Peek Report for Smartphones

North American Demand Analysis

iPhone 5 passes Samsung while BlackBerry Z10 delights

TM

An Argus Insights White Paper

877-99-ARGUS (877-992-7487) www.argusinsights.com sales@argusinsights.com Jul 8th, 2013

Table of Contents
Peek Report for Smartphones ......................................................................................................................................................... 1 Executive Summary ........................................................................................................................................................................ 2 Defining Delight and Other Metrics (a brief tutorial) ................................................................................................................................ 3 Delight Landscapes..................................................................................................................................................................... 3 Attribute Funnels ....................................................................................................................................................................... 4 Threat Quadrants ....................................................................................................................................................................... 4 Which Smartphone Brand is Delighting the Market the Most? ..................................................................................................................... 5 Which Handsets are Driving Consumer Demand? .................................................................................................................................... 6 How Does OEM Perception Differ By Carrier? ......................................................................................................................................... 7 Visions of Purchase Intent within Social ............................................................................................................................................... 8 What are the most shared and interesting links in Social Media?....................................................................................... 8

2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | May 2013

TM

Innovation Intelligence

Executive Summary
The Smartphone market is beginning to look like the Cold War where two superpowers, Apple and Samsung duke it out while the minor players nip at the heels of the market. This week Apple scored gains on Samsung as buzz and delight around the iPhone 5 increased to levels not seen in months while everything but the Galaxy S4 suffered declines in the eyes consumers. Motorola continues their decline in the face of the marketing seemingly waiting for the first Googrola phones to launch. BlackBerry continues to hemorrhage mindshare as consumers stop buying classic handsets and are slow to buy the new BB10 handsets. The Z10 continues to be a product loved by a niche market while the Q10 is seen as a pariah in the minds of customers. Nokias recent handsets are doing better but continue to mimic Apples PC market share of the 1990s, making a small segment deliriously happy. Key Takeaways for Retailers: Galaxy S4 is finally taking hold but unclear whether demand is due to promotions or improvements to the experience. Promotions may help to clear inventory but balance against iPhone promotions Classic BlackBerry handsets are finally fading enough from the landscape to clear out inventories. Nokia and BlackBerry have handsets that consumers love but need help expanding beyond the niche. Key Takeaways for Manufacturers and their Supply Chain While the Stylus and Big Screen work for the Galaxy Note II, every handset should not just blindly become pen enabled and huge. Slow growth of the iPhone 5 and the poor launch of the Galaxy SIV show an increase in feature fatigue and price sensitivity where increases in performance are no longer what is driving adoption. Failure of Facebook phone signals end of consumer interest in stove piped experiences. Consumers want to tailor their handset experience not just drink from a preordained hose. Key Takeaways for the Investment Community Blackberrys comeback has faltered even though a mix of prior BB owners and former iPhone/Android owners continue to sing the praise of BB10 on the Z10. Q10 is not doing as well. Samsung S4 is doing better but unlikely to drive new demand given how stuffed the channel is. Slow down in other Samsung handsets points to a week summer fo sales Nokia continues to fight to move beyond the niche and may pass LG and Motorola for mindshare this summer Motorola mindshare mirrors the decline of BlackBerry. They will have a weak summer ahead of the Google X Phone Launch Overall Smartphone market is starting to look a bit saturated for the summer as the overall demand seems to be contracting as consumers are either waiting for the fall or happy with the handset they already own Any growth in demand, such as recently seen in iPhone 5, will be driven more by retail promotion but with limited success outside Apple handsets as consumers will prefer a cheaper iPhone over a free anything else

Key Takeaways for Accessories Manufacturers Demand for Z10 seems to be slowing, along with Galaxy Note II and Galaxy S III. Galaxy S IV is probably not worth investing more resources in supporting, existing inventory should be sufficient as consumers slowly work through the inventory Samsung stuffed in the channel iPhone 4 continues to be one of the most discussed handsets, especially given low price and now universal availability. Market for older cases and pre-Thunderbolt accessories is not completely dead yet Lumia 928 is a surprising bright spot and may bear supporting in the near term with more accessories

