Google has said that its infrastructure was hacked in an apparent effort to get at Chinese dissidents' GMail accounts. The implication is that the Chinese government was behind the attacks. The company has taken a laudable and very strong stand and said it will no longer comply with Chinese government censorship. It also said that if it cannot operate in an uncensored way going forward it may exit the market entirely.
According to the Google blog post:
These attacks and the surveillance they have uncovered--combined with the attempts over the past year to further limit free speech on the web--have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.
China is the world's largest mobile market with 700 million subscribers, more than twice as large as the US population as a whole. The Internet advertising market in China is less mature than in the US and Europe, but over time it would be worth many billions off dollars. Baidu currently dominates search on PCs with roughly 65% - 80% market share.
This is a very gutsy move on Google's part. There's no reason to believe the Chinese government will allow Google to operate on an uncensored basis. So that may mean -- if Google is true to its public word here -- that it must say goodbye to the world's largest Internet market.
Presumably Android handsets would still be available in China (e.g., the Dell Mini 3) but they would likely have to be stripped of Google Search and other services.
Morgan Stanley's Mary Meeker gave a mobile-centric Web 2.0 conference presentation that everyone was talking about several months ago. From our point of view there wasn't anything particularly new in her remarks but she put everything together into historical context. And the crowd there, which may not have seen mobile as "distruptive," was paying attention.
Now comes hundreds of pages and slides that everyone can download here:
There's a ton of data and projections in these documents. Read them over the holiday or before bedtime. Perhaps the most interesting part (I haven't been through everything) is the historical analysis that talks about previous disruption cycles and predicts winners and losers in the future accordingly.
The big themes are that the mobile Internet will be "at least" 2X the size of the PC Internet and that the whole thing is "ramping" much faster than the desktop did. The latter point we've made many times in the past.
We are clearly in a kind of double-transition period: traditional media are contending with the fruits of massive consumer Internet adoption but the transition to mobile is happening simultaneously and perhaps a bit obscured as a result. But just as the Internet is "disruptive" of traditional media, mobile is also potentially disruptive of aspects of the Internet. Google has seen that perhaps better than any of its competitors and moved very aggressively as a result.
Many companies, analyst firms and media outlets tend to focus on ad revenues as a measure of whether a medium has "arrived." For example, many of the articles and even forecasts about mobile ad revenues tend to talk about how small they are relative to traditional Internet advertising. And when, oh when, will it be "the year of mobile"?
Dude this year already was. We're here.
Whether ad networks and publishers can efficiently and effectively monetize the mobile Internet is not going to matter to consumers -- not going to matter. Consumers will be using the mobile Internet more and more and as a primary access point in an increasing number of situations. It will be preferred in a large number of cases.
The smartphone is going to become "the remote control for your life," in the way that the iPhone or iPod Touch can literally become a remote control device for TV. People will want to access content that they've researched, saved, collected online (i.e., in the cloud) from the mobile device. But the future is not just about phones; it's about myriad mobile devices and Internet access points in the world against near-ubiquitous connectivity.
The mobile Internet -- from a consumer perspective -- will get larger and larger. Ad revenues will come but consumers are way ahead. Millennial Media predicted that we'd see 100 million mobile Internet users in the US next year. I think that's nearly a slam dunk prediction. Frequency is another matter of course but it too will go up over time. Voice search on my handset may mean that I do as many or more searches there than on my PC.
I'm sitting on the couch and I want to know the answer to trivia question X. Do I get up and go into the other room? No, I take out the smartphone and speak the query: "Who was the 17th president of the US?" Done. Now back to the movie.
Advertisers, agencies and publishers ignore the mobile Internet at their own peril.
If you thought that the PC Internet gave people control over which ads they consumed, you ain't seen nothing yet. Less inventory and consumer ambivalence about ads on their handsets means that advertising will really need to turn into "content" or be so viral or targeted that people will be motivated to respond. This despite the fact that mobile response rates are much higher than on the PC.
That's a bit of a paradox, I realize.
