Quick Thoughts – Apple’s different audiences

I’ve already written three posts about Apple’s announcements from last week, but there was one topic I had intended to squeeze into one of the others but which never actually made it in. So here it is, in brief.

I originally planned to title this post “Who Apple keynotes are for” as an echo of my piece on what the Apple Watch is for, but in the last couple of days we’ve seen more news that turns this into a broader theme. Specifically, Apple launched a new section on its site about privacy, with a letter from Tim Cook to Apple customers about how Apple treats their data, and more broadly Apple’s attitude towards data collection. On top of all the discussion about the keynote last week, this has got me thinking about the different audiences Apple addresses in different ways with different communications:

  • Launch events: these are watched by at least three separate audiences: the press, the Apple faithful and gadget lovers more broadly. Apple has different objectives for each of these three groups.
  • Website communications, such as the privacy letter: the letter is linked to from the front page of Apple.com, but only down in the bottom right corner, where many users visiting the site to learn about or order a new iPhone won’t even notice it. Those visiting the Apple site are going to be people with some interest in Apple products, many of them already customers.
  • Advertising: this is the only Apple communication that really gets broad play among the population as a whole, including those with no existing interest in Apple. TV ads, billboards, bus shelter posters and the like all generate broader awareness of and interest in Apple products, and its TV ads are particularly crucial.

Of those three sets of communications, only the third is mass-market in nature. Apple doesn’t typically say how many people watch its keynotes, but I would guess it’s 10 million or fewer in most cases. Even if it was double that, it’s a tiny fraction of its customer base (which numbers in the hundreds of millions) let alone the total addressable market. Website communications are likely read by far fewer people, though they also get some pickup in the press, as Tim Cook’s letter has this week. But advertising is where Apple not only talks to the total addressable market, but also where it provides specific triggers to buy, rather than just generating interest. Launch events are held before products are even on sale, and in the case of the original iPhone, iPad and Watch events, well before customers could even place a pre-order. Website communications like the privacy letter are about educating both existing customers and potential switchers, but again aren’t a call to action. Only advertising is a call to action: a specific invitation to buy an Apple product.

As such, the nature of these communications will be different. Just as the emphasis, tone and content of the iPhone introduction event was different from those of the ads that followed when the product went on sale, so I would expect the Apple Watch commercials to be very different in their tone and focus from the launch event. The launch event was about seeding interest and intrigue (with a significant element of mystery, especially around pricing), while the commercials will be far more specific, focused and with a specific aim in mind: getting people to buy one.

Techpinions post: Google and Microsoft’s platform problems

My post on Techpinions today is about Google and Microsoft’s platform challenges, which appear very different on the face of it, but actually have a lot in common. Microsoft increasingly wants its third-party services to succeed on platforms owned by (arguably) its two main competitors, Google and Apple. While Google is struggling to compete on a platform it theoretically owns (Android), which has been increasingly co-opted by both official Android licensees and users of the AOSP version of Android such as Chinese OEMs and Amazon. Microsoft’s challenges are particularly stark, and stem in part from the business models it and its competitors employ for key services:

Microsoft competing against freeHead over to Techpinions to read the full post.


Motorola’s lessons for Samsung

I’ve been testing three of Motorola’s new devices for the last several days: the new Moto X and Moto G smartphones, and the Moto 360 smartwatch. I don’t do traditional reviews – there are plenty of sites out there that do those well – but I thought I’d share some of my thoughts about these devices, briefly, but also about what they can teach us more broadly, and tech Samsung specifically.