2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | 17 June 2013

TM

Innovation Intelligence

Defining Delight and Other Metrics (a brief tutorial)

In the quest to answer the question of What about the user experience is driving demand? Argus Insights has developed the Delight Metric based on the star ratings of consumer reviews. This Delight metric, developed initially as part of research at Stanford University, has been shown to be a proven predictor of consumer adoption, along with the volume of consumer conversation around a product, the Buzz. The graph belows shows the actual Monthly Tablet Sales for 2011 and 2012, along with the predictive model created using just the Delight and Buzz Metrics. For those interested in statistics, the model had an Adjusted R Squared of 72.4% and a p-value of 0.0017, meaning that 99.83% of the variation in Tablet sales can be explained using the Argus Insights model.

Comparing NPD Actual Sales to Argus Insights Predictions

$4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $-

WorldWide Monthly Sales

Millions

$ NPD Sold Actual Predicted Using Argus Insights Metrics

Copyright 2013 Argus Insights, Inc.

Jun-1-2011

Apr-1-2011

Apr-1-2012

Jun-1-2012

May-1-2011

May-1-2012

Nov-1-2011

Mar-1-2011

Mar-1-2012

Nov-1-2012

Figure 1: Comparing actual Tablet Sales to Argus Insights predictive model using proprietary Delight and Buzz metrics.

Delight Landscapes
Delight is normalized from multiple consumer review sources to be -1 to 1, roughly equivalent to one to five stars. As it is measured from the launch of a product, it can be used to track the market falling in and out of love with a given experience. The graph below shows the Delight and Buzz results for the iPhone 4s and iPhone over time. The y-axis is the Delight level and the size of the area of the bubble represents the Buzz levels. This allows comparisons between one product and another or even between brands, using the same normalized metrics of Delight and Buzz. When looking at the entire landscape you can rapidly identify which products and brands are winning the battle for hearts and minds. The next question is always what are they doing different from the competition?
Figure 2: Buzz and Delight for Recent iPhones. Notice rough start for iPhone 5.

Mar-1-2013

Dec-1-2011

Dec-1-2012

Feb-1-2011

Sep-1-2011

Feb-1-2012

Sep-1-2012

Aug-1-2011

Aug-1-2012

Feb-1-2013

Apr-1-2013

Jan-1-2012

Jan-1-2011

Oct-1-2011

Oct-1-2012

Jan-1-2013

Jul-1-2011

Jul-1-2012

2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | 17 June 2013

TM

Innovation Intelligence

Attribute Funnels
The next visualization helps to unpack what is driving the user experience by extracting the topics that are top of mind and their associated sentiment. These Funnel Diagrams are ranked by the volume of overall topic mentions with the spread of mentions showing how wide spread the positive and negative mentions of these topics are. The example Funnel Diagram in the figure below is an example of the usage scenarios discussed by consumers in the iPhone 5 reviews. You can see for the iPhone 5, consumers still discuss using it as a phone the most where as, discussion of the iPhone as a Laptop Substitute barely registers in the minds of users. Funnels like this help to understand what is driving adoption of a particular product and can offer powerful comparisons between products and brands. If you wonder why Blackberry Z10 customers are delighted or why Galaxy S4 customers are not, check out their Funnels.

iPhone 5 Usage Scenarios

-5%
Phone Web Surfing Music Email Movies Gaming Friends Social Media Significant Other Family Skype/Video Chat/Phone Books News/Weather/Sports Messaging Work Coworker Laptop Substitute Figure 3:Attribute Funnel for iPhone 5 Usage Scenarios