Source: Morgan Stanely research
Chinese search engine Baidu.com is developing a mobile app that will be preloaded on many Chinese handsets in an effort to prevent Google from gaining share as search goes increasingly mobile. According to Computer World:
Mobile phones pre-loaded with the Baidu Palm application should appear on the market soon as the company has already reached deals with handset makers, a Baidu representative said in an e-mail late Friday. The software is the "most important product in Baidu's mobile strategy," the company said in a statement announcing it last week.
Baidu is the third largest search engine by volume in the world, based solely on its dominance of the Chinese market:
According to Opera's most recent State of the Mobile Web report, Google is third and Baidu is first among the top ten sites visited by those using the Opera browser on mobile devices in China:
The iPhone, which had a lackluster debut in China (chiefly because it's so expensive), is mostly a Google search device, as is Android. In particular, if Android devices do well in China that will benefit Google's market share. It will be interesting to see if Chinese Android users still prefer Baidu or simply use the Google box on the handset's homescreen.
The following charts are from the Opera "State of the Mobile Web" report for October. They represent the top sites and other data from Opera users in the countries represented below. More countries' data are available via the Opera site.
Although there is some slight movement among sites, the "top 10" are fairly consistent over time. For example, Facebook and Google vie for the top spot in the UK and US month after month. The recent strong showing of Yahoo! (no. 3 and 4 in the US and UK) can likely be attributed to the company's improved mobile homepage/portal.
You can check any month this year by going here and then changing the final number to the desired month.
Over the past 24 or so hours there has been a great deal of news and speculation around Samsung, the number two handset maker and number three or four smartphone maker depending on the numbers you consult. Earlier the company said it would introduce "bada" ("ocean" in Korean) as a new mobile OS. Then there were rumors that the company was going to boost Android at the expense of the Windows Mobile and Symbian operating systems.
Apparently Samsung will retain WinMo for enterprise-oriented handsets and dump Symbian entirely. Today the Register UK provides some more dirt and visibility on the developments:
Samsung phones won't be Symbian based: they'll be using Android for high-end consumers and retaining Windows Mobile as it still has the edge in the enterprise, while the new Bada platform will fill that mid-range feature-phone market.
But for Nokia's footprint as the largest mobile handset maker in the world it would be time to say Symbian is dying. Indeed, the latest Nokia "flagship" handset, the N900 uses Maemo instead of Symbian, which is a statement in and of itself.
Update: Samsung reverses or corrects itself, now saying that it will continue to support Symbian. While this saves face for Symbian/Nokia it ultimately doesn't matter because the user experience is no longer competitive.
Korean-based Samsung is the second largest mobile handset maker after Nokia. Today the company announced that it too is creating an "open mobile platform" -- bada. According to the press release out this morning:
The name ‘bada’, which means ‘ocean’ in Korean, was chosen to convey the limitless variety of potential applications which can be created using the new platform. It also alludes to Samsung’s commitment to a variety of open platforms in the mobile industry. Samsung bada also represents the fresh challenges and opportunities available to developers, as well as the entertainment which consumers will enjoy once the new platform is open.
Based on Samsung’s experience in developing previous proprietary platforms on Samsung mobile phones, Samsung can create the new platform and provide opportunities for developers. Samsung bada is also simple for developers to use, meaning it’s one of the most developer-friendly environments available, particularly in the area of applications using Web services. Lastly, bada’s ground-breaking User Interface (UI) can be transferred into a sophisticated and attractive UI design for developers.
Samsung will be able to expand the range of choices for mobile phone users to enjoy the smartphone experiences. By adopting Samsung bada, users will be able to easily enjoy various applications on their mobile.
It's not entirely clear but Samsung seems to be saying that bada will include smartphones and non-smartphones:
More and more people want rich and connected application-experiences that are currently available only for smartphone consumers. Samsung has developed bada to make these exclusive smartphone experiences available to everyone.
Another mobile OS doesn't make a lot of sense, given how many already exist and the market's willingness to only support a handful of them. Still, Samsung as the number two handset maker might find some success . . .
