Uber Is Clearly Not For the United States

When I hear of all the talk of Uber coming out of the United States, I am struck with a sense of disbelief. I cannot understand why the Americans, who at least in my impression seem to think that buses are very undesirable or even dangerous in certain cities, have suddenly come to love public transportation.

Luckily, there are statistics for this. The Flowing Data website compiled data from the United States Census Bureau’s 2013 American Community Survey and created a great interactive map in addition to the following chart.

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The vast majority of Americans go to work driving alone in their cars. Although there is a bit of carpooling, any mode of public transport is very, very rare. Really, there isn’t any surprise here.

The United States is very obviously not the ideal market for an taxi-like service. Uber is only skimming a very small portion of the transportation market; one that taxi-drivers used to own.

Examples of Smartphone Specialization and Implications for Google’s Control

A while back, Bob O’Donnell wrote a piece on Techpinions titled “Tablet and Smartphone Futures: Specialization”.

Ultimately, technology products are likely to follow the path of other mass-produced goods, such as cars, appliances and even clothing. In all those markets (and many more), the ability to specifically target different types of consumers and then create products that match the unique needs/interests of those different consumers is what allows companies to thrive. Now, it’s time for technology companies to step up to those challenges and give us the breadth of product options that the market is hungry to see.

I very much agree with Bob’s point. The wider a product penetrates a market, the more diverse needs it will have to address. This is what has happened in almost all markets, and although personal computing devices are different in that customers can install software to customize to their preferences, there is little guarantee that this is sufficient to satisfy the very divergent needs.

Furthermore, diversification is not necessarily aligned with the interests of the platform owners. In the case of Apple, they try hard to control the experience on their devices. They minimize customization options in the name of simplicity. They try hard to find a single one-size-fits-all that works well. In the case of Google, the first started by allowing OEMs and carriers to customize the Android OS, but then scaled back when they felt they were losing control of the platform, and that fragmentation was becoming an issue for developers. It is clear that the platform owners are discouraging diversification.

What we are seeing is a natural tension between conflicting requirements. In this situation, small changes in the market could dramatically shift the balance of power. This is why I’m very interested in observing how specialized products will enter the market, and what level of success they will achieve.

One example that cropped up recently is the announcement of some very interesting Android smartphones from KDDI, the second largest carrier in Japan.

The first exhibit is a smartphone targeted towards primary school pupils (miraie KYL23). Apart from the hardware which is designed to withstand the constant abuse that one can expect from small children, it has good Web filtering features, and can even track what swearwords and insults your child may have typed-in. You cannot use Google Play or other Google Services; instead, you install apps from a specialize app store.

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Message pops up when you try to enter “ばか” (stupid). It tells you that you are using a bad word, and your parents will be notified.

When you think about it, it’s absolutely obvious that you don’t want to use a Google certified Android device on these smartphones, and you really have no choice but to go with AOSP.

As the smartphone market saturates and it becomes important to address the smaller niche markets, it is very likely that we will see even more customization. In this situation, the restrictions that Google applies for Google Play certification may be too limiting, and AOSP may see more adoption. Obviously, Apple will not play in this market.

Update

Importantly, the miraie KYL23 smartphone is manufactured by a Japanese smartphone vendor, Kyocera, which also sells Google certified smartphones. Therefore, although it has been rumoured that Google does not give out licenses to companies that also sell AOSP or forked-Android, this does not always seem to be the case.

App Annie Shows iOS App Store Widening Revenue Lead Over Google Play

As I have been mentioning on this blog for quite a while now, despite the impressive growth rates that Google Play is showing in revenue growth, data suggests that the gap in absolute revenue between it and the iOS App Store is actually widening.

App Annie has been my source for data. However, since about a year ago, they have made it quite hard to directly observe the gap. Now, in a recent report, App Annie has provided the chart that clearly shows this trend.

This that chart;

App Annie Index 2014 Retrospective EN pdf 5 39ページ

We can clearly see that Google Play’s revenue growth rate has been quite impressive, but that is only because it was quite small in 2013. In absolute terms, the gap is clearly widening. Hence the current trajectory suggests that Google Play will not catch up with iOS in revenue.

Breaking down the revenue, we can see why.

  1. As App Annie has previously shown and as they show again in their most recent report, revenue growth of both the iOS App Store and Google Play comes almost entirely from three countries; Japan, South Korea and the United States. Revenue growth from developing countries, the countries where Android is typically very strong, is still almost negligible.
  2. In both Japan and the US, iPhone is increasing market share. Therefore it follows that iOS App Store revenue in these markets should be outpacing Google Play. With the iPhone 6 and 6 plus, it looks like this is starting to be the case in South Korea as well. Therefore, iOS App Store revenue in winning in the countries that matter.
  3. Android is continuing to gain market share in the developing countries and download numbers in these nations clearly show tremendous growth. This however has very little effect on absolute revenue because in these markets, customers simply do not pay much for apps.

What else would I like to know

Now that it is clear that Google Play revenue will not catch up with iOS App Store in the foreseeable future, the next topic related to the app ecosystem that I find interesting is the status of non-game apps.

