Knowledge. Passion. Innovation.

VisionMobile Research

Mobile Megatrends 2009

Mobile Megatrends 2009

Andreas Constantinou, Ph.D. Research Director,

VisionMobile twitter: @andreascon

Knowledge. Passion. Innovation.

Last updated: 2 June 2009 licensed under a Creative Commons Attribution 3.0 license.

Mobile Megatrends

Eight Centres of Gravity: the New Rules of Mobile. Market Gravity: The Rise and Fall of Market Value. The Software Industry is Consolidating. Mapping Business Model Innovation: Value Quadrants. Open is the New Closed. The Mobile Application Store Phenomenon. NaaS: Network as a Service. Mobile Service Analytics: the Most Underhyped Opportunity.

VisionMobile

Research Reports

selected analyst reports On-Device Portals: Beyond WAP (ARCchart)

High-Capacity SIMs (Informa)

Mobile Software Management Report

The New Age of Handset Customisation: 2006-2011 (ARCchart)

Mobile Operating Systems: The New Generation

Activating the Idle Screen: Uncharted Territory (Informa)

MDM Case Study: Motorola (Ovum)

Firmware OTA: From Hype to Market Reality (ARCchart)

Open Source in Mobile: 2007-2012 (Informa)

Five Defining Traits of Open Source (Informa)

GPLv2 vs GPLv3 White Paper

Mobile Megatrends 2008

VisionMobile

Market-How Maps

The 100 million club : the watchlist of software companies whose products have been embedded on more than 100 million cellular handsets

Mobile Industry Atlas :a visual map of who's who in the mobile handset industry, showcasing 800+ leading companies across 47 market sectors.

selected clients

VisionMobile

Advisory services

Mobile Megatrends 2009

Knowledge. Passion. Innovation.

Eight Centres of Gravity: consolidation of power 1

Eight Centres of Gravity: consolidation of power The industry is moving again into a vertically integrated structure From the vertically integrated devices 20 years ago, to the horizontal enabler era of ODMs and OSes,

and again into a vertical integration of hardware + software + services with Nokia, Google et al

1

start

Eight Centres of Gravity: consolidation of power

Google, LiMo, Nokia, Qualcomm, Apple, Microsoft, Adobe, Intel are building vertically integrated solutions and related ecosystems

in effect: Centres of Gravity

1

ecosystem players

vertical solution

Eight Centres of Gravity: consolidation of power

Starting from software or hardware, and building upwards

..

..the value wars are moving up the stack!

1

Eight Centres of Gravity: consolidation of power 1

Eight Centres of Gravity: consolidation of power

Outlook:

-  RIM aggressively moving into forming a centre of gravity

-  LiMo’s future is uncertain: LiMo-compliance only applies

to circa 1% of the software stack

-  How succesful will be Adobe’s transition of Flash Lite into Flash 10

through the Open Screen Project?

-  Can Sony Ericsson elevate Capuchin from a toolkit to a platform?

-  Will Nokia divorce its Internet and manufacturing personae?

- Plus: networks are now moving into horizontal structure; via

outsourced IT operations, outsourced customer operations (see

MVNO) and outsourced sub-brands (see Blyk, Out There Media)

1

Market gravity: the rise and fall of market value 2

Market gravity: the rise and fall of market value

Every market sector follows a downwards path;

As if pulled by a gravity, it goes through 3 stages:

- Novelty: the point when a novel product

is introduced, but demand is scarce.

- Differentiation: market is formed and

products become a point of differentiation

-  Utility: when the products in the market

have limited sale value, but have become essential

commodities.

Gravity accelerators/decelerators For every market there are factors or events causing

its gravity to accelerate or decelerate (e.g. see what

Google Latitude has done for MNO location services)

2

value line

market formation

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location services

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Market gravity: the rise and fall of market value 2

value line

Device technologies Network services

mobile service

analytics

mobile application

stores widgets

Active Idle

Screen

on-device portals

application environments

browsers

Java virtual

machines

multimedia codecs

touch- screens

market formation

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core operating systems

voice services

network as a service

location services

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billing access

photo sharing

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The software industry is consolidating 3

The software industry is consolidating

Operating systems for smartphones are now reduced to two choices: (smartphone OSes are strategically important to OEMs due to high margins of smartphones)

1. S60: now with low cost of ownership and UIQ, MOAP out of the way Pros: Backed by Nokia, SEMC, Samsung, LG, but not Motorola. Mature and operator compliant

Cons: Nokia’s dominance of package ownership and lack of UI differentiation may alienate OEMs

2. Android: advanced architecture, but not catering to OEM needs Pros: Backed by HTC, SEMC, Samsung, LG, Huawei. Dell, Garmin, Fujitsu, China Mobile, Vodafone, O2.