Separately there's speculation, based on an HMC Investment Securities report, that Samsung will dramatically reduce its reliance on Windows Mobile as a smartphone OS over the next several years:
While Samsung is the second-largest handset maker in the world, its smartphone share is 4th or 5th. The chart above (which again is speculative, based on the aforementioned report) shows Windows Mobile declining as a mobile OS from roughly 90% of Samsung smartphones to about 20% in 2012, with Android growing -- and presumably "bada" as well.
When Google CEO Eric Schmidt said earlier this year that there were "18 or 19" Android devices on the way many people waited sketpically for evidence of his remark. Now they appear to be coming out weekly (and I think there are now more than 20 in the market globally). The Nook eReader is Android-powered, the Moto Cliq was just released by T-Mobile and Verizon has begun to push, to considerable buzz, the new Droid (also from Motorola).
The Boy Genius Report has had the device and offers a pretty extensive and highly favorable review/preview:
The Droid isn’t an iPhone competitor because nothing at this point in time is an iPhone competitor besides the new iPhone. And things don’t have to be right now. Everyone can eat. So will the Motorola Droid be successful? Absolutely, we think. It will eat in to BlackBerry sales, Windows Mobile sales, and positively murder any lingering Palm Pre sales. It’s that good. Did you notice how Verizon still hasn’t announced the BlackBerry Storm2?
We really enjoyed using the Motorola Droid and think you’re going to love it. It’s not as straight forward as an iPhone and a little more involved than a BlackBerry, but if you’re up for the challenge, so is the Droid.
And yet another Android device has appeared: the Zeppelin from Motorola. Apparently to be released in China first, it's the first dual-band Android phone (GSM, CDMA).
The point in the quote above about Android phones eating into RIM, WinMo and Palm sales is very real. With the exception of the iPhone Android seems to be sucking all the air out of the room.
Related: The BlackBerry Storm 2 is apparently coming out next week. Will people wait for Droid?
See also: Verizon's Droid is a series, not just a phone.
The following are excerpted iPhone-related comments from the Apple earnings call transcript (Seeking Alpha). . .
Apple CFO Peter Oppenheimer:
We are thrilled to have sold almost 7.4 million handsets in the September quarter. That’s a new company record and an increase of 7% over the prior September quarter when we increased channel inventory by 2 million handsets following the introduction of the iPhone 3G and the dramatic expansion of geographic distribution. iPhone sell-through in the quarter increased 38% year over year . . .
We are looking forward to selling iPhones in China beginning later this month as this very large market represents a great opportunity to expand iPhone's reach even more broadly. We also plan to expand our carrier relationships in the U.K. and Canada.
The Apps store continues to be an unparalleled success, with over 85,000 apps available and over 2 billion customer downloads to date, including over half a billion downloads in the September quarter. In addition to adding more apps at an amazing pace, we have continue to enhance the Apps Store experience with iPhone OS 3.1 which includes new features such as genius recommendations and a streamlined way to organize apps within iTunes.
Recognized revenue from the iPhone handset sales, accessory sales and carrier payments was $2.3 billion during the quarter compared to $806 million in the year-ago quarter, an increase of 185%. The sales value of iPhones sold during the quarter was $4.5 billion.
Question (multiple carriers, pricing changes):
[If] you start to go to multiple carriers can you talk a little bit about the pricing of the phone when you go from exclusivity to multiple carriers? And obviously, not specific but any sort of color we can have in terms of pricing dynamics change on the phone from you to the carrier?
COO Timothy D. Cook:
Our pricing is confidential . . . so it’s not something I could comment on in detail but generally speaking from markets where we’re already selling I would not expect to see a wholesale price difference as we bring on other carriers. However, the end user price is really set by the carriers themselves so you may or may not see a street price difference.
So when you go from exclusive to multiple carriers, you wouldn’t necessarily see change in pricing that you are charging the carrier? Is that correct?
COO Timothy D. Cook:
Question (competition for the iPhone):
There’s a lot of obviously wannabes that are coming to market in the season, particularly Android and many of them are offering touch screens and richer browsing and media and app stores and are being given carrier support. How do you think about maintaining your momentum and differentiation amidst that kind of environment?