App Annie has noted in their Q3 2014 report that “Games drive nearly all Google Play Revenue Growth”. This is deeply disturbing. It suggests that the non-game categories in Google Play are barely growing at all.

When we revel in how technology has improved out lives, we are seldom talking about games. We are talking about apps that help us and our children learn things, apps that improve our productivity and apps that help us communicate. If these apps are not growing, then it suggests that tech is not improving or lives, but is in fact an opium that enslaves us to spend money wasting our time.

It would be terrible if this were the case.

Questions About Google Becoming an MVNO

Some quick questions that I have following the reports that Google is striking deals with Sprint and T-Mobile to become an MVNO;

  1. What will the larger carriers, Version and AT&T think about this? Unlike Android OEMs who had to rely on Android in spite of how Google provoked them with Nexus phones and Motorola, carriers do have a choice. If they decide that they don’t want to do business with a competitor, they can more heavily promote iPhone or Windows Phone, and de-emphasize their efforts selling Android phones.
  2. Will Google have access to the data that flows through the wireless network? I think this is unlikely because MVNOs don’t own the wireless communications infrastructure, but I don’t know much about the system so I can’t really say. I’m sure Google would like the data, but if they really did, they could simply monitor everything that happens on Android phones. Maybe eavesdropping on the network is more acceptable than on the phone.
  3. Is this a Nexus? As I recall it, the purpose of the Nexus project was to create good hardware and sell them at low prices, hopefully encouraging their OEM to follow suit. Is the purpose of the current deal to do this. Since MVNOs are completely reliant on their partner for the network, Google has no control over the quality of the network. The only thing they can control is price. They might try hard to lower prices, that’s all that they can do.
  4. Is Google just dipping its toes into the water? Maybe their ambition is to eventually become a full scale carrier. Becoming a carrier would give them data and the ability to improve on quality.
  5. Maybe Google just wants the money. Despite all the businesses that Google is getting into, money generation is almost all from their old search advertising business. As the Internet and even smartphones are starting to saturate the market, it is likely that Google will start to see its revenue growth slow down. Google is certainly looking for other ways to earn money. Maybe becoming an MVNO is simply part of this plan. Maybe they are simply looking for profitable businesses in adjacent markets. I doubt that MVNOs make much profits, but Google has to start somewhere.

64-bit Android Is Starting To Hurt

Ever since the iPhone 5s was announced with a 64-bit processor, I have been watching when Android will move to 64-bit. My concern is that if Android does not move to 64-bit soon, the performance gap between Android and iOS may widen to a point where it becomes ridiculous to talk about “High-End Android”.

I initially thought that it would be a software issue; that Google would not commit itself to the high-end and would not be aggressive in moving the OS and applications to 64-bit. This has been true to a certain point. However, AppleInsider reports that the CPU hardware might be having an even harder time moving to 64-bit.

Following up on rumors in December that described “hard to solve” issues that Qualcomm was experiencing as it works to deliver its first mainstream 64-bit mobile chip, Bloomberg has now reported that Samsung “will use its own microprocessors in the next version of the Galaxy S smartphone.”

Citing “people with direct knowledge of the matter,” the new report said Samsung tested Qualcomm’s Snapdragon 810 but “decided not to use it.” Both companies have declined to address the issue publicly.

Two weeks ago, a research note by JP Morgan described the same overheating issue, explaining, “For the Snapdragon 810, a flagship chip for use in high-end models, we believe the issues are related to the implementation of new 64-bit ARM cores (A57), which is causing overheating when accelerating above 1.2-1.4 GHz frequencies, which is a major limitation for a flagship phone.”

This is starting to look very bad. It is starting to look like high-end Android will truly end up being a Samsung exlclusive.

Apple Watch Pricing Revisited

Following a tweet that I read yesterday, I’ll give an update on my thoughts (1, 2) on the price of the Apple Watch.

Abdel IbrahimさんはTwitterを使っています gruber Touché I say that because so far every girl I ve asked would like Edition but when I suggest at least 2K they re turned off

Full thread on twitter

Abdel’s point is very valid, and I think its something that Apple has deeply thought about. The thing is, and I mentioned this before, unlike watches in general, the Apple Watch will live and die by its ecosystem. Apple has to ensure that the ecosystem will be vibrant and profitable for developers, and the way to do that is to maximize the number of users who are willing to spend a dollar or so for an app. If the price of the Edition is so high and the design of the Watch not appealing enough for women, then the Apple Watch as a whole may not attract enough female users.

I’m certain that this is not what Apple wants, and they would push hard to make the Edition affordable, at least for the majority of women in developed countries.

Then the question is, how low can Apple possibly go?

This depends on how much gold is used in the watch. In my first article, I quoted a teardown of a Rolex gold watch;

  1. Case ring weights 18.5 grams. Contains 13.875 grams of pure gold. It has a value of $178.43.
  2. Case back weighs 7.21 grams. Contains 5.41 grams of pure gold. It has a value of $69.57.
  3. Bezel weighs 5.30 grams. Contains 3.98 grams of pure gold. It has a value of $51.18.
  4. The bracelet weighs 68.85 grams. Contains 51.64 grams of pure gold. It has the most value at $664.09.
  5. The total value of the pure 24kt. gold in this Rolex President is $963.27.