Moto X

Last year’s version of the Moto X was already a very good device in a number of ways, and this year’s version fixes several problems: the price/performance ratio feels a lot better, the materials and build make for a more premium experience, and the camera is a lot more competitive. I’ve been using the Moto X as my main phone for the last few days, and I’ve really enjoyed it. The camera still isn’t as good as the iPhone camera, or arguably the Galaxy S5 camera, especially in low light. And the digital shutter mechanism still frustrates me by taking pictures when I’m trying to change the focus point. But it’s an awful lot better, and I’ve taken some nice pictures with it, including this one:

IMG_20140914_162715In short, the Moto X is much better on the things it was bad at. But it’s also got even better at the things its predecessor was good at – namely the little software customizations that added significantly to the stock Android experience without taking it over, adding huge numbers of visual customizations and tweaks, or overloading the device with gimmicks and widgets. What Motorola has done really well in these devices is creating in its software elements that significantly add value to Android without feeling like they’re trying to replace it. They’re done in such a way that they feel like they are – or should be – part of the core OS, both visually and in terms of their functionality and integration into the OS itself. Unless you’ve used stock Android, it would be hard to see where Android itself ends and Motorola’s enhancements to it begin.

In many respects, this is just the sort of thing Samsung should have been working on over the last few years, to set its handsets apart against the flood of other Android phones. Instead, it’s focused on gimmicks – features that are eye-catching and make for good demos, but that don’t really make life easier or improve upon the core Android experience. If Google were keeping Motorola, I would say these features should slowly work their way back into the core Android experience as Motorola invents new ones. Under Lenovo, I wonder to what extent these innovations will continue and to what extent Lenovo will embrace them at a corporate level and build them into its other devices too. If it’s smart, it will realize what it’s getting here and fully embrace it.  Continue reading

What the Apple Watch is for

This is my third post on Apple’s announcements last week – my first, on the new iPhones, is here, and my second, on how the Apple Watch might change the smartwatch market, is here (on Techpinions). I had planned to do my next Apple post on Apple Pay, to complete the triumvirate, but my thoughts on that are still percolating, and in the meantime I’ve done more thinking about the Watch, and specifically what it’s for. Benedict Evans and Ben Thompson have both addressed this point, and yet my feelings are somewhat different, and I wanted to share them here. You should absolutely read both of their posts too (Ben T’s are elaborated on in a podcast as well), as they have lots of great insights.

Apple has defined new products in relation to existing ones

Apple has an interesting history of introducing new products, right back to the original Apple computers. I think it makes most sense to think about this visually, and as such I’ve created the video below to illustrate it, but by way of introduction. By way of context, Apple has essentially always introduced new products in one of the following ways:

  • They do the same things as an old product, but in a new form factor (laptops)
  • They replace existing devices in the category (iPods)
  • They combine existing categories (iPhone)
  • They sit in-between existing categories (iPad).

(There is a YouTube video below – if you’re reading this in an RSS reader or your email, it may not show up.)

Continue reading

Microsoft and Mojang: where’s the strategic rationale?

Microsoft finally announced today its intention to acquire Mojang, the maker of the Minecraft game, after days of rumors. Throughout the last few days, I’ve been wondering why Microsoft would want to buy Mojang, and now that the news is official, and we have commentary from Microsoft, I’m none the wiser. This is a somewhat baffling acquisition, unless it’s been made purely as a financial investment, and there are much better uses for that money in building Microsoft’s business and ecosystem.

One-hit wonders abound, but Minecraft is different

There are lots of one-hit wonders in the mobile gaming market in particular – King, Zynga, Supercell and others have had one huge hit and have thereafter struggled mightily to repeat the success of that one game with subsequent releases. Mojang is also a one-hit wonder, but Minecraft is very different from FarmVille, Clash of Clans or Candy Crush Saga, in several ways:

  • It’s not just a mobile game, though it’s one of the highest-grossing in that category. It’s also available on PCs and consoles
  • It’s not a flash in the pan like some of those other games – Minecraft appears to have real longevity, having launched in 2009 and showing little sign of slowing down yet
  • It has a totally different monetization model from those other games, booking essentially all its revenue from a customer up front with a high-ticket one-off purchase, rather than in-app purchases or advertising
  • Its customer base likely skews significantly younger than most popular mobile games (and perhaps games in general), in that it is very popular among kids of all ages as well as adults
  • Minecraft is to a far greater extent than other games an ecosystem rather than just a game, with hundreds of books and digital material helping players to learn how to use it effectively.