COO Timothy D. Cook:
Well, Mike, we feel great about how we ended the fiscal year with selling 7.4 million, as Peter talked about in the preamble. And that put us over 20 million -- almost 21 million for the fiscal year, which was up 78% from before. And so we have significant momentum.
Also when you look at the ecosystem that we’ve got with iTunes and the Apps store with the Apps store having over 85,000 apps, which is a country mile more than anyone else, plus the very strong product pipeline that we have, we feel very, very good about sitting up and competing against anyone.
Frankly I think that people are really just trying to catch up with the first iPhone that was announced two years ago and we’ve long since moved beyond that.
Question (iPhone enterprise performance and Europe):
I have a question on I guess the enterprise business. . . [On] your iPhone business, any color you can share with us, the break-out between consumer and enterprise? At least qualitatively and how that has been trending?
COO Timothy D. Cook:
The iPhone is either being deployed or being piloted in well over 50% of the Fortune 100 and from an international point of view, if you look at Europe, this is true in about 50% of the Financial Times 100. And so we feel very good with the progress that we've made since the iPhone 3GS was announced.
Also, another very key market for us, that some people call enterprise, is that over 350 higher-ed institutions have approved iPhones for their faculty, staff, and students. And in addition to both of these, we continue to be very happy with our sales in the government arena.
Market research company Synovate released findings from a wide-ranging survey of 8,000 mobile phone users in 11 countries (504 respondents in the US). The markets included Canada, Denmark, France, Malaysia, the Netherlands, the Philippines, Russia, Singapore, Taiwan, the UK and US. Here are some of the top-level findings (largely verbatim):
More than two phones + smartphones:
Most used features:
Beyond voice and text messaging, the most regularly used phone features were:
Mobile Internet access:
SMS behavior, dating and lying:
What these data show (once again) is that people find their mobile phones an indispensible piece of personal technology and communications tool. They love them; they're more attached to them than the PC.
The figures above on mobile Internet access are consistent with what we've independently found -- 27% of US users accessing the Internet on their mobile phones. We also found an identical number regarding social network access via mobile phone among US users: 15%
Here's a snapshot of the Chinese search market according to mostly Chinese government data compiled by Reuters:
China's 3G networks are now being built out, which will accelarate growth of the mobile Internet. China's online advertising industry is still small and in the early stages of development.
Late last year or early this year Google CEO Eric Schmidt said there would be roughly 18 Android devices in the market by the end of 2009. It's starting to happen. Last week Motorola introduced its first of two Android phones. And today LG announced its first Android device, the unmemorably named LG-GW620:
The new LG-GW620 features a 3-inch full touchscreen and slide out QWERTY keypad to meet the growing needs of consumers who rely on their mobile phones for more than just making calls. The LG-GW620 benefits from an operating system that was created from the ground up to take advantage of the many mobile applications and services developed by search leader Google.
Simultaneously (and curiously) the company reminded everyone of its commitment to the Windows Mobile platform in the same press release:
In addition to the Android model, LG announced in early September that it will be introducing a minimum of 13 new smartphones over the next 16 months that utilize Microsoft’s Windows Mobile. The newest release, version 6.5, was announced just last week.
I've argued in the past that it will be potentially difficult for consumers to differentiate these various Android phones and similarly challenging for the OEMs and carriers to create and highlight differences -- which has been the history of Windows Mobile to date as well.
Running a promotion in conjunction with the Oprah show in the US, T-Mobile is offering a $100 discount on the MyTouch3G Android phone. That reduces the price from $199 to $99 (for as long as it lasts). Separately, INQ, which is wholly owned by Hutchison Whampoa, said at Mobilize that it's getting into the Android business. INQ previously announced "social mobiles" that have built in apps for Facebook, Twitter and Skype.
That means the companies with announced or existing Android handsets include:
How will all these phones separate themselves from one another? Motorola and HTC are trying software layers and services. We'll see how different these other phones are from one another when they show up. Regarding pricing, there are now a slew of "smartphones" selling for $150 or less in the US and a bunch at $99:
As I've argued, the de facto price ceiling on smartphones is $199 and it may be going down if the recent price jockeying is any indication. Anything above $199 won't be viable as a mass market device.
