The tough world of smartphones

Mar 302012
 
How do mobile phone users reduce costs

Dell’s announcement they are going to exit the Smartphone business – for the second or possibly even third time – comes on the same day Nielsen release a survey showing smartphones are now the bulk of US mobile phone purchases.

For Dell this shows the problem they have in being locked into the commodity PC business, what was once a lucrative business is now suffering softening margins and slowing sales. In desperation they are looking to other product lines but struggle to differentiate themselves in other markets.

The difficulties of doing this in the smartphone sector is shown in Nielsen’s analysis of what phones are selling.

Of those sold in the last three months, a whopping 43% were Apple products while 48% were Google Android devices.

Even more frightening in those Nielsen figures is Blackberry’s collapse where the Canadian product has 12% of the market but only 5% of sales in recent months. It’s little wonder Blackberry’s owner RIM is laying off senior managers.

For Microsoft, that only 4% of phones were “other” than Android, Apple or RIM show just how tough the task of selling Windows Phone is going to be, something that won’t be helped with dumb marketing stunts.

Google’s apparent success in mobile isn’t all that it seems either; while the Android platform has nearly half the smartphone market it doesn’t appear to be particularly profitable.

The Guardian’s Charles Arthur looked at a number of legal cases involving Google’s mobile patents and extrapolated the claimed damages to get an estimate of how much Google earns from Android.

Arthur estimates Android has earned Google $543 million dollars between 2008 and 2011 which, given Google’s mobile revenues last year were claimed to be $2.5 billion last year, indicates Google makes more money from Apple devices than it does from its own products.

While Arthur’s estimates are debatable, they show how Apple’s profits dominate the smartphone market. Google, like Dell in computers, are locked into the commodity, low margin end of the market.

Just as Dell have learned that entering new markets doesn’t guarantee success, Google may have to learn the same lesson.

To be fair to Google, at least management are aware of being too dependent upon one major source of revenue.

Whether mobile services built around the Android platform can provide an alternative cashflow of similar size to their web advertising services remains to be seen.

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Who will be the future Betamaxes?

Mar 162012
 
different technology standards like video cassettes cause problems

This morning Paypal announced its PayPal Here service, a gizmo that turns a smartphone into a credit card reader.

On reading PayPal’s media release in the pre-dawn, pre-coffee light I found myself grumpily muttering “which platforms?” as the announcement kept mentioning “smartphones” without saying whether it was for iPhone, Android or other devices.

It turns out to be both Google Android and Apple iOS. It adds an interesting twist to the Point Of Sale market we’ve looked at recently.

The omission of platforms like Windows Phone raises the question of which platforms are going to go the way of Betamax?

Sony’s Betamax and JVC’s VHS systems were the dominant competitors in the video tape market in the early 1980s. They were totally incompatible with each other and users had to make a choice if they wanted to join one camp or the other when they went to buy a video recorder.

On many measures Betamax was the better product but ultimately failed because VHS offered longer program times and Panasonic’s licensing out of their technology meant there were more cheaper models on the market.

A few days ago Bloomberg Businessweek listed the Betamax device as one of the “technology’s failed promises”

With a superficial comparison, Apple would seem to the Betamax while Google and possibly Microsoft are the VHS’s given their diverse range of manufacturers their systems run on and Apple’s refusal to license out iOS, which was one of the reasons for Sony’s failure.

But it isn’t that simple.

In the smartphone wars, it’s difficult to compare them to VCRs as the video tape companies never controlled content and advertising the way smartphone systems do – although Sony did buy Columbia Studios at the peak of the Japanese economic miracle in 1987.

This control of content is what makes the stakes so high in the smartphone and tablet operating systems war. A developer or business that dedicates their resources to one platform could find themselves stranded if that platform fails or changes their terms of services to the developer’s detriment.

Another assumption is there is only room for one or two smartphone systems; it could turn out the market is quite happy with two, three or a dozen different systems and incompatibilities can be overcome with standards like HTML5.

In a funny way, it could turn out to be Android becomes the Smartphone Betamax due to having too diverse a range of manufacturers.

One of the first questions that jumps out when someone announces a new Android app is “which version?” The range of Android versions on the market is confusing customers and not every app will run on each version.

More importantly for financial apps like PayPal Here and Google Wallet, smartphone updates include critical security patches so many of the older phones that miss out on updates pose a risk to the users.

In the financial world confidence is everything and if customers aren’t confident their money is safe or will be promptly refunded in the event of fraud they won’t use the service.

Whether this uncertainty will eventually deal Google out of the game or present an opportunity for Microsoft and other companies is going to be one of the big questions of the mobile payments market.

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The high stakes of Lumia

Feb 152012
 
Can the Lumia range save Nokia and Microsoft Windows Phone

Yesterday Nokia and Microsoft gave a preview of their upcoming Lumia 710 and 800 phones for the Australian market. It’s make or break time for both companies in the mobile space.

