Two Recent Deaths in the Smartphone world. Long Live the Emperor.

July 23, 2010 by · 2 Comments
Filed under: Business, Technology 

Within the last couple of weeks two surprising deaths happened in the Smartphone world: Kin and Nexus One (direct from Google); both of whom I had blogged about before here and  here.  Similar to my predictions on tablets, the world has decided to make me look bad.

I can’t say either action is a real surprise, given the success – or lack thereof – of both products, but it begs the question of what the hell is so unique about Apple that makes them so successful?  Both products were reasonably good and both came out with some marketing strength and high hopes, albeit none had Jobs sticking his turtleneck out for.  In fact one can almost say they are truly cleverphones.  Nexus One sold directly by Google lasted a few months but managed to sell more through the carriers than direct.  Kin, on the other hand, didn’t even last enough to hear comments about it.  Microsoft has decided to protect their channel by pulling it out of the market and allowing HTC, Dell, Samsung, and LG who will release Windows 7 Phone Series (gotta love Microsoft’s marketing) devices this year for the “holidays”.

What I think is really happening is that even strong players like these tend to underestimate the power of the wireless carriers.  They own the customer since people buy phones in order to get a service, not the other way around.  Smartphone OEMs have learned the game and have succumbed to the carriers’ will, quite successfully I might add.  The market has turned into a selection of services where you pick a desirable phone for.  In other words, I know I want AT&T, Verizon, Telus, Vodafone, etc.  for whatever reason and then I select my phone.  Nexus One tried to separate it out unsuccessfully, even given the fact that Google didn’t need to make money on the phone!  People still bought the subsidized phone through the carrier in spite of a long term commitment.

Microsoft on the other hand didn’t try to sell direct, but attempted to bypass OEMs, where carriers buy more devices from.  So it is easier for them to add a Windows 7 Phone from HTC to the portfolio they already buy from them.  Besides, Kin was a succession of project “Pink” in which Microsoft had an agreement with Verizon to supply a device.  This contractual agreement forced Microsoft to release Kin with an OS that was not quite Windows 7 Phone.  In addition to that Verizon changed data plans and made the Kin less than attractive cost wise.  Again, a wireless carrier took control of the market.

One can also blame Palm’s near demise (and HP’s gain) on carriers’ acceptance or choice.

Whatever the reasons are, wireless carriers will continue to dominate and control the market.  Granted, both Google and Microsoft have a potentially great future with their mobile OS without their own branded phones as long as they follow the desire of the carriers they sell through.

The only exception so far is Apple.   AT&T has gained millions upon millions of customers that wanted one and were willing to compromise their carrier selection for the privilege of carrying an iPhone.  When Apple opens up to Verizon we’ll most likely see them run back and abandon AT&T.  Apple will churn the base, Verizon will add users, and AT&T will lose them.  Very few new iPhone users, but Apple will continue to sell them new ones.  Will Jobs be open to have an unsubsidized dual system (AT&T and Verizon) iPhone to sell direct so users can declare him his loyalty?  I can see it if AT&T and Verizon decide to create cheaper iPhone plans since they will not subsidize the phone anymore and create a price war.  We’ll see.

But for the time being iPhone remains the only device requested by name and the carriers maintain control over everything else.  For how long?



Android phone with Yahoo search

March 3, 2010 by · Comments Off on Android phone with Yahoo search
Filed under: Technology 

No, it’s not a typo.   AT&T pulled Google search out of the new Motorola Backflip apparently due to contractual agreements between the carrier and the search engine as reported by MocoNews.  I just think it’s funny that the reason Google got into the mobile world by developing Android is to take advantage of mobile search.  Yahoo, who also wants a  piece of the pie seems to have a better and cheaper mobile search strategy that does not involve a new mobile OS.

