NxtWave - InWireless-Device and Platform Battleground

The Device and Platform Battleground
Jan Dawson
Chief Telecoms Analyst
+1 973 457 5814
jan.dawson@ovum.com
@janovum
Agenda
Introduction and definitions
Platform evaluations and scorecard
Device vendor evaluations and scorecard
Some words about tablets
Conclusions
Q&A
Copyright Ovum. All rights reserved. Ovum is part of the Datamonitor Group.
Devices vs. platforms
Samsung
LG
HTC
Devices
Sony Ericsson
Motorola
3
RIM
Nokia
Apple
HP
Android
Platforms
Windows
Phone
Criteria for success for device and platform vendors

Handset vendors
Ease of use
Predictability
Operators
Flexibility
Stability
Developers
Ease of use
Attractiveness
Consumers
Sexy device
4
Compelling UI and apps

DEVICE VENDOR APPEAL
OS-agnostic vendors pick their platforms
Nokia
Sony
Ericsson
HTC
Windows
Samsung Android
Phone 7
LG
Motorola
OPERATOR APPEAL
Operator appeal October 2010

Apple
Android
RIM
Windows
Symbian
AT&T
Sprint
T-Mobile
Verizon
Total
25
11
Source: operator websites

8
Operator appeal March 2011

Apple
Android
RIM
Windows
Symbian
AT&T
Sprint
T-Mobile
11
Verizon
Total
35
12
11
Source: operator websites

9
Operator appeal change since October
10
Apple
Android
RIM
Windows
Symbian
AT&T
+2
+3
Sprint
+3
+2
T-Mobile
+3
+1
+1
Verizon
+1
+2
-1
-2
Total
+1
+10
+1
+2
+1
Operator appeal
11
Some operators have expressed frustration and resentment directed

at Apple in particular, which dictates terms in a way others dont
Android and Google have provided a welcome alternative but also

signaled potential for unsettling disruptive trends e.g. Nexus One,
700MHz auction
RIM has begun actively positioning itself as the carrier-friendly

alternative touting especially its efficient use of bandwidth
Nokia has also recently promised to be the operator-friendliest vendor
Ultimately, its easier to alienate operators than it is to butter them up
When vendor/operator conflict is bad for customers

and developers
Android presents a good case

study in how platform and
device vendors and operators
can come into conflict
Vendors and carriers together

determine when Android
updates are pushed to
individual devices
This means that many Android

devices are running earlier
versions
Source: Android Developer Program Target Devices
12
DEVELOPER APPEAL
Apps in app stores (thousands), most recent numbers

400
350
300
250
200
150
100
50
0
iOS
14
Android
Ovi
BlackBerry
WP7
Apps in stores vs. days since launch
15
But its about quality, not quantity!
This is the battle cry of the app stores with few applications, who will
also delight in pointing out the number of flatulence related apps
Currently over 120 just with references in the title in iOS App Store
The problem with this argument is that the biggest app stores are also
proving to have the most engaging, profitable and high quality apps
RIM used to claim leadership in enterprise apps, but even that has
slipped away over time
16
Its hard to measure quality apps but number of downloads would

certainly be an indication, as would revenues (more on this later)
But some examples can be helpful
Some apps popular across platforms
17
Popular apps available on various platforms

Facebook
Twitter
MLB
ESPN ScoreCenter
Netflix
Hulu
Pandora
NY Times
DropBox
Evernote
YouTube
Google Maps
Kindle
Angry Birds
Fruit Ninja
Yelp
Skype
Foursquare
Google Voice
Gmail
Opera
Swype
18
iOS
Android
BlackBerry
WP7
Ovi/Symbian
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Y
X
X
X
Y
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Y
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
A humorous take on cross-platform development
19
Another view of top apps across platforms
Number of top 200 cross-platform

publishers appearing in each store
Source: Distimo
20
The ability to bill customers for paid apps is key
One of the things that Apple has demonstrated is that the ability to
easily bill customers for paid apps is key to developer appeal
Apple recently announced it has 200 million credit cards on file
Android has struggled with this, as Google has very few paid
relationships with customers
Many users have had to create payment accounts just to buy apps
RIM and Nokia/Symbian/Ovi have pursued the carrier billing route to

overcome this problem putting the charges on the phone bill
Nokia claims it has over 100 operators with integrated billing
RIM has been announcing deals Vodafone, Telefonica, T-Mobile
Android Market is starting to offer carrier billing too AT&T, T-Mobile
21
In-app purchases are another key source of revenue
22
Apple has had in-app purchases

since June 2009 and they account
for about half of app store revenue
RIM added in-app purchases in