-3%

0%

3%

5%

Smartphone Threat Quadrant

0.8
Slow Burners Nokia Winners

Threat Quadrants

Another visualization used throughout the report is the Threat Quadrant that illustrates the relative performance by playing Delight and Buzz against 0.7 Apple each other in a two by two matrix that represents 0.6 four possible classifications of a product or service: Winner, Loser, Slow Burner and Why Bother. Those Samsung 0.5 products with high Delight and high Buzz relative to BlackBerry HTC the market are clear Winners. Those who drive 0.4 LG lots of conversation about the bad experience are Losers. Products delighting a niche slice of the 0.3 Motorola market are called Slow Burners and have a chance 0.2 to broaden their appeal to a larger segment of the market. Why Bother are products where the few 0.1 people that even care enough to comment publically Why Bother? Losers say negative things, calling into question why the 0 company bothered to launch the product or service 0 500 1000 1500 2000 2500 in the first place. The Threat Quadrant on the left details the relative perceptions of Smartphone Figure 4: Threat Quadrant for Smartphone Brands showing relative manufacturers. Since the Threat Quadrant is a Consumer perception along with month-to-month changes. snapshot in time, occasionally we will include trend lines to show the change over the previous snapshot. We will use this snapshot to show the relative brand performance by carrier and the handset rankings at each carrier as well. Notice that for this particular quadrant, the market perception for all brands but BlackBerry.

2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | 17 June 2013

TM

Innovation Intelligence

Which Smartphone Brand is Delighting the Market the Most?

1 0.67 Argus Insights tracks the consumer response to products using customer authored reviews leveraged by shoppers to support their own purchase decisions. Our metrics based on these reviews have been proven to be leading indicators of future consumer demand. The diagram to the left shows the latest results for major handset brands in North America. While most brands received an uptick in perceived consumer delight this past week, Apple also saw an increase in buzz, probably due to the success of iPhone 5 promotions by Best Buy and other Retailers. Even though BlackBerrys quarterly performance did not meet expectations, consumers still see their handsets in higher esteem than many brands. LG continues a downward slide in the face of the resurgence of HTC with the One handset and others. Both Nokia and Motorola are experience significant volatility in how consumers view handsets from these manufacturers. Notice that buzz is decreasing for Moto as the market waits for the new Google/Moto handsets. Nokia is another matter. While new handsets are delighting consumers (Lumia 928 is in the top 10 this week), Nokia is failing to move outside a niche group of consumers with their offerings. The biggest news is a significant drop in the consumer buzz around Samsung. Typically this drop in buzz precedes a drop in demand for a given brand. Given how Samsung stuffed the channel with Galaxy S IV handsets, retailers are working hard to churn through their inventory helped by a global advertising blitz by Samsung. As consumer stop buying older BlackBerry handsets, the overall demand is sliding given that excitement over the Z10 and Q10 has not been enough to ignite broad renewed interest. As we will see later, the Z10 is what is carrying BlackBerry now as those keyboard holdouts spent Q1 buying old handsets rather than waiting for the Q10. 5

Apple

0.5 0 0 5 10 15 20 25 0.52 0.5 0 0 1 5 10 15 20 25 0.53 30 30

HTC

BlackBerry

0.5 0 0 1 5 10 15 20 25 30

LG

0.5 0 0 1 5 10 15 20 25 0.50 0.29 30

Motorola

0.5 0 -0.5 1 0 5 10 15 20 25 30

Nokia

0.5 0.62 0 0 5 10 15 20 25 0.61 30

Samsung

1 0.5 0 0 5 10 15 Axis Title 20 25

30

2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | 17 June 2013

TM

Innovation Intelligence

Which Handsets are Driving Consumer Demand?