Pros: designed from the ground up for 3rd party developers; fastest in developing and debugging apps

Cons: not designed for 2nd parties (OEM partners); variant creation is very resource intensive

Cons: software is not pre-integrated with telephony stack and needs Google engineering resource;

Our prediction: 5 Android devices will launch within 2009.

3

The software industry is consolidating

..while other smartphone OSes have been sidelined:

Linux is no longer the panacea it was considered to be in 2006 - Android’s flexibility and short time-to-market has pre-empted Linux’s openness

-  ALP, Azingo are still in development, with phones expected in early 2010.

-  LiMo has been a diversion for ALP, Azingo and Myriad (Purple Labs), diverting focus away from

product development, into operator customisations and business development.

-  The discontinuation of Motorola’s L-J and the decline in the Japan smartphone market has meant

lower volumes from key Linux champions

-  Linux is now meaningful only as an OS-supporting base

Windows Mobile has niched itself into a corner -  OEMs use Windows Mobile for enterprise phones or tactical wins (e.g. HTC X1)

-  ODMs do not have the money or expertise to invest in consumer-oriented industrial designs

-  The first consumer-oriented version of the OS, Windows Mobile 7, has been delayed to 2010

RIM’s Java platform and OSX growing strong but not licensable

3

The software industry is consolidating

Mobile Linux landscape: from 10 vendors in 2007 to 5 in 2009

- Linux for mid-end: Myriad (ex Purple Labs)

now including Openwave client business and the Sagem software business

-  Linux for smartphones: Azingo and Access Linux Platform two acquisitions later, ALP is suffering from permanent beta status - since PalmOS 6 in 2004

-  Linux for MIDs: Moblin (now with OpenedHand) and Ubuntu Mobile Missing in action: MontaVista, A la Mobile, OpenMoko (no consumer devices).

- Plus system integrators: WindRiver (now with Mizi know-how), Teleca, Movial

But Linux market share is in decline Linux only 5.1% of the smartphone market in 3Q08, compared to 6% in 2006 (data: Canalys)

3

The software industry is consolidating

Four application environments set to dominate:

- WebKit: de facto standard for web content and service delivery to hit 100m shipments by 2H09 due to its integration with S40, S60, OSX and Android.

Most OEMs are expected to adopt WebKit as compliant, customisable and low cost

-  Flash Lite: now at 50% share of devices sold, but migrating to Flash 10 + OSP Adobe suffered similar setbacks as Java; ubiquity, but fragmented runtime (to be addressed with Flash 10)

-  Qt: Nokia’s foundation for deploying Ovi services and its branded core apps on a single substrate across S40, S60, PC and other OEM handsets

-  Java ME slowly moving towards MIDP3 Java will stay around due to 80% penetration across

sales base and established Java applications market.

But OEMs will push more advanced Java VMs.

3

source: Nokia

The Evolution of Revenue Models 4

post-launch

value created in channel, at point of sale

and during in-life use

pre-launch

value created during design, development and production

Services value created in the cloud

Device value created on the handset

Value Quadrants: mapping revenue model evolution 4

the WHERE of value creation

the WHEN of value creation

post-launch

value created in channel, at point of sale

and during in-life use

pre-launch

value created during design, development and production

Services value created in the cloud

Device value created on the handset

Value Quadrants: mapping revenue model evolution 4

industrial design hardware embedded software software & hardware IP

Value

monitoring activation configuration management

Value

services, apps and content delivery

Value

Design and development of software, hardware and services

Value

each quadrant delivers

distinct Value

post-launch

value created in channel, at point of sale

and during in-life use

pre-launch

value created during design, development and production

embedded s/w vendors

network operators

service deliv. platforms

advertisers content aggregators

industrial design houses

hardware vendors

development tools vendors

handset OEMs

ODMs and EMSs

handset OEMs

Services value created

in the cloud

Device value created on the handset

service analytics

handset OEMs

application developers

SIM card manufacturers

Value Quadrants: mapping revenue model evolution 4

industrial design hardware embedded software software & hardware IP

Value

monitoring activation configuration management

Value

services, apps and content delivery

Value

Design and development of software, hardware and services

Value

..delivered by distinct players

post-launch

value created in channel, at point of sale

and during in-life use

pre-launch

value created during design, development and production

per active user, per impression per click per transaction subscription risk-sharing