So, this acquisition isn’t the same as buying one of those big mobile game makers – Microsoft clearly isn’t buying into a one-hit wonder and hoping to replicate its success. And it’s a good thing, too, since the founders are all moving on with the acquisition. But what is Microsoft after?

Bringing content in-house has rarely worked out well

There’s a long history of platform owners bringing certain content in-house, for a variety of reasons:

  • Generating exclusivity around the content for the owned platform, which is in fact what Microsoft did with the Halo franchise. That’s clearly not the intention here, however.
  • Bringing content to an owned platform the current owner won’t bring it to. For example, bringing Minecraft to Windows Phone. However, this is an enormously expensive way to achieve that objective, and Microsoft could easily have covered the costs of porting and maintaining Minecraft on Windows Phone for far less.
  • Wanting to capture more of the revenue opportunity associated with popular content, rather than splitting or even handing over all the revenue to the content owner.

None of these really make a great deal of sense in the context of the Mojang acquisition, except possibly the last one. But that’s hardly a strategic rationale – rather, a simple financial transaction. Perhaps Microsoft heard that Minecraft might be for sale, and didn’t want it to end up in the hands of major competitors who might withhold it from the PC or Xbox platforms. But that seems a little far-fetched, and none of the other reasons really make a lot of sense. Continue reading

Techpinions post: Apple Watch impact on smartwatch market

This week’s Techpinions post is a follow-up to my post from a few weeks ago about market prospects for smartwatches, off the back of my smartwatches report. I revisit my conclusions both from that report and from the previous post in light of Apple’s forthcoming Watch. As you may recall, I’ve been extremely bearish about the smartwatch market absent some major catalyst, and Apple’s entry into the market always had the potential to be that catalyst.

The concluding paragraph from the piece is below:

For all these reasons, the Apple Watch will be just the kind of catalyst I talked about in the conclusion to my report. It won’t drive majority adoption of smartwatches any time soon, but it promises to fix several of the key demand- and supply-side barriers to smartwatch adoption, and will be a huge hit for Apple. At the same time, it will provide a boost to other vendors, who will have to compete largely around the Android opportunity and the lower end of the market. Exactly how big the boost to the market will be is hard to estimate until we know more about the watch as we approach its release. But we could easily go from single digit millions of shipments per year to tens of millions in the wake of its launch.

You can read the whole piece, including the reasoning behind that conclusion, here.

Apple closes another window for competitors

This is the first of what will likely be several pieces from me over the course of this week on Apple’s big announcements, both here and in my weekly Techpinions column. This one focuses on the iPhone specifically.

Apple has always provided windows of opportunity for competitors

In the in-depth Apple profile I wrote for clients a couple of months ago, I said the following:

Apple competes very effectively in the market segments it targets, but deliberately limits the segments of the markets it competes in.

As a corollary to that, one of my first recommendations to Apple’s competitors was:

Play where Apple isn’t. The easiest approach to take is to play where Apple chooses not to. Early in this report, we discuss Apple’s focused approach and the ways in which it limits its own addressable market through its focus on premium devices, a small number of devices, and a relatively controlled approach to customization. Competitors should play up their differences and focus on those markets where Apple doesn’t play, or doesn’t play effectively. Very few companies can go up against Apple in its target markets and win.

