and its dependency on Windows Phone alone is a weakness.  Nokia would be much better off if the company manufactured both Android and Windows Phone devices. Nokia, with its economies of scale and strong brand name, could auction placement of either OS to the highest bidder on its devices.

Nokia is running out of time and Samsung is gaining market share eagerly. How soon will Microsoft need to knock on Samsung’s door offering to pay billions for promoting Windows Phone on millions of Samsung devices?

Insisting on sailing upwind

In this partnership, Nokia and Microsoft insist on sailing upwind with their sails flapping (those of you who’ve had any experience sailing will know how boring this can be). Combining two business models of the 1990′s won’t help the two companies regain their positions in the new world order, dominated by companies with Internet-age business models, like Apple, Google, Amazon and Facebook.

As it seems, the only way out for Nokia and Microsoft would be the acquisition of Nokia’s smartphone business by Microsoft, as Andreas Constantinou predicted a year ago on this blog.

– Michael
[Michael Vakulenko is a Strategy Director at VisionMobile, where he focuses on mobile platform research and mobile ecosystem economics. Michael has been working in the mobile industry for over 16 years, starting his career in wireless in Qualcomm. Michael has a broad experience across many aspects of the mobile industry, including smartphone ecosystems, mobile services, handset software, wireless chipsets and network infrastructure. He can be reached at michael [/at/] visionmobile.com]

Carriers have built vast empires and generated piles of cash by doing what ‘it says on the tin’: carrying voice. Not long ago, their services were the only way to carry voice over wired or wireless connections. However, the internet changed the game. With affordable and fast enough data connections, plus the freedom to install their own apps in a growing base of smartphones (at around 35% of total handset shipments in Q4), users can pick-and-mix alternative voice solutions, like Skype, Vonage or Viber.

Early Skype users would have experienced the mode of disruption documented by Clayton Christensen in his book Innovator’s Dilemma. Skype provided a low-cost (free) alternative to incumbent solutions, but with a fairly poor user experience characteristic of a disruptive early-stage technology. Sure, VoIP wasn’t that new, but as a downloadable offering to the masses via an ordinary household internet connection, it was.

From Disturbance to Disruption

As Christensen’s theories predicted, carriers mostly saw Skype as a minor disturbance, insufficient to warrant revision of their strategies.  But it marked a pivotal moment in the evolution of communications, which was the unbundling of voice from the carrier network. In other words, consumers can take their data connections from carrier X and their voice services from provider Y: Skype, Viber, or whomever. The industry refers to these unbundled services as “Over The Top” (OTT) solutions.

However, the minor disturbance has become, well – disturbing – at least to some carriers. The modes of disruption have been aided by several key trends, in no particular order:

1. Open (enough) device operating systems – Android and iOS
2. More afforable data tariffs and speedier internet connections
3. Dramatic lowering of barriers to entry for internet platforms of all kinds
4. Consumer behavioural changes
5. Increase in carrier inertia preventing timely responses to OTT threats

These trends, and more, are covered extensively in my new book “Connected Services,” which, like this blog post, I wrote using my own “notes from the field” in the last 21 years of working in mobile generally, but the last 7 years specifically trying to evangelize Web paradigms to the boards and senior management of various carriers.

Open Device Platforms = choice

The consequence of open smartphone platforms is increasingly well understood. It enables users to choose how they want to experience their communications services. Viber is one of the best examples. It essentially replaces the standard dialer on the device with a custom one, not too dissimilar in experience, but enables calls to be placed for free via a data connection.

During the catastrophic Java ME era, before Android, replacement of the dialer on the phone was unthinkable. That’s all changed. The iPhone still doesn’t quite enable a seamless replacement of the dialer, as it won’t run an alternative at “boot-up,” but Android certainly does. Mr Number, a Palo Alto start-up, are busy exploiting this fact to provide an alternative Android dialer that essentially “unbundles” the calling and messaging experience, initially to manage call and texting spam. However, as with all disruptive technologies, the initial service is only the thin edge of the disruptive wedge. It is easy to imagine plenty of powerful disruptive scenarios orchestrated by or between these types of solution, enough to push the carriers out forever.