There’s actually a better page here which shows you what each part looks like.

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Comparing the Rolex watch to the Apple Watch, we can see that the Apple Watch does not have a gold case back or bracelet or a bezel to hold the glass in place; it only has the case ring. Also, although hard to be certain from just the photos, it’s likely that the gold in the case ring is also much less than a Rolex because the face of an Apple Watch is almost entirely the screen

It looks like the Apple Watch would only use a very small fraction of the gold in a Rolex. I suspect that Apple is purposely using as little gold as they can without sacrificing the design, which is in direct opposition to the Rolex which is trying to stuff in as much gold as possible. I would guess that Apple is only using at maximum, 15 grams. Maybe much less. The fact that people who actually wore the watch found it to be very light, might be a hint in this direction.

This would suggest that, at today’s gold prices (~40,000 USD/kg), the price of using gold will be something like 600 USD. Therefore, I think that it’s quite possible that Apple could make the Edition less than 1,500 USD.

I actually expect Apple to try even harder to further reduce prices because I think that it is a strategic imperative.

Slow Adoption Of Android 5.0 Lollipop

It seems that three months since its release, the adoption of Android 5.0 Lollipop seems to be unprecedentedly slow.

Still, as can be observed from the graph below, three months into its existence KitKat somewhere around 2% was already present in a significantly higher number of devices than Lollipop currently is.

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Compared to previous major upgrades of Android, Lollipop is quite big. It renews the UI design (Material Design) from Holo which has been in use since Android 3.0 (2011), it features a new ART runtime that replaces Dalvik which has been in use since, the beginning and it also has support for 64-bit devices. Lollipop is brand new in many ways, and I thought that Google would try very hard to drive quick adoption.

This clearly hasn’t been the case. I strongly doubt that this was intentional.

A bit worrisome.

Office 365 Adoption

Very interesting statistic from Okta regarding adoption of Office 365 relative to other cloud services. This is for businesses.

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In particular;

  • Office 365 is used across companies of all sizes. Workday, Clorox, Seton Hall University and DocuSign – all very different organizations in terms of age, size and industry – connect their Okta tenants to Office 365.
  • Banking, food & beverage and manufacturing favor Office 365 over Google Apps.
  • Consulting and law firms, as well as general technology companies, are more divided with pretty even adoption of Office 365 and Google Apps.
  • Google Apps is the clear choice among advertising firms, educational institutions and software companies.

Short Note on App Store vs. Google Play Revenue

As Benedict Evans wrote in his weekly newsletter, Apple reported its revenue from the app store in 2014.

Apple reported that app store revenue net of its 30% commission was $10bn in 2014. This is actually the same as the figure it gave at WWDC in the summer for the previous 12 months – I suspect there’s some rounding going on. Apple’s commissions on this would be about 2% of CY 2014 revenue.

Apple announcement link

Although we will not know exactly what the rounding error was, given the very strong growth of the app store in the past, it is quite difficult to believe that sales have suddenly flattened out. So to get a better picture, I decided to provide an update to my series of articles on the iOS App Store vs. Google Play (most recent one is here).

In that article, I lamented that App Annie was not giving out the actual growth of neither the App Store nor Google Play and as such, it was impossible to see whether the revenue gap was closing in absolute terms.

Since then, App Annie has reported its Portable Gaming Spotlight, 2Q14 report in conjunction with IDC. This report gives us a direct answer.

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As you can clearly see, iOS App Store absolute revenue growth is larger than Google Play absolute growth. Although Google Play is doing remarkably well on a YoY percentage basis (>+100%) compared to iOS App Store (+70%), it is not closing the gap at all.

Also you have to keep in mind that Google Play revenue is increasingly games. In fact, App Annie notes in their Q3 2014 report that, “Games drive nearly all Google Play Revenue Growth”. This is presumably not the case with iOS which suggest that the gap between the App Store in Google Play revenue is wider and also growing if we include non-game apps.

Actually, my view is that the difference in non-game app category is more interesting than the total difference. It’s likely that by now, iOS has about 6-times more non-game revenue than Android. This means that apps like Byword, RunKeeper and others which are either paid-apps or in-app payment apps are struggling on Android.

Overhyping the Revenue Potential of the Emerging Countries

A beautiful infographic on the state of App Stores by App Annie.

Unfortunately, I can’t agree with the title “Mobilizing the Next 5 Billion”. If anything, this infographic tells us how dominant the “app store superpowers”, Japan, South Korea and the United States are. These superpowers are not only dominant in current revenue, but also have revenue growth that is equal to the emerging countries. This means that the emerging countries are not catching up; instead the lead of the superpowers is widening.

The infographic tells us that the superpowers will remain dominant in revenue for the foreseeable future. The next 5 billion is unlikely to contribute significantly to total revenue from app stores for quite a while.


Infographic GMIC 11182014 2