Of course, one can always change the preferred search engine on the phone once you bought it.  But it defaults to Yahoo in this case.  Android’s biggest advantage is user customization.  This is like the antitrust fights agains Microsoft for embedding Internet Explorer with the OS “abusing” its leadership to force people to use I.E.  Like people won’t download other browsers!  It is really a hassle to download Mozilla, Chrome, or Safari, right?  Who wants to do 3 clicks?  Not to mention the fact that I.E. updates require more than 3 clicks and it gets updated more often that most geek’s underwear… But let’s not go there.

The trend of Androids with Yahoo, iPhones with Bing, Symbians with Google, Blackberries with Lycos (not sure if it still exists) and all permutations and combinations of those is what’s interesting.  The most useful feature of smartphones (besides the phone) is search.  How many times have you been in a restaurant and wanted to go watch a movie?  Who calls the theater anymore? But now the Search engine, the OS and the smartphone itself are independent entities.   By that I mean that you can go to your favorite website and buy a phone, pick your OS, your service provider and your search engine.  Cool!

It is also entirely possible that carriers and device manufacturers are so pissed at Google due to the Nexus One release that they are cutting them out of the loop.  Perhaps.  But if the trend goes on, for whatever reason mobile search will be up for grabs.  And, my fellow reader (singular) our mobile search is worth money, lots of money!

So when are we going to get service subsidies (i.e. lower data plan costs) from the search engines?  Picture this:  You go to your preferred service provider’s website and choose your plan, phone, OS, and accessories.  On the next screen you pick your search engine which includes an extra incentive.  Yahoo may offer $5/month rebate, Google $50 for accessories, Bing something else.  Now, that’s driving choices.

Google:  If you want to be back in the Android (what a funny incident) subidize people’s data plans and stop making your own phone.  Well, not really, just subsidize my data plan. 



Another Googlesque act at the Nexus of the smartphone market

January 22, 2010 by · Comments Off on Another Googlesque act at the Nexus of the smartphone market
Filed under: Business, Technology 

 Google is an amazing social experiment. Besides giving bloggers an endless source of topics to write about, it challenges all common sense, business logic, and engineering innovation concepts. In a very Googlesque fashion, Nexus One was announced during 2010 Consumer Electronics Show in Las Vegas. What is more surprising is that it will most likely be a success.

Without having had my hand on it it is tough for me to have an opinion on its performance. But given the engineering track record of Silicon Valley’s favorite they probably nailed it (even if they didn’t you know there will be a Nexus 2). But that is not what will make it a success, nor is that what is surprising about it. Motorola, LG, HTC, Sony Ericsson, and others have or have announced plans for Android powered smartphones. Yet, Google, the author of Android, decides to put out a device that competes with all of them. Moreover, Google does not have to make money from it (even though they will) since it is really a bet on mobile advertisement revenue. So far nobody has found a way to make money on mobile ads, but it is my contention that if somebody can figure it out it will most likely be Google. It is hard to imagine that Google decided to compete with their hardware partners just to make a “few” bucks selling hardware. They most likely did it for the same reason Google does everything else: to disrupt a market.

Imagine a world in which you do not have to pay for cellphone service. Pretty much the way you didn’t have to pay for TV in the past. Advertisers paid for it and consumers take advantage of that money flow. I know, I know, those days are waaaay over and not likely coming back anytime soon (until Google has a say). But in the mobile Internet business the biggest barrier to entry IMHO for mobile search to explode is the hefty $30 – $50 a month data fee from your preferred carrier plus a $100 – $300 “club entry fee” for your favorite smartphone. Sure there are hundreds of millions of smartphones out there and there will be more in the years to come, but the mobile search revenue still dwarfs the “fixed” one. Granted usability, contextual value, and other issues are still important. But Apple and Google will shortly solve those. Cost will remain a barrier. Unless, yes, unless it is free. In other words, paid by advertisers. You and I can pick our favorite smartphone subsidized by a carrier to get your voice revenue and Google pays your data plan as long as you search. Weird? Sure, but then again Google is known for its weird business models.