Revenue models

per active user per unit per activation per app install

Revenue models

per developer seat per site per CPU

Revenue models

industrial design hardware embedded software IPR

Value

embedded s/w vendors

network operators

service deliv. platforms

advertisers content aggregators

industrial design houses

hardware vendors

development tools vendors

handset OEMs

ODMs and EMSs

handset OEMs

Services value created

in the cloud

Device value created on the handset

per unit per platform per device model per year

Revenue models

monitoring activation configuration management

Value

services, apps and content delivery

Value

Design and development of software, hardware and services

Value

service analytics

handset OEMs

application developers

SIM card manufacturers

Value Quadrants: mapping revenue model evolution 4 .. and using

distinct revenue models

post-launch

value created in channel, at point of sale

and during in-life use

pre-launch

value created during design, development and production

per active user, per impression per click per transaction subscription risk-sharing

Revenue models

per active user per unit per activation per app install

Revenue models

per developer seat per site per CPU

Revenue models

embedded s/w vendors

network operators

service deliv. platforms

advertisers content aggregators

industrial design houses

hardware vendors

development tools vendors

handset OEMs

ODMs and EMSs

handset OEMs

Services value created

in the cloud

Device value created on the handset

per unit per platform per device model per year

Revenue models

service analytics

handset OEMs

application developers

SIM card manufacturers

Value Quadrants: mapping revenue model evolution 4 .. confirming recent trends

.. uncovering new players

.. and innovative revenue models

post-launch

value created in channel, at point of sale

and during in-life use

pre-launch

value created during design, development and production

Services value created

in the cloud

Device value created on the handset

Value Quadrants: mapping revenue model evolution 4

.. and revealing the evolution of

value creation in mobile

patents & IPR

per active user, per impression per click per transaction subscription risk-sharing

Revenue models

per active user per unit per activation per app install

Revenue models

per developer seat per site per CPU

Revenue models

per unit per platform per device model

Revenue models

software monetisation

Open is the new closed 5

Open is the new closed

Open source is moving from early adoption to maturity across all handset

OEMs Multiple major mobile open source efforts: Android, Symbian/S60, LiMo, Qt, WebKit, Java ME,

MIDP3, AOL OMP, Qt, GTK, Eclipse IDE,..

Key benefits:

-  Shares cost and risk of developing software building blocks

-  Speeds up innovation via third party contributions

Key risks:

-  Lack of education and established best practices in mobile OSS

5

Open is the new closed

understanding licenses vs governance models 5

governance model

opinion leaders moderator based members only single company

permissive (BSD, MIT, ..)

weak copyleft (LGPL, MPL, EPL, ..)

strong copyleft (GPL)

non-copyleft (APL, others)

Linux kernel

GTK+

license type

phoneME Funambol

Qt

dual license (commercial + copyleft)

platform

Proprietary community license

Android

hobb

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Part

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Moto MIDP3

Foundation

OMP

Foundation WebKit

OKL4 Rhomobile

governance model

opinion leaders moderator based members only single company

permissive (BSD, MIT, ..)

weak copyleft (LGPL, MPL, EPL, ..)

strong copyleft (GPL)

non-copyleft (APL, others)

Linux kernel

GTK+

license type

phoneME Funambol

Qt

dual license (commercial + copyleft)

platform

Proprietary community license

Android

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Part

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Moto MIDP3

Foundation

OMP

Foundation WebKit

OKL4 Rhomobile

Open is the new closed which licenses and governance models are commonly used?

5

similar license, varied governance

Open is the new closed

While:

Licenses are standardised, converged and well understood 4 licenses used most often in mobile projects (LGPL, EPL, APL, BSD)

Governance models are proprietary, diverging and poorly understood

And while:

- Licenses are about source control source code access, modification, contribution and distribution

- Governance is about product control product modification, forking, roadmap, IPR, membership fees..

5

Open is the new closed

How ‘open’ is an open source project?

Some questions to ask: - Is the source code publically available or to members only?

- Are code check-ins publically accessible ?

-  Are the minutes from meetings publically availably?

-  Are there any fees or contractual commitments (NDAs, etc) required for members?

- Who has access to check-in code? (and what is the process/medium for check-ins)

- Who has the authority to release code and binaries (how is the release schedule determined)?

- Who is entitled to branch source code ?

- How is the roadmap formed ? What is the process and who has voting rights ?

-  Are IP rights (patents, copyrights, etc) of contributions maintained or automatically transferred?