February 2011
Android Market has announced its

intention to offer in-app purchases
Rumor has it Ovi Store will add it in

v.2.6
There is no sign as yet on

Windows Phone
END USER APPEAL
Platform shipments for five major platforms in 2010
24
Downloads of apps are hard to measure
25
Hard data on application

downloads is hard to come by
Apple regularly updates its
figure and recently hit 10 billion
downloads
Others Nokia and RIM
report downloads per day
Not all platforms report
numbers e.g. Android reports
nothing on this
35,000
30,000
Downloads per day,

based on reported
numbers.
25,000
(Android is a mystery
although third-party
sources suggest over 3
billion total)
20,000
15,000
10,000
5,000
0
iOS
Ovi
BlackBerry
SCORECARD AND
FORECASTS
26
Device platform scorecard
5-
1-
4-
Developers
1-
2-
End users
Device
vendors
Operators
27
Our global smartphone OS forecast

700
600
500
Other OS
Windows Phone
BlackBerry OS
iOS - iPhone
Android
Windows Mobile
Symbian OS
400
300
200
100
0
2010
28
2011
2012
2013
2014
2015
2016
Our North America smartphone OS forecast

180
160
140
120
Windows Phone
Symbian OS
Other OS
Windows Mobile
iOS - iPhone
Android
BlackBerry OS
100
80
60
40
20
0
2010
29
2011
2012
2013
2014
2015
2016
How do the various players seek to create value?
30
Pure-play device vendors (Samsung, HTC, LG, Sony Ericsson)

device sales
Google / Android advertising revenue
Nokia and RIM devices plus services
Apple devices plus apps plus content
Microsoft license fees plus advertising revenues, plus boost to other

consumer lines (Xbox, Live services)
Apple ecosystem value share
31
Android ecosystem revenue share
32
DEVICE VENDOR TRENDS

AND SCORECARD
Device vendors
Samsung
LG
Nokia
HTC
Devices
Sony Ericsson
Motorola
34
RIM
Apple
HP
Android
Platforms
Windows
Phone
OS-agnostic vendors pick their platforms
Nokia
Sony
Ericsson
HTC
Windows
Samsung Android
Phone 7
LG
Motorola
35
Device shipments by vendor, thousands

140,000
120,000
100,000
Nokia
Samsung
LG
Apple
RIM
Motorola
Sony Ericsson
HTC
80,000
60,000
40,000
20,000
0
Q1 2008 Q3 2008 Q1 2009 Q3 3009 Q1 2010 Q3 2010
36
Smartphone shipments by vendor, thousands

30,000
25,000
LG and Sony Ericsson dont

break out smartphone
numbers
20,000
Nokia
Apple
RIM
Samsung
HTC
Motorola
15,000
10,000
5,000
0
Q4 2009
37
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Average selling price, all phones, as reported

700
600
500
Apple
HTC
RIM
Sony Ericsson
Samsung
LG
Nokia
400
300
200
100
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2008 2008 2008 2008 2009 2009 3009 2009 2010 2010 2010 2010
38
Operating income, as reported, except Apple

3,500
3,000
2,500
Apple
Nokia
Samsung
RIM
HTC
Motorola
Sony Ericsson
LG
2,000
1,500
1,000
500
0
-500
-1,000
Q1
2009
39
Q2
2009
Q3
3009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Average selling price vs. operating margins 2010

700
Apple
600
500
400
HTC
300
RIM
Motorola
Sony Ericsson
200
100
Samsung
LG
0
-10%
40
-5%
0%
5%
10%
Nokia
15%
20%
25%
30%
35%
Smartphones as a percentage of shipments

