On the first day of the F8 developer conference, Facebook finally pulled the trigger on something we had expected for months. Facebook messenger is now a platform along the lines of WeChat and other Asian messaging apps. While this isn't necessarily "novel", it tells us something about Facebook's vision for mobile.
Facebook announced the SDK for messenger along with the fact that 40 apps, including ESPN, Dubsmash, and Talking Tom and Giphy had already signed up for the program. Their willingness is simple to explain -- app stores have fixed the app distribution problem, but have consequently made app discovery far more difficult. Easy app distribution and low entry barriers have created a deluge of app developers with more than a million apps and counting. But with these numbers, app developers have found it increasingly difficult to reach consumers through all the noise. This is where Facebook Messenger comes in:
I have been a bit of a wearables skeptic ever since Android Wear was unveiled at Google I/O last year. Following that, Apple's original announcement of the Apple Watch just added to my list of questions about the category. Hoping to find some answers, I watched yesterday's Apple Watch keynote with great interest. Curiously, what I found were more questions.
Before jumping in, I have to say that I really enjoyed the recent debate around the Apple Watch (for completely non-analytical reasons). The certainty with which some have predicted the imminent success or failure of the product has been very amusing. Unfortunately, my powers of clairvoyance aren't nearly as evolved, so all I have are questions. That said, it could be worth studying some of the arguments put forward in these debates.
The change in Google's narrative over the past few months has been very interesting to watch. The recent "Peak Google" proclamations remind me of Facebook's post-IPO narrative in 2012. Conventional wisdom back then was that Facebook's decline was imminent as mobile was not a meaningful part of their revenue. Of course, Facebook's app install ads and other mobile initiatives disproved that narrative in short order.
Some observers even make it seem as though Google's growth has seen a major slowdown in 2014. Interestingly, both Google's revenue and operating profit growth accelerated in 2014. This isn't to say that mobile does not pose a challenge to Google. It does, but it is important to understand exactly what those challenges are and the way forward. By looking at Google's financial reports, their biggest challenge is a decline in operating margins. This has been triggered by increase in search advertising on mobile, which delivers lower CPCs. While consumers used search on PCs for more involved research on products/services, the interaction window for mobile search is shorter. Lower ad engagement led to fewer bids on keywords and consequently, lower CPCs and margins.
A few months ago, I wrote a post comparing the early sales of smartwatches to those of tablets and modern smartphones (early iPhone and Android models). As I expected, the numbers didn't bode well for smartwatches. Now that we have another year's worth of data to play with (from Canalys this time), we have an opportunity to test the validity of my previous analysis.
The chart above plots smartwatch shipments against smartphone and tablet shipments for two years after the point when each category was meaningfully conceived. Data on smartwatch shipments has been combined from multiple sources including Canalys, Strategy Analytics and ABI Research. Now compare this updated chart with my previous observations.
Microsoft made some long expected announcements today -- the return of the start menu, one version of Windows 10 across all devices and an attempt to make Windows apps work across those same devices. Unfortunately, the limited overlap between Windows PC developers and mobile developers makes the latter a weak proposition. On the other hand, Microsoft's HoloLens headset may have some potential.
I have long been a believer in the long-term potential of "field of vision" devices (AR and VR) for one simple reason -- despite their downsides, their potential benefits cannot be matched by existing computing platforms. In my opinion, this is a necessary (but not sufficient) condition for triggering a new market disruption. While we are still in the early stages of the technology (think first mobile phone, not first smartphone), I believe we could see increasing consumer interest in this category over the next five years.
Benedict Evans recently wrote an insightful piece exploring new questions for the mobile industry. Among the five questions he brought up, I believe that the evolution of interaction models and messaging will end up being the most important.
I don't have anything to add there as think Benedict's analysis here was excellent. However, I do think that three of his questions could benefit from deeper analysis. I also think that he may have missed a crucial question brought on by the scale of the mobile industry.
Yesterday, Apple announced a minor refresh to their iPad portfolio, with improvements mostly focused on Touch ID and a thinner footprint. In many ways, this did feel like this was a "placeholder" upgrade. The new iPads would certainly appeal to loyalists, but they don't seem to target the primary reasons behind the recent slowdown.
The slowdown in iPad sales (or high-end tablet sales, in general) was caused by three factors -- 1) Increasing overlap in use cases of large screen smartphones (or phablets) and tablets, 2) Inability to move downmarket, despite lower iPad Mini prices, because of competitive reasons highlighted in the chart above, and 3) Limited upmarket mobility because of a lack of developer focus around productivity.