Faster, Cheaper Connections

Better technology gives us more bits for less money. Here in the US, that trend has jumped dramatically with the widespread availability of 4G (LTE) connections and devices. There is a class of users today who don’t need to talk that much, or at all, and so can easily do so via their data bundle using an app like Viber. In other words, they don’t need any voice minutes. These are the early adopters who threaten to disrupt carriers by usurping the “Carrier X” experience with the “Viber experience” or the “Whatsapp” experience. That road leads to obscurity and eventual death no matter how loudly and often marketing say “we’ve got the brand.”

Low-cost Low-friction Software Platforms

The remarkable fact about Viber, Mr Number and other OTT apps is that they are built by tiny start-ups with comparatively little budget but stellar teams. These financial lightweights are busy stealing the core communications experience away from carriers who might spend more on a single TV ad than the budgets of many of these start-ups combined.

The power of the developer has increased dramatically in the last few years and continues to grow. The proliferation of Software-, Platform and Infrastructure-as-a-Service products has lowered the barriers to entry to a point where any aspiring entrepreneur and a few developers can build services on tiny budgets that can challenge mighty carriers.

Moreover, entirely new breeds of software platforms have arisen to meet the needs of start-ups with aspirations in the voice and messaging world. Twilio is the perhaps the most talked about example. They provide powerful voice and messaging APIs without investing a single cent in infrastructure. Upon visiting their offices in San Francisco, they took great delight in revealing their “sophisticated” infrastructure – a solitary and lonely router sitting in an otherwise empty wiring closet. It would be funny if it wasn’t so painfully true. Twilio is built using Amazon’s Web Services, as are so many start-ups these days, starting at only a few dollars a month!

The emergence of a category of Communications-as-a-Service (CaaS) providers is an interesting development in the platforms market. Twilio were not the first. Companies like Voxeo were already there with services like Tropo.com, also offering powerful voice and messaging APIs with on-demand pricing to developers. I know that many of the well-known “darling” messaging start-ups in Silicon Valley are using Tropo “under the hood.” There are even companies specializing in API-enabling technologies, like apigee.com and developer-community design agencies, like AlphaPunk, such is the nature of software ecosystems.

Shifts in Consumer Sophistication

Blackberry Messenger, Whatsapp, Viber, Skype are no longer used by nerdy early adopters. Grandparents are using Skype to keep in touch with their grand kids. Indeed, a whole class of use cases has arisen just around Skype, from remote learning to baby-sitting. The tipping point for this shift has been the apps revolution, accelerated by the iPhone. Thanks to the marketing education of Apple and others (“there’s an app for that”), it is so easy to install an alternative service via the click of a button – one click and the “Carrier X” experience is toast!

Increase in Carrier Inertia

Relative to “born on the Web (2.0)” companies, carriers are the proverbial tortoise alongside the hare. They have exceptionally powerful voice and messaging apparatus, but not available in any form that enables innovation to happen.

Contrary to what some might think, carriers are not dumb. This is a point explored well by Christensen in his analysis of companies who failed to respond to disruptive innovation – “these weren’t companies run by idiots.” However, carriers do have is inertia, aggravated by the following factors:

1. Their IT systems are too complicated, lacking in agility and mostly deployed in tactical “stove-pipe” fashion. By the way, even early dot.com darlings, like Yahoo, have the same problem (perhaps counter-intuitively for so-called “Silicon Valley” companies).
2. IT systems are managed by external vendors with typically long development cycle times.
3. Carriers are NOT technology companies. They lack the software expertise of a Voxeo or Twilio, who build their own platforms.
4. The necessarily risk-cleansed IT frameworks and paradigms can’t in any way support agile innovation, even if carriers wanted to (and some of them do).