What’s been fascinating about Apple’s history with the iPhone is the ways in which it has deliberately held back features or functionality in either hardware or software which competitors offer. In the process, it’s provided a series of windows of opportunity for competitors to differentiate on that basis, and to hammer Apple for it in their advertising. The chart below shows a number of these features and the windows of opportunity Apple has allowed competitors to offer them without competition. In each case, the starting point is when major competitors began to offer the feature, and the ending point is when Apple began offering it, either in iPhone hardware or in iOS. (To be sure, some of these were far more useful and meaningful differentiators than others).Apple windows of opportunityIn some cases, the window has been very small, lasting just a year or so. Such was the case with the initial iPhone’s lack of 3G, push email and third party apps. But other windows have lasted much longer, such as the absence of widgets. But in all these cases, Apple has been content to allow competitors free rein in these areas while it either didn’t consider the feature important or wanted to wait until it could get it right. Continue reading

Quick thoughts: on Microsoft’s IFA announcements

Half the tech world is making announcements this week at the IFA trade show in Germany. A couple of other companies are making announcements elsewhere (Motorola today/tomorrow in Chicago, Apple next week in Cupertino). Samsung, Sony and other companies’ IFA announcements have received plenty of coverage, but Microsoft’s have flown somewhat under the radar, at least in part because there was no new flagship device. And yet I think there’s more significance in Microsoft’s IFA announcements than people realize. Here’s why.

Reconciling “devices and services”: a third way

There’s been significant discussion about how to reconcile Microsoft’s continued focus on both cross-platform services and making its own devices (this is a topic I’ve previously tackled here). The question has been: does Microsoft distinguish its services on the basis that they work just as well on any device, or its devices on the basis that its services work best on them? This week’s announcements suggest a third possibility: Microsoft will distinguish its own devices through commercial bundling of its services at attractive terms in a way others can’t match. For example, bundling in three months of Skype international calling with one of its new phones. We’ll see more of this sort of thing going forward both with Lumia smartphones and Surface tablets. Incorporating Nokia into Microsoft made this sort of thing much easier, and it will fully take advantage of that.

Smartphone positioning beyond low end remains challenging

Microsoft was smart to sit out this round of flagship phone announcements – Nokia’s flagships haven’t sold well anyway, but going head to head against new entrants from Samsung, Sony, Motorola, Apple and others seems particularly foolhardy. But Microsoft’s big challenge is that it’s been unable to establish a solid set of differentiators in the mid and high end, even as its “cheap, but still good” strategy makes big inroads at the low end. Its 500-series devices are its top sellers in almost all its major markets, and that’s useful for scale purposes, but it doesn’t help at the high end (and in fact may hurt if the Lumia brand gets a reputation for being a budget marque).

Branding strategy is confused but should be reconciled soon

The IFA announcements also highlight some brand confusion caused by the co-existence of the Nokia and Microsoft marques on the devices announced. The two smartphones are dubbed Nokia Lumia, while the accessories are the Nokia Wireless Charging Plate and the Microsoft Screen Sharing solution. The Nokia brand is supposed to go away soon except for low-end phones (since it belongs to the rump of the Nokia corporation), but that hasn’t happened yet. And yet Nokia needs to do more than just replace the Lumia brand – it ideally needs to reconcile its various hardware brands, at the very least Surface and Lumia.

Microsoft Screen Sharing has promise but not just yet

The Microsoft Screen Sharing device flew almost completely below the radar, but has in fact been heavily trailed for months. It’s a Chromecast equivalent, but at an Fire TV / Roku price point, and that’s its first big problem. But it’s symbolic in that it’s Microsoft’s first foray into the living room for non-gamers. The second big problem is that Microsoft has done very little to promote the Miracast support in its devices until this point, mostly because it hasn’t had a companion device to sell. But now that it does, the challenge will be educating existing device owners that their devices are compatible. Microsoft Screen Sharing may become a Google Cast / AirPlay equivalent brand which we’ll see show up in more places now, and I think Microsoft should absolutely play that up. But it should also cut that price significantly and/or enable carriers to bundle it for free with Lumia devices.

