Archive for the ‘Business models’ Category
“Unlocked” iPhones Are Still Tied to Carriers and Future SIM-Less iPhones Will Be Too
If you buy an unlocked iPhone you’ll see why “SIM-free” won’t be like freedom, to misquote a famous Apple superbowl advert.
Unlike other manufacturer’s SIM-free phones, “unlocked” iPhones continue to behave differently based on the network SIM inserted — see the screenshots below. This sets a precedent for future iPhones that may dispense with any need for a physical SIM card.
An unlocked phone allows a consumer to use their phone with any operator. Such iPhones have long been on sale in many European and Asian countries and Apple US has just started selling unlocked and contract-free iPhones on the online US Apple store. As consumers pay the full unsubsidized price for these iPhones, buyers expect to have complete control over their devices. Network operators should have no say on how they’re used. But that’s not the whole truth.
Apple has just secured a patent that will allow them to ship an iPhone with no need for the for the tiny operator-provided smartcard known as a SIM. This is being widely reported as an attack on operators by threatening their customer relationship.
If operators are smart, this won’t be the outcome. Instead, end users will be the ones whose freedom is squeezed by such a future iPhone.
Why? Current “unlocked” iPhones show that Apple is prioritizing their carrier relationships over end users, even for those that buy iPhones at full price, with no operator subsidy or contract lock.
On these “unlocked” iPhones the network settings available to the phone’s owner depend on what operator SIM is placed into the phone. Read the rest of this entry »
Apple’s iMessage Cannibalizes SMS But is No Threat to Operators
A major part of Apple’s new iOS software update is iMessage, which replaces the iPhone’s standard SMS app. The iOS5 software is compatible with approximately 200m of the 250m total iOS devices sold, including both the older iPhone 3GS and iPhone 4 models, as well as the iPod Touch and iPad. It’s also installed on all new devices including the iPhone 4S. As of today, over 25 million devices now have iMessage installed and Apple sold 4m iPhone 4S handsets on its first weekend on sale.
The way iMessage works is extremely interesting. In so doing, iMessage cannibalizes carriers’ SMS and MMS services:
- Any messages sent from an iPhone to another iPhone with iMessage installed are automatically sent by iMessage over the Internet rather than via SMS. This bypasses carrier text messaging (SMS) charges but requires a working data tariff.
- Similarly, any photos or videos sent over iMessage bypass costly operator MMS systems. There’s even an iMessage preference option for users to switch off MMS so they do not inadvertently incur MMS charges when they’re intending to send for free via iMessage.
- Messages can be sent to or from iOS devices that lack SMS capability, such as the iPad and iPod Touch.
- Users can address messages to an email address rather than a phone number. This is essential to send messages to an iPad or iPod Touch. New iMessages sent to a phone number only appear on an iPhone. Any messages addressed to an email address are sync’ed to all iOS devices tied to that Apple ID.
- Users can change their iMessage “Caller ID” to be their email address so that any replies go to all of their devices. This is very similar to the way Apple’s video chat service, FaceTime, setup works. Additionally, users can attach multiple email addresses so that iMessage will receive messages sent to any of a selection of email addresses.
- By default, iMessage does not report whether a message has been read but there’s an option to set this to “on”. There’s also an optional ‘Subject’ field that starts out “off”.
iMessage is clearly Apple’s take on BlackBerry Messenger (BBM), small messaging players such as Whatsapp or eBuddy, and Internet instant messaging systems such as Microsoft Live Messenger or AIM. But iMessage does not the deliver the precise same mix of product benefits as any of those alternatives.
Apple has a number of differentiated twists on their execution that guarantee iMessage will be a success:
Apple’s iCloud Enables A Post-PC World That Will Boost iPad & iPhone Sales
With the launch of the 2011 iPhone models, Apple will also launch iCloud, a new online services play that replaces MobileMe. This is a part of the iOS5 software that will be available for free to existing iOS devices and will ship as standard on new iPhones, iPads and iPod Touch’s.
This is a core part of Apple’s near term strategy to drive greater device sales — iPhone, iPad, iPod Touch and Mac — as Apple builds a post-PC world. Over the long haul iCloud will also help Apple’s content and services revenues but that won’t be its most important initial impact.