- Do contributors have to transfer patents contained in the contributions ?

- Are there any safe harbour provisions for contributors to the source code ?

5

Open is the new closed

Governance models allow OSS use while maintaining control:

- LiMo Foundation: open by inheritance Open because its members’ handsets are built on top of the Linux kernel

Zero community contributions in two years since foundation (hired community manager in 4Q08)

Only 40% of R1 code is OSS, rest is proprietary

- Symbian Foundation: open source capitalism Open to compete with Android, marginalise Windows Mobile and make UIQ/MOAP irrelevant

Open so as to reduce barriers to innovation, while lowering costs and risk of software development

Nokia will have most influence over roadmap due to gravity of contributions: open source capitalism

-  Android: as open as Google wants it to be Members can access code, but Google controls commits and product management

Commercial agreements allow Google to bundle apps and services on Android handsets

5

The Mobile Application Store Craze 6

The Mobile Application Store Craze

The industry has been trying to open the mobile apps market for many years

2002: open route to technology (SDKs) the plan: open OSes and Java will enable 3rd party applications and revenue

The reality: complex APIs, high porting costs, poor tools, poor discoverability, poor provisioning

The result; Symbian (10,000 apps), BREW (10,000 apps), Java ME (45,000 apps)

2008+: open route to market the plan: help developers deploy and make money, help users discover

the reality: Apple’s app store the first to get the recipe right

the result: 35,000 apps within 10 months, circa $500M revenues/year for Apple app store

the impact: ALL major handset OEMs, OS vendors and operators want their own mobile app store.

6

The history of Mobile Application Stores

Qualcomm intro’d mobile app stores (MAS), but Apple perfected the recipe.

6

Apple App Store Android Market RIM App Center Palm Software Store BREW Mobile Shop

2002 2008 2009+

2009+: mobile application stores everywhere!

OEMs: Samsung Innovator, MTK App Stores, Symbian, Microsoft MarketPlace, Adobe AppZone

Operators: Orange App Shop, Verizon Appzone, Sprint OnDemand, China Mobile, T-Mobile, ..

White label: Handango, Mobango, GetJar, Everypoint, Ideaworks 3D, Tanla, Motricity, Cellmania,

Handmark, Javaground, OnMobile, Comverse, Amdocs, Qualcomm Plaza, Bango App Seller

Ovi Store

Ovi Store update

- Applications: native (Symbian/S60) + Java + widgets + Flash Lite apps

- Content: *premium only* ringtones, wallpapers, videos, and themes

- Self publish process (needs taxpayer ID + copyright declaration). 50 EUR reg. fee

- Billing will be via credit card AND premium SMS (8 countries initially)

- Revenue share: developers will get 70% revenue share (varies with MNO billing).

- Availability: 200 million handsets by end 2009 (downloadable, not embedded)

- Migration: WidSets discontinued to become Ovi Store runtime on S40.

- Advertising: Spotlight will allow ad placements (time or CPM-based)

- Features: recommendations based on friend picks and location (key to breaking promotion barriers of Apple’s top-25 lists and avoiding app price decline)

6

The key success factors of the MAS recipe (1/2) 6

The key success factors of the MAS recipe (2/2) 6

The Mobile Application Store Phenomenon

The Apple App Store has also disintermediated the mobile apps value chain.

Before:

After:

..and is stirring a rethink of the mobile games business: “The traditional mobile-game business model is not bearing much fruit. Console-game publishers

Eidos, Vivendi and Sony and mobile content aggregator Player X have all closed their mobile-

game-publishing operations; Glu, the third-largest mobile game publisher in terms of revenue has

seen is share price collapse; and many companies have gone out of business, including publisher

Telcogames and Jamba-owned developer Ojom.” .. “Fishlabs reports that it makes more money

each day selling games at just €0.99 (US$1.30) each to iPhone users than it did in a month from

all operator portals put together, where it sold them for the much higher price of €5 a game”.

Source: Informa Mobile Media magazine, February 2009.

6 Developer

(20%) Publisher

(20%) Aggregator

(20%) Operator

(40%) End user

Developer (70%)

Apple (30%)

End user

The Mobile Application Store Phenomenon

Outlook:

-  Successful MAS solutions will require all five key success factors

-  Supply of MAS ingredients is in abundance Marketplace and content catalogues (e.g. Cellmania, Handango, GetJar), billing (e.g. Tanla, Bango, Qpass),

distribution and retailing (e.g. July Systems, Motricity, Jamba, Handmark), on-device storefronts (e.g.

mPortal, SurfKitchen, Everypoint), provisioning (e.g. InnoPath, Red Bend, mFormation).