Nokia is now making its N900 Linux (not Symbian) based "mobile computer" available for pre-order across the globe. Although there are early mixed reviews of the device, which I have not used, most are generally positive. What then is the outlook for this smartphone by another name? In the US at least it's bleak -- very bleak.
Why do I say that? Mainly because the company is charging $649 (452 EUR). What the heck is Nokia thinking? The company apparently hasn't learned the lesson of the N97. Nokia's "flagship" smartphone, launched without carrier support in the US in June, and was priced at more than $700. It has been a spectacular failure to date.
Now the company appears poised to duplicate that failure with the N900, chiefly because of the pricing.
By contrast, Taiwan-based ASUS is set to launch the world's cheapest eReader and shake up the market. The new device features a unique "book-like" design that can be closed and has a foldable spine:
There are now probably about 10 readers in the market or coming very soon. The ASUS Eee Reader reportedly will be out by the end of the year. Amazon's Kindle 2 (as opposed to the DX) is $299. Sony has already beaten that price by $100 with its recently announced eReader pocket edition ($199). And the Eee Reader will apparently come in at or below £100 (approx. $163).
Despite the affection many of its owners have for it, the Kindle is not the iPhone and it won't have the ability to resist these cheaper rivals. Meanwhile Apple is going to come out with a tablet of some kind either late this year or early next. That device will be expensive by comparison but it will be positioned as more than an eReader (media tablet) and so may find an audience despite its price tag. One can assume that iPhone apps will work on it.
But price will largely drive eReader adoption and the sub-$200 price point is the one that will generate mainstream appeal. The "winning device" will be connected, cost $200, offer a color touch screen and offer full Internet browsing. And as these connected readers proliferate the world of the "mobile Internet" becomes more interesting and complex.
Gartner's is the latest in the flood of mobile ad forecasts to hit the market. As reported in MediaPost, here are the highlights:
The leading region (probably based on the number of subscribers and handsets, rather than the characteristics of the ad market) is Asia, followed by North America and Europe, according to the IT consulting firm.
Gartner says the leading ad category will be display, followed by search, apps and SMS.
The company also sees smartphones constituting 45.5% of handset sales by 2013. This may be aggressive, however. It depends on pricing chiefly. But developments such as the BlackBerry Storm being cut to $50 (in anticipation of Storm 2) and the $99 iPhone 3G will continue to drive smartphone growth.
In addition the upgrading of feature phone capabilities is a bit of a wildcard in mobile ad forecasting. Certainly SMS is a universal platform that is handset "agnostic," but other types of ads will likely make their way into improved feature phones over the next few years.
Related: Separately, Forrester said that European mobile Internet penetration will be 39% by 2014. My belief is that this figure is conservative. However the degree of engagement is highly variable and dependent on dataplan and smartphone adoption.
And the EU is investing in LTE to boost mobile Internet speeds and growth. This will help drive adoption. In Europe mobile subscribers pay considerably less on average than in North America.
"I can confirm it is not an exclusive deal," Apple spokeswoman Natalie Harrison said in an e-mailed statement.
This potential gives Apple access to China Mobile's 500 million subscriber base, if a deal can be worked out between the companies. China Mobile will be offering Android phones in the near future.
The market for high-end smartphones such as the iPhone is currently tiny but will grow in the next several years as Chinese carriers build out high speed networks.
After more than a year of rumors and speculation it has finally been confirmed that the iPhone will be coming to China -- to the number two carrier there, China Unicom. It was announced formally today in an earnings release:
On 28 August, the Company and Apple reached a three-year agreement for the Company to sell iPhone in China. The initial launch is expected to be in the fourth calendar quarter of 2009. This will provide users with brand new communication and information experience.
China has three operators: China Mobile, China Unicom and China Telecom, which are just now building out their 3G networks. China Unicom lags far behind the dominant carrier China Mobile. But even small success in China, which has a relatively small smartphone market today, will mean big numbers for the iPhone.