Apple still makes the vast bulk of its revenues from hardware sales despite having by far the most successful app store, music download store and various other services initiatives. Example: In the first three years after the launch of the Apple App Store Apple generated $1.1bn in revenue from iOS apps (1). But this figure is dwarfed by their iOS device revenues of over $100bn in the same period (2). Apple has great margins on those hardware revenues too.
Because of that hardware model, Apple has enormous incentives to create new product features to drive device sales, even if that means offering those new features or services for free. Apple can be disruptive with “free” offerings too. The “contagion of free” business models are not just the preserve of Google and Valley-based VC-funded startups.
This is the cloud the way it should be: automatic and effortless. iCloud is seamlessly integrated into your apps, so you can access your content on all your devices. And it’s free with iOS 5. — Apple marketing, October, 2011
Those devices sales give Apple a massive incentive to package its cloud services for free. In so doing, Apple undermines those that have cloud-based services as their core business. This includes Google. Although Google charges for few cloud services — the main exception being Google Apps for businesses — it still generates direct advertising revenues across all of its cloud services such as Gmail. So, if people choose to use Apple’s services instead of Google it still hurts Google’s bottom line.
iCloud supports Apple’s desire to sell more devices by helping two overlapping groups of consumers:
Apple’s Metrics Demonstrate the Need for Strategy, not Tactics, to Counter the iPhone
Next week Apple will announce new iPhones. There will be a backlash. There will be praise. Much of significance will be lost in the noise.
Instead, Apple’s metrics should focus rivals’ attention on the importance of multi-year strategies.
Competitors are forever seeking to emulate Apple. But too many deploy me-too tactics, rather than following a consistent and sustained long term strategy:
- HP fired its CEO under a year after appointment. There’s only time to kill things, not build them, in such a short period.
- Nokia dithered on MeeGo. In 2009, Nokia partnered with Intel on MeeGo, then killed MeeGo just a year later, to focus on Microsoft Windows Phone instead.
- Samsung’s Galaxy S of 2010 resembles the Apple’s old iPhone 3GS of 2009, not the designed-from-scratch iPhone 4 that the S actually competed against at the time the S arrived in the market.
Part of the problem is that Apple keeps its strategy to itself: New products seem to appear out of Apple’s magic hat fully-formed at high profile launch events as if they’ve been born an adult, with no incubation or nurturing period. There are rarely betas or pre-announcements months ahead of availability, unlike the perpetually beta services of others. But we know Apple takes years to create these products. The iPad’s origins pre-date the iPhone and go back to around 2004 — six years before it launched — while serious development began in 2007, again years before competitors had anything publicly available that they could copy.
By mistaking tactics for strategy Apple’s many competitors are doomed to poor results. The time needed to build products as deeply and well designed as Apple’s can’t be completed overnight. Software design takes years to do. The supplier relationships that Apple is securing are long term. The investment that Apple is placing in key component design — moving into chip design with the A4 and A5 — is not something that any company could achieve without clear multi-year strategy.
Despite the Android evangelists and Apple naysayers, Apple’s metrics are nothing short of outstanding:
Kindle Fire Will Spontaneously Combust Traditional Media Business Models
I speculated ahead of Amazon’s launch that the Kindle tablet should be called the Kindle 451, from the Bradbury book where the temperature of 451F is that which causes book paper to spontaneously ignite. I was wrong. Kindle Fire is the better name as the Fire will burn so varied a selection of physical media that no single named temperature could describe its impact.
This is the first true media tablet, as I predicted it would be. With the Kindle Fire, Amazon is making a play for movies, TV, music, magazines, apps, games as well as books.
The Kindle Fire is the first tablet that has its whole design optimized for content consumption. There’s no extraneous features. No camera. No aspirations to replace a notebook PC.
While Apple, Google and Microsoft aim to build tablets and smartphones that drive a post-PC world, Amazon is taking ownership of digital media. And, as digital media will become all media, by implication Amazon is now becoming the leading player in media as a whole. It’s impossible to assess the prospects for the Kindle devices without also assessing the potential for the total digital media market.
Yet despite the Kindle Fire’s impressive hardware the price is extremely aggressive at just $199, a fraction of the price of Apple’s iPad. Until the component breakdowns have been completed we can’t be sure… and I’m writing this minutes after the end of the launch event… But I strongly suspect that Amazon has only achieved that price due to its expectation of strong sales for Amazon’s content services, ie an effective content subsidy again as I predicted would happen.