-  OEM-led mobile app stores will be most successful OEMs control provisioning, on-device discovery and have access to global distribution. Mobile app stores

will be a key post-sales revenue source for OEMs.

-  Operators will struggle to build and will buy or white label Operators/carriers lack of control over MAS key success factors and have limited s/w know-how.

They will end up buying in or licensing MAS solutions

Our prediction is that the Joint Innovation Lab will be short-lived.

6

7 NaaS: The Network as a Service

Network as a Service

Mobile networks have traditionally been closed and slow to innovate -  internal-only product innovation has been extremely slow

-  limited to mass-market, reach-all-handset services

-  limited to a handful of 2nd parties, on a need-to basis only

-  very complex APIs (IMS, Parlay, proprietary SDPs)

But operators/carriers are finally realising that there are major revenues

to be made by becoming a ‘service platform’ or a WebCo

Network as a Service = reselling API access to 3rd party services Plus allows operators/carriers to empower a long-tail of applications that better cater to the long tail

of consumer preferences more choice = more users, less churn.

7

Network as a Service

Networks have a breadth of services and consumer intelligence to expose e.g. click-to-call, billing access, send SMS/MMS/email, get location, IVR services, get device capabilities,

access to voicemail, user authentication, access to user profile/calendar/contacts/favourites/photos.

Early NaaS providers:

- Orange Partner: 28 APIs, 4,000 active users most APIs are alpha and only in France

- Vodafone Betavine: 5 APIs, 13,000+ users, 200+ applications rev share on apps

- BT Web21C SDK: 6 APIs, 9,000+ developers provided by Ribbit (now BT)

-  O2 Litmus: 3 APIs initial APIs are free, plan to charge for SMS/MMS APIs

-  More joining Telenor Playground, Sprint Mobility Framework, Deutsche Telecom Develop Portal

Standardisation efforts

-  GSMA One API, Telefonica WIMS 2.0, Open Movilforum

7

Network as a Service

NaaS services are late to market and slow to mature:

-  3 years behind web companies (e.g. Amazon affiliates, Google AdSense)

- 5 years behind alternatives (e.g. aggregators for SMS, billing, location)

- High charges for API access (e.g. Orange €500 activation charge for Contact Everyone API).

- Lack of intra-country and inter-country reach (APIs limited to subscribers reached by

the operator within each country. There is also a lack of consistency across regional implementations).

-  Lack of carrier-grade reliability (e.g. complaints of downtime on BT’s SMS API)

-  No direct route to market for developers (developer programs are often run by R&D

teams or otherwise lack direct access to commercial deployment or bundling deals)

-  Limited operator experience in working with developers unlike web companies

7

Network as a Service

Outlook:

Next-gen SDPs and NEPs will run NaaS services on behalf of operators.

Companies to watch:

Aepona ($45M funding, major telco customers in US, Europe and blueprint for GSMA OneAPI)

Ribbit (NaaS pioneer, Web 2.0/Internet background, acquired by BT)

see also:

www.slideshare.net/aubs/open-apis-a-telcos-perspective,

www.gsmworld.com/accessentry

7

8 Service analytics: the most underhyped opportunity

Mobile service analytics

Mobile is the most data rich industry; yet we are still in the dark ages

- Difficult to assess devices, services and the user experience due to a scarcity of widely deployed measurement tools and the complexity of extracting intelligence

-  Yet the mobile has infinitely more information about us than the web more information (voice, text, location, presence, mood, movement,..), more implicit (easier to extract),

more often available, more closely tracking our behaviour more valuable!

-  and the analytics applications are phenomenal customer profiling and targeting, customer segmentation and value analysis, campaign management, ad

inventory management, user experience analysis, network planning, handset & service performance

analysis, revenue assurance, ..

-  Did you say privacy? it will be traded off for new capabilities especially for social networking - see Facebook

8

Mobile service analytics

Mobile service analytics is an under-the-radar market. Early suppliers:

The value is across

- gathering & storing metrics through device or network probes

- aggregating across domains e.g. user segments, location, handset, services, etc

- extracting intelligence information depending on the application

..and will enable many new revenue sources and revenue models

8

Further reading: Industry Atlas A visual who’s who of the mobile industry www.visionmobile.com/maps

Mobile Open Source: Training Course covering economics, licensing, governance models, communities, operating systems, standards, case studies and strategies. www.visionmobile.com/workshops

Thank you !