100%
90%
80%
Apple
70%
HTC
60%
Apple, HTC and RIM are all

buried in the single 100% line
above
RIM
Motorola
50%
Nokia
40%
Samsung
30%
20%
10%
0%
Q1 2009 Q2 2009 Q3 3009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010
41
How do you measure success in the smartphone

market?
For years, the focus has been on market share

This made sense, because share meant customers liked your products,
and you were building scale, which could lead to further competitive
advantage
But raw market share actually tells us little today

Trajectory is far more important e.g. Nokia is dominant today, but with
the death of Symbian and slow ramp of WP7 it will likely slip
But equally important is value delivered to shareholders does it matter if
you have 90% market share if you have 10% margins?
42
Ultimately, success can only be measured by reference to multiple

data points, not least of which should be profits and trajectory
Device vendor scorecard
43
Shipments
ASP
Margin
Smartphones
Apple
1-
1-
HTC
2-
3-
LG
8-
Not reported
Motorola
4-
Nokia
RIM
3-
2-
Samsung
Sony Ericsson
Not reported
SOME WORDS ABOUT

TABLETS
Tablets are the emerging battleground in devices
Competition in smartphones is well established, but tablets are the

emerging battleground in devices
Smartphone vendors (and some PC vendors) are entering the space

mostly with smartphone-based operating systems
Apple reinvented the tablet space with the iPad running iOS
Early Android tablets used stretched versions of the smartphone OS, and
newer tablets are using a tablet-oriented version Honeycomb
RIM and HP (Palm) have announced but not yet launched tablets based
on proprietary OSs QNX and WebOS
Microsoft has yet to enter the market, partly because neither its
smartphone OS nor the PC version of Windows seems appropriate
45
An interesting trend more than just a giant iPod
46
The iPad has been criticized since its release (to little effect) for being
little more than a giant iPod
The version of iOS that runs on the iPad is indeed just a scaled up
version of what runs on iPhones and iPods
However, tablet operating systems from HP, Google and RIM promise
to bring something new to the tablet OS space, namely using the
larger screen size to put more than one thing on screen at once
Android refers to its widget implementation as Fragments, while

Playbook has some similar features, and HPs TouchPad uses a tilebased multitasking interface
Tablet forecast, 2010-2015

160,000
140,000
Middle East & Africa

Asia-Pacific
120,000
100,000
80,000
Eastern Europe
Western Europe
South & Central America
North America
60,000
40,000
20,000
0
2010
47
2011
2012
2013
2014
2015
Some comments on market share in tablets
48
We believe Apple and the iPad probably had about 90% market share
last year in tablets, with 14.7 million shipments
Its share is likely to remain high for some time, and it will continue to
lead the market, until 2015
At that point, we expect Android to overtake it as the largest player by

shipment market share, with 36% to Apples 35%
These two together will dominate the market, with just 29% going to
other platforms in 2015
The iPad 2 just reinforces the point that others are going to have to
work hard and start shipping to compete effectively
CONCLUSIONS
Conclusions
50
Apple leads on a number of fronts in the platform space, but Android

is rapidly catching up or moving into first place
But their strategies and objectives are entirely different, with Apple
chasing consumer electronics revenue and Google chasing ads
Other platforms have to play catch-up in several departments and risk

falling too far behind to catch up
Among device vendors, smartphone focused players are strongest in

ASP and therefore margins, requiring a transformation for many
Tablets threaten to perpetuate the dominance of the top two players