Running Across Quicksand

Carriers like Telefonica are trying to do something about the OTT threat by simply embracing it, like with their Network-as-a-Service initiative BlueVia and their Viber-like client, called O2 Connect. They are amongst the most innovative of carriers, relatively speaking.

In my earlier work for Telefonica and O2 UK, the order of the day was to preach the mantra of low-friction platforms. Some success was achieved through the introduction of relatively radical platform ideas. One example is hashblue.com, the cloud storage solution with its real-time texting API. It was built in a matter of weeks, API first, using software technologies du jour, including so-called “No-SQL” storage and “trendy” languages. However, the messaging integration took up to three times longer to “implement,” by which I mostly mean configure some settings deep in the bowels of the infrastructure.

A more ambitious initiative was connFu, a project to build a set of low-friction web-friendly voice and messaging APIs in a Tropo.com fashion. Indeed, it is public knowledge that Telefonica collaborated with Voxeo in the production of Rayo, a new web-friendly API for building real-time communications services. The approach was 100% “Web 2.0” and light years ahead of other carriers, yet still not aggressive enough compared with the ongoing onslaught of OTT solutions. So why isn’t it enough?

Software DNA

It all boils down to one thing – the rise of the developer (facilitated by all of the above trends). Carriers have always had a rocky time figuring out developers and software paradigms. Even now, they mostly continue to misunderstand how software economics really work, in general, never mind the outlying, yet tremendously influential, innovation machine of Silicon Valley, which is like a mini empire of developers.

It isn’t just about app stores and their rev-share models! The software ecosystem that surrounds the Web is far more sophisticated and penetrating. Developers, by which I mean all those engaged in the ecosystem, not just the stereotypical “Garage guy” (which is how many carriers perceive them) yield increasingly significant power over the way that digital services are consumed and will be consumed in the future. This is an inescapable fact.

The digital revolution is all taking place via software, up and down the stack – from new database technologies, through new operating systems, all the way up to the apps, which are mostly the tip of the software iceberg that the carriers are crashing into. Nonetheless, the band keeps on playing on the deck and the porters keep shuffling the deck chairs in vain, yet well intended, attempts to innovate. But most of this will come to nothing and the OTT guys will triumph until carriers realize that having software DNA is a necessary condition for innovating in the world of digital services that many carriers believe they occupy. This too, is an inescapable fact.

- Paul

[Paul Golding is originally from the UK, but now living in Palo Alto, US. He has 16 patents in mobile and is the author of several leading books about mobile apps and mobile strategy, used in top companies and universities. In his 21 years in mobile, he has been Chief Architect, CTO and various senior tech/product roles for companies across the world, from start-ups to multi-nationals.]

2011 turned out to be open hunting season for mobile platforms, with the MeeGo, webOS and LiMo projects coming to an end.

MeeGo, webOS and LiMo, together with Windows Mobile and Symbian are just the tip of the dead OS iceberg. The last 10 years have seen numerous companies launch operating systems or platforms for mobile devices, most of which have been fallen under the media radar.

A brief history of dead platforms

The table below lists all known mobile platforms that have died or are a ‘zombie’ (semi-dead) state – that’s all 26 of them, from Access Linux Platform to Windows Mobile. We‘ve also researched the birth and death date of each platform.

Most of these platforms have been designed as software platforms, that is, aimed at reducing costs and time-to-market for handset makers, aka OEMs. Most of the platforms were provided under a software licensing model were monetized via add-on services (e.g. IXI and Danger) or kept for in-house use (e.g. Nokia GEOS). Only post-2007 did we see applications platforms, i.e. those designed to target primarily developers and offered under a zero-royalty model. For the differences between software and applications platform see our earlier post on Platforms 101 and why not all mobile platforms are created equal.

Why are 25+ platforms dead?