Apple iPhone 4
1 0

0.52

Apple iPhone 4S
1 0

0.58

Apple iPhone 5
1 0

0.71

BlackBerry Z10
1 0

0.81

HTC One
1 0

0.72

LG Optimus G
1 0

0.50

Nokia Lumia 928

1 0

0.79

Samsung Galaxy Note II

1 0

0.74

Samsung Galaxy S III

1 0

0.63

Samsung Galaxy S IV
1 0

0.73

To the left you will find the ten highest rated phones based on a mix of Delight and Buzz. Demand across the board is slowing this summer expect for a few flagship products. The top handset in the minds of consumers is now the BlackBerry Z10, followed closely by the Lumia 928 at Verizon. The Galaxy Note II remains a favorite, portending a potentially grand market reception for the soon to be released Galaxy Note III, as long as Samsung learns from the failed S4 launch. The Galaxy S4 is finally recovering from the initially slow launch and is competing effectively with other leading handsets. This shift and the recent decline in buzz around the Galaxy S III and the Galaxy Note II, may signal the demand is finally rising, thanks largely to huge campaigns deployed by Samsung. The iPhone 5 has slipped to fifth place but has recently stolen mindshare from the other handsets. Only the Galaxy S4 is motivating consumers to share their experiences as much. Though the Z10 is the highest rated handset, there are very few consumers discussing BlackBerrys flagship handset, signally a significant slowdown in the demand for BlackBerry products, especially given the lackluster market response to the Q10. Simply stated BlackBerry is in deep trouble. Even Nokia is doing better overall when it comes to demand though both have been relegated to shrinking niches in the marketplace. The experience of BB10 is delighting consumers showing that BlackBerry finally got it right but maybe too late. If demand continues to fall, BlackBerry becomes ripe for acquisition. Nokias continued in ability to even rise above LG in the marketplace is heavily influenced by their relationship with Microsoft which means Nokia handsets will always have a niche with Windows users but the current state of the market makes it difficult for Nokia to move beyond that niche. Noticeably absent are any Motorola RAZR handsets or the Google Nexus 4. The market is waiting for any innovation dividends from the Motorola purchase and their patience is running out. Even the iPhone 4 continues to outperform any of the Motorola flagship handsets in the marketplace. 6

2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | 17 June 2013

TM

Innovation Intelligence

How Does OEM Perception Differ By Carrier?

The Carrier Brand Quadrants illustrate the brand performance by major US carriers over the past month. The x axis shows the volume of reviews from that carrier for that brand over the past month. The y-axis illustrates how well that brand met user expectations based on the review ratings for the past month. The trend arrow shows the change over the prior month. This allows the visualization of the shift in user expectations by carrier.

AT&T
1 0.8 0.6 0.4 0.2 0 -0.2 0 50 100 150 Samsung Apple HTC LG 1 0.8 0.6 0.4 0.2 0 0 50 100

Verizon
Samsung Apple HTC LG

Motorola
Nokia RIM

Motorola
Nokia 150 200 RIM

Figure 5: Brand Quadrants for AT&T and Verizon Highlighting Which Brands Are Delighting OR Disappointing Smartphone Consumers. Trend Arrow shows direction of change over prior month.

Interest in the HTC One is dropping at AT&T along with the Galaxy S IV while Apple and LG customers are finding new reasons to buy. Most striking are the drops in Nokia and Motorola in the minds of AT&T customers. Verizon also saw Motorola, Nokia, and HTC customers express increased frustration with their experiences while Apple, BlackBerry customers all were happy with their new phones. The Lumia 928 drove the most buzz at Verizon.

T-Mobile
1 0.8 0.6 0.4 0.2 0 -0.2 0 20 40 60 80 Samsung Apple 1 0.8 0.6 0.4 0.2 0 -0.2 0 -0.4 500

Sprint
Samsung Apple

HTC
LG Motorola Nokia RIM

HTC
LG Motorola 1000 1500 Nokia RIM

Figure 6 Brand Quadrants for T-Mobile and Sprint Highlighting Which Brands Are Delighting OR Disappointing Smartphone Consumers. Trend Arrow shows direction of change over prior month.