I’ll be publishing more on Windows Phone in the coming weeks as I have an in-depth report on the state of the platform coming shortly, though I may follow Microsoft’s lead in waiting until after the IFA / Apple hubbub dies down…

Techpinions post: Five thoughts on privacy and security

My post today on Techpinions is on privacy and security, and was sparked by what’s been widely called the “iCloud hack” since the news broke at the weekend. Since we know little about the mechanics of the hack so far, I’ve held off commenting on the specifics, but instead shared five more general thoughts on privacy and security:

  • If Apple really is at fault, it needs to remedy the situation fast
  • The impact to Apple will be very limited
  • Privacy attacks are very targeted
  • The difference between careless and deliberate privacy invasions
  • Users are always the weak point in security.

Feel free to head over there to read the piece in full, and as always feel free to join the comments section – it’s always a good place for vibrant discussions on the issues.

Quick Thoughts: on iPhone sizes

Now that it’s official that Apple will be holding an event on September 9th, speculation has turned once again to exactly what size the various iPhones Apple might launch will be. Much of the debate so far has focused on whether there will be one or two new sizes: 4.7 inches seems to be a universal certainty, but there’s some debate over whether or not we’ll see a 5.5-inch phablet-style iPhone. My Techpinions colleague Ben Bajarin has a great, skeptical, take on the prospects for such a device.

I’m not quite as skeptical as Ben, but I’m also not totally gung-ho about the phablet category. It’s particularly dangerous to extrapolate demand for iPhones at different screen sizes from Android purchasing behavior, for two main reasons:

  • iPhone and Android users behave very differently, in a whole variety of ways: Android users spend less on devices and apps, spend less time in apps, download fewer apps, are more likely to live in emerging markets and in Asia, and so on and so forth. They’re simply very different user bases, and there’s no particular reason to believe they’ll behave the same way when it comes to screen sizes when their behavior is so different in every other way.
  • Secondly, and perhaps more importantly, it’s very easy to reverse cause and effect with screen sizes in the Android world. Many people seem to assume that, because most premium Android devices are larger than 4.5 inches, that must be what people want. But the reality is that it’s almost impossible to buy a premium Android device with a screen smaller than 4.5 inches. So, the question becomes, are premium Android devices only made in sizes above 4.5 inches because that’s all anyone wants, or is that all anyone wants because that’s all that Android OEMs make? I’d argue that Android device makers have very deliberately targeted the larger size as a way to set themselves apart from the iPhone, but that doesn’t necessarily mean it was demand-driven.

For these reasons, I’m skeptical that we’ll see the same share of sales by screen size with the iPhone as we’ve seen with Android, even if Apple does release a 5.5″ phone. Apart from anything else, there are people who have very deliberately stayed with or switched to the iPhone precisely because it fits their hand better.

That raises another question few people seem to have tackled: will there still be a premium iPhone, i.e. one with the same specs as the 4.7″ and 5.5″ models, at 4 inches? In other words, will it be possible to buy the equivalent of the iPhone 5S at the same screen size in late September, or will the 4-inch screen be the lonely province of the 5C equivalent? And if that’s the case, does it mean that this screen size gets phased out altogether next year or the year after? I’d like to see the 4″ size stick around in the premium tier for at least another year, just to give customers a chance to vote with their feet. If no-one buys the 4″ device, Apple can jettison it next year. But I suspect there are people who like the 4 inch size and will find it difficult to abandon. Having said that, of course, if Apple stops making that size, where else will those customers go? The iPhone is already the only premium handset being made at that size.

The last question is how these three sizes might sell. My guess is that if all three sizes stick around, the 4.7″ model will sell best, followed by the 4″ model, and lastly the 5.5″ model. If the 4″ model doesn’t stick around, then the 4.7″ model will vastly outsell the 5.5″ model. If it’s just 4.7″ and 4″, it might be 70/30 in favor of 4.7″. Of course, a lot depends on the pricing. If it’s strictly tied to size, and each size bump triggers a big price increase, that’ll tip things significantly in favor of the smaller devices. I suspect Apple might give the larger devices more storage capacity too, as a way to bridge the gap, such that they start at 32GB instead of 16GB. Regardless, it’ll be fascinating to watch.