Amazon’s Kindle Tablet Will Be The First True Media Tablet
[Updated after the Kindle Fire launch event: I've noted what happened in italics. I've not made any other edits.]
Tomorrow Amazon holds a major launch event and will likely unveil its first tablet, according to Techcrunch named the Kindle Fire.
To date, everyone bar Apple has failed with tablet launches. If Amazon mimics Apple then its tablet will fail too. Apple has too many economies of scale, industrial design expertise and supplier relationships for a retail-centric company like Amazon to emulate. Especially, if the Amazon tablet has taken a fast route to market by using the same ODM hardware manufacturer as RIM .
To succeed, Amazon must, and I’m sure will, take a different approach. The success of the Kindle shows Amazon is prepared to think differently from others and to disrupt its own products — in the Kindle’s case to disrupt the cash cow of print book sales — in order to be innovative and seize early advantage in digital markets. If Amazon’s hardware is undifferentiated and virtually the same as RIM’s PlayBook then Amazon has to differentiate elsewhere with content, experience and business models. Otherwise it will suffer the same fate as RIM’s PlayBook.
Amazon cares little about the post-PC world, unlike Apple and Microsoft who are playing that different game. Instead, Amazon is driven by a post disc and post print world where all media will be digital.
Amazon will build a true media tablet. The first true media tablet. The Kindle tablet will focus on the future of all media — TV, movies, music, books, magazines — to enable Amazon to become the dominant digital media retailer. That is Amazon’s ambition.
On that basis, here are the areas to watch for in Amazon’s tablet product launch and what impact each item will have on the market:
- The extent to which the Kindle tablet’s business model is content-subsidized. Few devices enjoy a lower up front price because of content subsidy. It’s hard to do. Games consoles are the obvious exception but even in that market history is awash with console failures. Nintendo’s 3DS is the most recent struggler. Outside of games almost all devices are priced without a content subsidy. Even Apple sees content revenues as icing rather than a key profit centre that would warrant a lower up front price for iPads or iPhones. Carriers too subsidise iPhones based on communication revenues, not media. Arguably, only Amazon’s own Kindle eReader has extended a content-led device sales model outside of the games market. If Amazon offers its tablet for a very low price, based on expectations of future content sales, then Amazon will successfully disrupt the market and enjoy very significant sales. If the price is tied to hardware costs, then the price will be less aggressive and Amazon’s tablet will compete at a similar price to rivals and consumers will judge it based on the overall product package.
Update post Fire launch event: Price is just $199 which given the component quality (IPS color screen; dual core processor; same broad hardware as the much more expensive PlayBook etc.) looks to have been set based on expectation of future Amazon content sales. Read the rest of this entry »
Multiple Personalities: The Impact of Windows 8 on Windows Phone Mango
This week the first significant feature update to Windows Phone 7 should roll out to users’ phones. Or perhaps it will be next week, Microsoft is being vague. Either way, this should be a reason for Microsoft to market the hell out of their innovative and worthy smartphones. Instead, the world is being distracted by Windows 8 and competitor activity, rather than the update variously called Mango or version 7.5. Microsoft is at risk of presenting multiple personalities to the world.
“We haven’t sold quite as many as I would have liked in the first year… I’m not saying I love where we are but I am very optimistic on where we can be. We’ve just got to kick this thing to the next level.” Steve Ballmer, Microsoft CEO, at Microsoft’s financial analyst meeting, September 14, 2011.
To date, Windows Phone hasn’t sold as well as Microsoft hoped and wanted. Microsoft really needs Mango to succeed or Windows Phone 7 may itself stagnate and eventually die, despite its highly differentiated social network integration, hubs, and Metro user interface (UI).
The use by Windows 8 of the same Metro interface pioneered on Windows Phone 7 should boost adoption of Microsoft’s smartphones. By confirming Microsoft backing for the Metro UI it should help app developers to create apps for both Windows 8 and Windows Phone. Having more quality apps should then boost Windows Phone sales. It’s the classic virtuous circle.
And Windows Phone really needs more apps, and more quality apps too: as of September 2011 there are just over 32,000 apps available compared with over 425,000 for Apple’s iOS; over 250,000 for Android; even the iPad has over 90,000 apps in Apple’s App Store.
This virtuous circle won’t happen unless Microsoft amends its strategy.