After the initial burst of Apple interest, Samsung is clearly the winning brand at T-Mobile. Nokia seems to be making a small comeback at T-Mobile at the expense of LG and HTC. Sprint consumers seem to be coming out of their overall funk based on delight with Samsung products. Apples lack of dominance across the carriers indicates a growing saturation in the US market where growth comes from replacement over new iPhone users. The whole market is waiting for fall to bring innovation to the market after the all hat and no cattle launch of the Galaxy S IV and the teaser of iOS 7.

2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | 17 June 2013

TM

Innovation Intelligence

Visions of Purchase Intent within Social

Argus Insights tracks the smartphone brands in social media. Most of what we see are promotions, advertisements for cases, gaming related tweets when someone achieves a new level, etc. Much of the twitter traffic regarding smartphones does not come from humans but from software bots acting on their behalf. One of the sure ways Argus has found to determine whether the tweet author was silicon based or carbon is by using tweets tagged with a geolocation. Today, while only a small percentage of tweets contain this data, only human users that have opted in to share their location coordinates publish this data, something a bot cannot yet do. Below is a US map showing the relative volume and distribution of mobile brand tweets over the past two weeks.

Figure 7: Brand mentions in Twitter by location. Though clustered in population centers, relative distribution does change by handset brand. Regional affiliations such as more RIM in Canada and more LG mentions in the Midwest.

Notice that there is little dispute that Apple and Samsung receive the most call outs from Twitter users. Not only is this an indication of the install base but also which brands have the most active engagement in the lives of handset users. While the clustering of discussion around major metro areas is not a surprise, the detail of which handsets are mentioned most in these areas is of interest as they tend to be the leading indicators of shifting trends in the mobile landscape.

What are the most shared and interesting links in Social Media?
Much of the social media around Smartphones are spam campaigns or contests for free phones. Below are a selection of the links most shared beyond the enticement adds of the continuous spam onslaught in social media. TechCrunch Commentary on iOS 7 Depature of HTC COO Matthew Costello Top 5 Things To Know About BBM Video, BlackBerry's Video Messaging Service Crackberry Coverage of iOS7 Event

Oddly enough, BlackBerry related mentions topped the share charts during the week.
2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | 17 June 2013

TM

Innovation Intelligence

If You Would Like To Dig Deeper

This is a shameless call to action that details, in brief, the goodies you would be able to access when you sign up for a full subscription. Remember that the Buddha gave up all worldly possessions to find the path to true peace. We only ask for a small monthly payment to subscribe to our SaaS platform. You and your team will have ready access to all of the data used to develop this report as well as the same analytical tools used by Argus Insights on-demand, 24-7. Finally A Social Analytics Platform That Offers Actionable Insights The Argus Platform enables companies to use social media and user data to refine and launch effective marketing and innovation campaigns. By providing comprehensive and actionable consumer information and insights, Argus helps companies capture mind share.

How It Works The Argus Platform is able to deliver actionable insights through three simple processes. Collect: The Argus Platform pulls together consumer conversations in social media sources like Twitter and consumer review sites. This data is unsolicited, unstructured, unfiltered, and real-time, which offers more thorough and unbiased insights. Additionally, Argus can integrate proprietary data sources such as surveys, help desk reports, and net promoter score questionnaires to offer fully comprehensive reporting. Analyze: The Argus Platform normalizes sentiment data across sources, and then compares consumer conversations to uncover reasons behind consumer trends. By connecting ongoing social conversations and metrics to campaigns, Argus is also able to predict near future sales growth (1-2 quarters out). Report: The Argus Platform reports results in simple and intuitive visualizations with downloadable powerpoint-ready graphics from a dashboard customizable to the company's strategic questions.

Call today for free access to our demo account so you can evaluate for yourself the advantages Argus Insights can bring to your enterprise. +1-877-99-ARGUS
2011-2013 Argus Insights, Inc. | www.argusinsights.com | sales@argusinsights.com | 17 June 2013