but there is at least some room for the others if they start shipping
Thank you!
Jan Dawson
Chief Telecoms Analyst
+1 973 457 5814
jan.dawson@ovum.com
@janovum
BACKUP
52
How much value have platform vendors created?
Apple
Device revenues of $56 billion to Apple
Application store revenues of $2 billion to developers
Application store revenue share of $0.9 billion to Apple
Accessory revenues of $2 billion? to Apple and others
Google
Device revenues of $30 billion? to device vendors
Application store revenues of $300 million? to developers
Advertising revenues of $1 billion to Google
53
Of course, both also drive operator revenues
Quality apps BlackBerry
54
BlackBerry App World Free
BlackBerry App World Paid
BlackBerry Messenger
Chat for Facebook
WhatsApp Messenger
Bejeweled
Facebook
Facebook Chat
Poynt
Chat on Facebook
Twitter
One Touch Flashlight
Windows Live Messenger
The Game of Life
Chat for Facebook
The Simpsons Arcade
Yahoo Messenger
Uno
Google Talk
Chat for Facebook Pro
AOL Instant Messenger
Screen Muncher
Quality apps Windows Phone 7
55
Windows Phone Marketplace Free
Windows Phone Marketplace Paid
YouTube
Parachute Panic
Facebook
I Dig It
Adobe Reader
Pac-Man
Bubble Birds
Fruit Ninja
Xbox Live Extras
Need for Speed
Traffic
Zombies
The Weather Channel
Rise of Glory
Swipy Man
iBlast Moki
Kill the Duck
3D Brick Breaker Revolution
Amazon Kindle
Brain Challenge HD
Quality apps Android
56
Android top free
Android top paid
Androidify
Robo Defense
Gmail
X Construction
Jumpgate Free
Fruit Ninja
Pandora Radio
PowerAMP
Google Maps
Titanium Backup
Flash Player
Beautiful Widgets
Angry Birds
ROM Manager
Facebook
Root Explorer
Solitaire
Doodle Jump
Google Earth
DocumentsToGo
Quality apps iTunes
57
iTunes top free iPhone
iTunes top paid iPhone
Doodle Truck
Angry Birds
Skee-Ball Free
Angry Birds Seasons
Google Translate
NOVA 2
Block Shooter
Fruit Ninja
Angry Birds
JellyCar 3
Facebook
Words with Friends
Fish in Love
Cut the Rope
Words with Friends
Facebook Touch HD
Pandora
NBA Jam
Groupon
Tap DJ
Consumer and enterprise waves of smartphone adoption

60,000
50,000
40,000
Consumer
Enterprise
30,000
20,000
10,000
58
10
20
10
Q
3
20
09
Q
1
30
09
Q
3
20
Q
1
20
08
08
Q
3
20
07
Q
1
20
07
Q
3
20
06
Q
1
20
06
Q
3
20
05
Q
1
20
05
Q
3
20
04
Q
1
20
Q
3
Q
1
20
04

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The Device and Platform Battleground

Introduction and definitions

Platform evaluations and scorecard

Device vendor evaluations and scorecard

Some words about tablets

Devices vs. platforms

Criteria for success for device and platform vendors

Compelling UI and apps

DEVICE VENDOR APPEAL

OS-agnostic vendors pick their platforms

Operator appeal October 2010

Source: operator websites

Operator appeal March 2011

Source: operator websites

Operator appeal change since October

Some operators have expressed frustration and resentment directed

Android and Google have provided a welcome alternative but also

RIM has begun actively positioning itself as the carrier-friendly

Nokia has also recently promised to be the operator-friendliest vendor

Ultimately, its easier to alienate operators than it is to butter them up

When vendor/operator conflict is bad for customers

Android presents a good case

Vendors and carriers together

This means that many Android

Apps in app stores (thousands), most recent numbers

Apps in stores vs. days since launch

But its about quality, not quantity!

Its hard to measure quality apps but number of downloads would

But some examples can be helpful

Some apps popular across platforms

Popular apps available on various platforms

A humorous take on cross-platform development

Another view of top apps across platforms

Number of top 200 cross-platform

The ability to bill customers for paid apps is key

RIM and Nokia/Symbian/Ovi have pursued the carrier billing route to

In-app purchases are another key source of revenue

Apple has had in-app purchases

RIM added in-app purchases in

Android Market has announced its

Rumor has it Ovi Store will add it in

There is no sign as yet on

END USER APPEAL

Platform shipments for five major platforms in 2010

Downloads of apps are hard to measure

Hard data on application

Downloads per day,

Device platform scorecard

Our global smartphone OS forecast

Our North America smartphone OS forecast

How do the various players seek to create value?

Pure-play device vendors (Samsung, HTC, LG, Sony Ericsson)

Google / Android advertising revenue

Nokia and RIM devices plus services

Apple devices plus apps plus content

Microsoft license fees plus advertising revenues, plus boost to other

Apple ecosystem value share

Android ecosystem revenue share

DEVICE VENDOR TRENDS

OS-agnostic vendors pick their platforms

Device shipments by vendor, thousands

Smartphone shipments by vendor, thousands

LG and Sony Ericsson dont