The phone itself is quite nice – Windows Phone 7.5 runs quite fast with some nice features such as integrated messaging and coupled with good hardware it’s a nice experience. Those I know who use Windows Phones are quite happy with them (I’m an iPhone user myself).

Whether its enough to displace the iPhone and the dozens of Android based handsets on a market where both Nokia and Microsoft have missed opportunities remains to be seen.

The battle is going to be on a number of fronts – at the telco level, in the retail stores and, most importantly, with the perceptions of customers.

Probably the biggest barrier with consumers is the perceived lack of apps, to overcome this Nokia have bundled in their Maps and Drive applications while Microsoft include their Mixed Radio streaming features along with Microsoft Office and XBox integration.

As well the built in services, both parties are playing up their application partners with services like Pizza Hut, Fox Sports and cab service GoCatch. Although all of these are available on the other platforms.

While application matter, the real battle for Nokia and Microsoft is going to be in the retail stores where the challenge shouldn’t be underestimated.

Apple dominate the upper end of the smart phone market and Android is swamping the mid to low end. How Windows Phone devices fit remains to be seen.

In Australia, if they going to find salvation it will be at the tender hands of the telco companies.

The iPhone is constant source of irritation for the telcos as not only do Apple grab most of the profit, but they also “own” the customer.

On the other hand, Android devices are irritating customers who are bewildered by the range of choices and frustrated by inconsistent updates that can leave them stranded with an outdated system.

So the Windows Phone does have an opportunity in the marketplace although one suspects commissions and rebates will be the big driver in getting sales people at the retail coal face to recommend the Microsoft and Nokia alternatives.

Overall though, it’s good to see a viable alternative on the market. For both Microsoft and Nokia the stakes are high with the Lumia range – it could be Nokia’s last shot – so they have plenty of incentives to get the product right.

Microsoft has consistently missed the boat on mobile computing since Windows CE was launched in 1996 while Nokia were blind-sided by the launch of the iPhone in 2007 and have never really recovered.

To make things worse for Nokia, the market for basic mobile phones where they still dominate is under threat from cheap Android based devices. So even the low margin, high volume market isn’t safe.

For both, the Lumia range is critical. 2012 is going to be an interesting year in mobile.

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The mobile payments revolution

Oct 072011
 
mobile payments through smartphones and other devices are changing business

Ten years ago when I was running a computer support business we spent a lot of time trying to find an mobile payment service for our on-site technicians to process payments.

At the time there were plenty of options but they were all expensive, asking 6% in merchant fees at a time when our bank merchant facility charged us 2.75% to accept Mastercard, Visa and Bankcard. Interestingly, the cut the mobile providers wanted to take which was the same commission as American Express and Diners Club.

We’d long before decided Diners and Amex were too expensive and it was easy to make the same decision about mobile payments. The technicians were given a manual card swipe to carry around and they phoned through authorisations. It was messy and time consuming but a lot cheaper than the then high tech alternatives.

Given that history, I was keen to get along to the Australian Information Industry Association’s “Mobile Payments – Cooperate, Collaborate, or Abdicate” breakfast panel held in Sydney last week to see what has changed in the mobile payments space.

The rise of smartphones – and the developing SoLoMo trend among consumers which brings together social, local and mobile technologies – should have meant the era of online payments should have arrived and it’s puzzling why it hasn’t happened.

It isn’t for a shortage of operators; one of the panel members, Oliver Weidlich of Sydney’s Mobile Experience mentioned a number of the services such as Square, developed by one of Twitter’s founders that are changing mobile payment overseas.

Interestingly it was the audience questions that gave the answers to why online payments haven’t taken off in Australia. The key question from the floor was “which authority handles disputes should a phone be lost or stolen”.

As a customer, one hopes it’s the bank that takes responsibility as the idea of a telco – particularly their mobile phone divisions with their attitude towards billing customers – having control over your credit card or bank account would make most consumers’ blood run cold.

The point was well made though as it saw the panel’s bank, telco and credit card representatives all ruminating over the question of ‘who owns the customer’.

Oddly, while they argue about whose property the customer is, all of them may lose out. While services like Square and built in payment features on social media and mobile apps such as Foursquare or Red Laser may take a slice of the market, there is a bigger competitor already making huge inroads.

The day before the AIIA event, Internet payment giant PayPal announced a series of deals with various group buying sites and online applications. Their press release pointed out PayPal’s mobile payments, or mCommerce as they call it, is growing at over 400% a year

While it might not be correct to say PayPal were the elephant in the room at the online payments breakfast, it isn’t unfair to say Big Ears was just outside scoffing the morning tea while the incumbents argued about who would have first dibs on clipping the tickets of both merchants and customers.

It’s too early to say the banks, or the telcos, have lost the market but players like PayPal, Google with their wallet service and possibly even Apple – should a Near Field Communication (NFC) equipped iPhone appear in the near future – are going to make the mobile payment sector far more interesting and competitive.

For businesses, we need to keep a close eye on the mobile payments market as it is promising to offer a lot more options in banking and transactions that what we’ve been used to in recent years. The days of 6% merchant fees are well and truly over.