There are almost 700 million mobile users in China, more than 2X the US population as a whole. China Unicom reportedly has roughly 140 million subscribers. The largest US carrier Verizon has 87.7 million mobile subscirbers. China Mobile, the largest carrier there, has roughly 500 million.
Reportedly China Unicom has agreed to buy 5 million iPhones as part of its three year exclusive deal. Wifi will be disabled (as is currently the case across the industry in China).
Apple reported that it had sold 45 million iPhone and iPod Touch devices globally (80 countries). That breaks down to 26.4 million iPhones and 18.6 iPod Touch devices. About 25 million of those devices are in the US and the rest abroad. The 25 million US figure is divided as follows (per AdMob): 13 million iPhones and 12 million iPod Touch units.
China/Asia could move into second position on this chart if the iPhone succeeds in China. Imagine the potential Chinese apps market.
Related: Here's additional color and analysis from the Wall Street Journal.
Opera released its "State of the Mobile Web" report for July this morning. It should be remembered that Opera data are not identical to all mobile Internet usage. The Opera browser is not well represented on smartphones, though it is so far the browser of choice among BlackBerry users. (However RIM acquired TorchMobile, a webkit browser developer to boost its mobile Web usability.)
The following are data on top sites and handsets for the US, UK and Chinese markets. Other markets are presented in the data available on the Opera site:
The growth of Opera's global unique users is a kind of mirror or proxy for the rapid growth of the mobile Internet itself:
Opera is also important because most of the usage data coming out is skewed toward smartphones, which are still a small part of the overall market.
Long rumored, Dell's Android-based smartphone (dubbed the mini 3i) has been seen in China. Surprisingly the HTC lookalike device does not have WiFi and is 2G (but this is v 1). For more discussion of specs and speculation about the release date, see Techmeme.
As I said, this looks just like the HTC Magic/MyTouch Android handset, except for the absence of physical buttons on the front of the device. An interesting question to thus consider is how OEMs and carriers will differentiate these Android phones over time as more enter the market. More peripheral things such as camera, battery life and non-Android software (e.g., the HTC "Sense" interface) would presumably come into play.
Price would also be a potentially significant factor. As I've pointed out, OEMs now can't charge more than $200 for a subsidized smartphone in the US. Would multiple Android devices from multiple handset makers and carriers drive prices farther down?
It will be interesting to see who develops a $99 Android phone -- first.
Here are a couple of images of Dell's Android phone in China:
Related: China Mobile, the carrier slated to offer the Dell mini 3i, is launching an online apps store. This is analogous to other carrier apps stores (e.g., Verizon) rather than a handset OEM's (or OS maker's) apps store such as iTunes or the Android Market.
Gartner released its Q2 handset sales figures today. Overall unit sales were down, though smartphone sales grew a very healthy 27%:
Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 per cent decrease from the second quarter of 2008, according to Gartner, Inc. Smartphone sales surpassed 40 million units, a 27 per cent increase from the same period last year, representing the fastest-growing segment of the mobile-devices market
RIM/BlackBerry, Apple and HTC gained share, Apple most dramatically vs. Q2 2008. Nokia continued to lose share. Here are the numbers according to the IT consulting firm:
Regarding mobile OS share, Garnter said:
The firm also said the Pre only sold 205,000 units.
The news comes that Google has lost market share in China to native search engine Baidu, which now has a roughly 65% market share according to a report recently issued by US investment firm Bernstein & Co (relying on third party data). Others put the Chinese market even more in Baidu's hands (per iResearch):
It struck me, however, that Android might be a "back door" for Google into increased market share.
There are going to be at least two Android-based phones in the market through China Mobile in the next month or so (from Lenovo and HTC). Smaller rival China Unicom is reportedly working with Apple to launch the iPhone in China. There are also various rumors of a Dell smartphone launch announcement in China (OS unknown) in the next several days.
China is the world's largest mobile market with 700 million subscribers -- more than twice as large as the US population. Having several Android phones in China will give Google another bite at the Chinese search market, so to speak, which may enable the company to gain search share where it doesn't seem to be able to on the PC.
Related: The rumored Dell phone is reportedly to be an Android device.