This week, Microsoft unveiled a long-awaited update to its operating system -- officially dubbed, Windows 10. Microsoft says that Windows 10 is an attempt to create a single operating system that works across phones, tablets and PCs, without the compromises that were visible in Windows 8. This is certainly a much needed update that should help them retain their core customer base, but it also doesn't do much to cover up their biggest weaknesses.
First, let's point out the obvious. Microsoft's decision to skip a version number is curious. While Microsoft claims it was because Windows 10 was a "leap" forward, it is clearly an attempt to clear away the hostility faced by Windows 8, especially among enterprise users -- Microsoft's most important customers.
With the arrival of the iPhone 6 (and 6 Plus), this may be a good time to review smartphone market share and usage share trends around the world. As these data points reflect the tail end of the iPhone's product cycle, we should expect a market share bounce over the coming months. On the other hand, movements in usage share are unlikely to be as sharp.
This is a topic I've briefly discussed on Twitter and then again on Bernard Leong's podcast, but I think it deserves a deeper look. Many are excited about the potential of Uber integrating with self-driving cars. But in my opinion, self-driving cars could be disruptive to Uber's current business model. Let's take a look at a few facets of Uber's business model and gauge the potential impact of Google's self-driving cars.
As I've mentioned previously, Uber is a platform that connects transportation providers (or drivers) with potential customers. Self-driving cars completely remove drivers from this equation and could force Uber to own and manage their own fleet. With their current model, Uber operates with "zero capex" and their marginal cost for adding supply is effectively zero. But by owning self-driving cars, this marginal cost becomes a meaningful amount, i.e. the cost of each vehicle. With this revised cost structure, the value of Uber's business model changes completely.
Snapchat's valuation has soared from about $2 billion last year, when it reportedly declined an acquisition offer from Facebook, to $10 billion in its latest round of funding. Let's compare Snapchat's valuation and engagement metrics to those of other social networks/apps and attempt to understand the rationale behind this valuation.
While Snapchat is still a pre-revenue company, they are preparing to roll out their first monetization attempt this November. The service, called Snapchat Discovery, will allow users to view publications or video clips from advertisers. At this point, Snapchat may successfully monetize their user base before Whatsapp does. Of course, there are various monetization models available to both, that have already been validated by Asian messaging apps.
According to a report from Endeavour Partners, "more than half of U.S. consumers who have owned a modern activity tracker no longer use it and a third stopped using the device within six months of receiving it". This trend is symptomatic of a larger problem -- the job that a wearable device does is still unclear to most consumers. This is the crux of the problem I see with wearables, as they exist today.
Maybe we can look to the original wearable device, the watch, for some insight. The watch became popular with consumers because it met a ubiquitous need. The job of the watch was to give instant access to information (time), which users could then put in context (answer to the question "so what?") with their schedule, travel, etc. Consider this example:
I've gone back and forth on the prospects for Amazon's smartphone, and yesterday's launch of the Fire Phone hasn't really helped me make up my mind. Apart from the heavily rumored 3D interface, most of what Amazon announced was a surprise to me. It's difficult to ignore the fact that Amazon holds some distinct advantages, but there are also certain areas where they seem to be fighting an uphill battle.
Amazon's Challenges: Pricing and Dynamic Perspective
This week, Microsoft unveiled the Surface Pro 3 with a larger, 12 inch display and surprised some by holding off on a "Surface Mini". While Microsoft continued to harp on their "best of both worlds" mantra, it was very clear that this device was focused on productivity use cases and enterprise users. Does this signal a new era in tablet computing or is this simply a niche product?
I recently downgraded my tablet sales estimate because tablets haven't encroached upon productivity use cases as quickly as "phablets" have encroached on consumption use cases. So wouldn't the Surface Pro 3 fit with my definition of upmarket movement? Not quite. The challenge for tablets is to move upmarket into productivity use cases without compromising on their advantages over PCs -- 1) ease of use, and 2) lower price points. With the Windows 8 operating system and a price tag starting at $930 (incl. the keyboard cover), the Surface Pro 3 misses on both points.
This weekend, I came across an interesting post by Benedict Evans on "unfair but relevant" comparisons. While I agreed with everything he said, his focus was entirely on the hardware side of the equation. It may be just as relevant to compare today's hot mobile services to online service start-ups from the PC era.
The chart above compares the growth of Facebook's user base, since inception, to that of KakaoTalk and LINE. One disadvantage here is that we can only compare registered users for messaging apps to active users for Facebook. According to one estimate, 61 percent of LINE's registered users are active. If this proves roughly accurate for major messaging apps, KakaoTalk and LINE would still overshadow Facebook's user growth by a considerable margin. This is because PC-era start-ups like Facebook and Google operated in a much smaller playground as compared to today's mobile start-ups. But the "scale of mobile" has already been beaten to death. Does that necessarily mean that these companies also make more money?