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Choosing a mobile phone plan

Nov 142010
 

What’s your budget?

This is the most important point. What can you afford?

Be careful though as plans can be deceptive with a number of traps.

Understand your usage

Have a read of your bill and understand how you use your phone. Total up the number of calls you make and who make them to. Many providers allow you to download an electronic copy of your bill which you can then analyse your bill with.

If you do that, look at the total number of calls you make each month and the average time of those calls. You’ll find this is important as various plans have different billing periods and flagfall requirements.

Call rates

This is one of the trickiest areas to deal with on phone plans. Keep in mind each plan has unique tricks like minimum charges and flagfalls. So one provider offering 50c per 30 seconds call with a 35c connection fee may be cheaper for many of your calls than a provider offering 90c per 60 seconds with a 40c connection fee. This is why it’s important to check the average call costs.

Friends deals

Many providers have plans where calls between people on the same network are free, or you can nominate friends for a discount rate. If there’s a small group of friends you call a lot, it’s worthwhile looking to see if you can save money that way.

Don’t ignore data

In the age of the smartphone, data is now a major revenue generator for mobile phone companies. Have a close look at your data usage and keep in mind everytime you check your email, look up a bus timetable or find a restaurant you’ll be downloading data. This can add up and if you are going to be a regular user of online services you shouldn’t choose a plan with less than 1Gb download.

Coverage

It’s important to remember that the phone and the plan are pointless if you can’t get a signal. Check with the store before buying that your home and work can get a reliable connection. Also, if you’re going to be on the road a lot you’ll need to choose the provider who covers those areas well.

The best way of finding out is to ask your friends and colleagues how they find their connections. They’ll have the best feedback on which providers have the most reliable service.

Roaming

If you travel overseas you’ll find international charges can be a killer, so check carefully what you’re up for when you’re travelling.

Locked phones

When entering a plan, you may find the “free” handset included is locked to the network you’ve signed up to. If you want to “unlock” it, there’s usually a fee of several hundred dollars to release your phone from captivity.

Watch your bills

The danger period when entering a new plan is the first few bills. This is when any hidden traps can bite you. Check those first couple of bills carefully to make sure there are no surprises.

If you find any bill shocks, take a deep breath and call your provider. Should it turn out the plan doesn’t cover something, the phone companies will usually move you to the next plan up that will keep you within your budget.

Mobile phone plans

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Riding the hype cycle

Dec 152009
 
sine_wave_cycles

Despite the Google Phone only existing in a couple of photographs, the device is making headlines as the new “iPhone killer” and there’s no doubt early adopters are asking “should I wait for this new phone?”

It’s a tough life on the bleeding edge – the life of an early technology adopter features long days breathlessly waiting for the next hyped up product with short periods of extreme disappointment when the latest uber toy fails to live up to the marketing promise.

To explain how hype works in the tech sector, the consultants at Gartner invented the Hype Cycle.  The cycle explains how a typical product is released in a wave of publicity that drives it to the “peak of inflated expectations”.

Eventually the bubble pops and the widget plunges into the “trough of disillusionment” where users either abandon it or suffer the taunts of their friends and workmates.

Over time, those persistent fans find what the widget does well and it begins to crawl up the “slope of enlightenment” as the believers convince others the product really is good for something.

When enough people accept the widget as the best tool for a certain job it settles on the “plateau of productivity” where it happily sits until a better mousetrap comes along.

In reality some widgets move faster than others and not all make it over the peaks and plateaus. A look at the 2009 cycle shows some products that have taken a decade to approach the peak of inflated expectations while others have simply been abandoned by their makers or the market before they’ve completed the journey.

For business owners, most focus on the tools that have reached the plateau of acceptance. This is partly because wasting time on a new device that doesn’t do what it’s supposed to squanders an entrepreneur’s scarcest asset.

The other main reason for avoiding hyped products is they carry risk and most business owners have enough risk in their lives to satisfy even the most adventurous tech warrior.

None of that means we shouldn’t be looking at new gadgets and ideas – the world is moving fast and those who don’t adopt new technologies and concepts will be left behind. But just be a bit careful of the hype and unrealistic expectations of what the latest new thing can do for you.

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Bundled netbooks rise again

Oct 302008
 

The Wall Street Journal’s reporting HP are considering bundling netbooks with 3G phone plans. 

This is a good idea and following the mobile phone business model makes sense, particularly given netbooks are cheaper than most smartphones and 3G data plans are more expensive than most standard talk plans.

However it has been tried before in Australia by both Telstra and Optus and both plans have sunk like a stone. Probably because the marketing was poor, the dealer commissions non-existant and the plans didn’t offer real value.

If HP are going to make this work they will need to partner with a number of telcos in each market and make sure there is enough margin in the product for dealer commissions while offering a good value product to the customer.

I think it’s doable but the product needs to be bundled properly with the 3G plan and services.

I suspect we may see these products start to be marketed as dealers start to look for alternatives to their traditional mobile phone revenues as spending falls.

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