In the last decade, software platforms have failed for a combination of reasons.

Cost of ownership. The cost of creating a mobile software platform should not be underestimated. Symbian was quoted as having cost over $700 million of development cost. Even for lighter platforms, a vendor is looking at a ballpark of $100 million cost over 2-3 years of initial development, plus the incremental integration cost with each new hardware platform and the long-term R&D cost to maintain the platform to a competitive level.

Conflicting revenue model. Prior to the zero-royalty model introduced by Android, all software platforms were monetized through per-unit licensing in the order of $5 to $15 per unit. This obviously represented significant costs for the OEM and also competed with bundled (free) software stacks from chipset vendors like Texas Instruments’ BMI, Qualcomm BREW, Mediatek (HOpen) and Infineon RedArrow. That was of course before the mass arrival of smartphones and the abandonment of the royalty model.

Lack of network effects. Even though Microsoft had pioneered the two-sided software platform strategy with Windows since 1995, the benefits of network effects in mobile platforms were not properly understood until the launch of the Apple App Store in 2008. It was Apple that proved how network effects – the positive feedback loop between app developers and users – can lead to enormous demand-side economies of scale. It was the power of well-oiled network effects that made Nokia realize that “it had to go to developers” (and not wait for developers to go to Nokia) before eventually losing the Symbian battle against Android and iOS.

High adoption barriers. For a handset maker, adopting a new platform is a painstaking, multi-year process. HTC is rumored to have been working with Android since 2005 and with Windows Mobile since 2000, 2-3 years before it produced the first G1 and SPV models, respectively.  In addition, handset makers are very risk-averse (they have tough customer commitments to keep up to) and so have in most cases preferred to stick with their internal spaghetti platforms rather than take the risk of adopting a new one.

The ingredients of a successful platform

There are a handful of remaining software platforms today. Besides the usual suspects Android, iOS, Windows Phone and Bada, we should also consider BREW MP (still surviving), Trolltech’s Qt (an API framework acquired by Nokia in 2008 and rumoured to be soon reappearing on Nokia’s Series 40 handsets) and Smarterphone, a niche ‘smart’ operating system for feature phones recently acquired by Nokia.

The chart above makes it clear what is the success factor of modern platforms. Firstly, software DNA, that is a company with resources, processes and values routed in the PC or Internet world where developers, not OEMs are the platform’s primary customer. Secondly, a successful platform vendor needs to have large pockets due to the billions of dollars in investment needed to build a stable and advanced software foundation, while attracting developers to the platform. Note that the bubble size in the chart shows last relative size of 4 quarters of vendor revenues.

But the secret sauce is neither in DNA or money; it’s hidden in Stephen Elop’s famous burning platform memo: ”Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem”

The secret sauce behind the success of iOS and Android is how thanks to network effects (the closed loop driving users to developers and developers to users) platforms have managed to generate billions of external investment, both in the form of developer investments (time/effort) and operator investments (subsidies).

It’s network effects that have created near-insurmountable barriers to entry for Microsoft who despite boasting 75,000 WP7 developers achieved only one million sales of its flagship Lumia model from its strategic partner Nokia.

And whatever Bada, Tizen or any other alphabet-soup-chef tries to conjure up, they should never forget that you can’t buy developer love. You can only plant the seeds. That’s why Facebook Platform is following exactly the right strategy: take a vibrant developer community and offer it a new addressable market.

- Andreas
follow me on Twitter for more: @andreascon

10. From MeeGo to Tizen: the making of another software bubble

Article by Dave Neary

Just a short 1.5 years from MeeGo’s birth, Intel dumps it to shift focus to a new platform, Tizen, in partnership with Samsung. Guest author Dave Neary discusses the underpinnings of Tizen and why both MeeGo and Tizen are software bubbles
Read full article…

9. The death of Flash – 8 years in the making

Article by Francisco Kattan

Adobe’s decision to stop developing Flash for mobile browsers is the talk of the day – but the reasons behind Flash’s ultimate failure are not that obvious. Guest author Francisco Kattan discusses the chain of events that led to the death of Flash – a time bomb inadvertently planted by Adobe many years ago

Read full article…

8. Developer Economics 2011 – Winners and losers in the platform race

Article by Matos Kapetanakis (based on Developer Economics 2011 report)

Who is leading in the platform race – and who’s lagging behind? Marketing Manager Matos Kapetanakis examines the flow of developer mindshare and discusses how success is measured in the app era – in part 1 of our 3-part blog series on our newly released Developer Economics 2011 report (free download here)

Read on…

7. [Infographic] The Mobile Platform Race – How do mobile platforms stack up?

Infographic by Matos Kapetanakis

We’re proud to present our latest infographic, The Mobile Platform Race, showcasing some of the most important findings and insights from our Developer Economics 2011 report (free download here)

See full infographic…

 6. Mobile Platforms: The Clash of Ecosystems

Article by Michael Vakulenko (based on The Clash of Ecosystems report)

We at VisionMobile have been researching and helping to educate the industry about mobile platforms for the last five years. In this time mobile software has evolved from the world of “open OS” to the world of complex ecosystems, network effects, app stores which are redefining the rules of telecom industry. Today we share much of this knowledge in our Mobile Platforms: The Clash of Ecosystems report – a critical analysis of major mobile platforms and their battle for dominance ( free download here)

5. HTML5 and what it means for the mobile industry

Article by Andreas Constantinou [based on HTML5 and what it means for the mobile industry report]

HTML5 has been tipped to be a game-changer, with some predictiving it will take over most mobile platforms. But what is its real impact to the mobile industry? VisionMobile Research Director Andreas Constantinou evaluates HTML5 vs apps and what it means for the mobile industry as part of our newly released report (free copy here)

Read full article…

4. Open Source community building: a guide to getting it right

Article by David Neary

Everyone – from carriers to OEMs – is busy building developer communities. But many have failed and more have seen disappointing results. Guest author Dave Neary looks at what lessons history can teach us on community building and the key DO’s and DON’Ts

Read full article…

3. [Infographic] Top 5 Handset OEMs 2001-2010

Infographic by Matos Kapetanakis

In the past 10 years, the handset manufacturer landscape has changed dramatically.

Companies that seemed unshakable have lost ground and are gradually being replaced by new and agile contenders, borne from the PC industry. The ‘old OEM guard’ is still being driven by momentum, but as one-by-one these giants fall and smartphone adoption continues to accelerate, the battle for a spot in the top 5 leaderboard is getting more and more heated. See full infographic…

2. A new way of measuring Openness, from Android to WebKit: The Open Governance Index

Article by Liz Laffan (based on Open Governance Index report)

Much has been said about open source projects – and open source platforms are now powering an ever-increasing share of the mobile market. But what is “open” and how can you measure openness? As part of our new research report (free download), VisionMobile Research Partner Liz Laffan introduces the Open Governance Index – a new approach to measuring the “openness” of software projects, from Android to WebKit

Read the full article – and also check out the comments section…

1. Mobile Megatrends 2011

Article by Andreas Constantinou (based on Mobile Megatrends 2011 report)

In this fourth annual research presentation we take a deep dive into the many facets of change in the mobile industry; the DELL-ification of mobile, the battle for experience ecosystems, apps as web 3.0, the use of open + closed strategies to commodise + protect and how telcos can compete in the age of software. Read full article…

So, here they are – the top 10 articles on the VisionMobile blog for 2011. Next year we’ve got even better things planned, starting with our two big research reports that are on their way. The Cross-Platform Developer Tools report (out in Feb 2012) and our latest Developer Economics research (out June 2012). Sign up for our newsletter and stay up-to-speed with the latest news on our best blog articles and our latest research reports.