iPad Sales Decline

As reported in Apple’s Q2 2014 conference call, iPad sales significantly declined compared to the year ago quarter. A year ago, they sold 19.48 million units. This year, only 16.35 million. That’s a pretty big decline.

It’s not something that was totally unexpected. As early as August 2013, I noted that iPad sales and tablets sales in general were losing steam and this could be a longer-term trend. I wrote many times how the idea that tablets are replacing PCs is a fallacy, and that the iPad was actually carving out a new market, not replacing an existing one (1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13).

A summary of the current situation can be found in one of my posts that I wrote in Jan. 8th, 2014 (“What the Tablet Market Isn’t”).

So what I sense is the possibility that tablets (as computing devices) may have hit a roadblock in adoption, and this is due to the potential market being actually much smaller than envisioned. Much smaller than the PC market.

If this is the case, then what should be done about it? Or even, is it worth trying? Are we trying to artificially enlarge a market that is actually rather small?

These are questions that may be answered in the next iteration of iPads from Apple. Remember that “low-end disruptions” are at first not very capable, but they eventually move up-market through innovations that enable them to compete with high-end products but retain their simplicity. I strongly doubt that huge tablets or 2-in-1s qualify as this kind of innovation. Apple (and most likely only Apple) may have the answer in one of its labs.

If we look into the smaller details of Apple’s Q2 2014 earnings call, we see evidence of this.

“Thousands” of iPads being used at delivery company FedEx every day.

U.S. Department of Veterans Affairs is planning to deploy 11,000 iPads to change how doctors and patients interact. Will allow quick access to real-time secure medical information.

iPad has over 95 percent share of U.S. education market.

These are all markets where PCs couldn’t previously satisfy the “jobs-to-be-done”. In these markets, the iPad is not a replacement for PCs; it is allowing computing to happen in occasions where it was not previously feasible and creating a new market.

Cook said Apple has to focus on iPad penetration in both education and enterprise markets to drive further sales.

Creating a new market is generally much harder and a slower process then entering a pre-established market, especially if you are targeting government and enterprise. You have to consider the budgeting cycle and the internal decision process is longer and more complex. It is hard to prove benefit when there aren’t many examples to draw from. We all know that government and enterprise tend to be laggards in technology adoption due to the time they take in careful consideration.

It’s going to take a bit more time.

Why the Fallacy of Android-First

Dave Feldman wrote a very interesting post on TechCruch (“The Fallacy of Android-First”) where he details why the startup that he founded (Emu) launched Android-first, but after sixteen months, they reverted to iOS only.

There are many interesting points in this post. Here, I would like to categorize his findings and to draw a typical general picture of an innovative market leader and a follower frantically trying to catch up.

The allure of Android

Followers generally try to catch up with the combination of a) price and b) more features. With both more features and a price benefit, it seemly looks like the follower’s offering is better in all accounts. However, if you look under the hood, you often find that the features haven’t been well thought out and that they are actually quite useless.

In comparison, leaders usually focus on actual benefits. If they succeed, the leaders prevail and the market separates into low-end which becomes a price war, and the high-end which is rather stable. If leaders fail and are dragged into the price war, then the market loses the leader and everybody chases features that look good on paper, but are not beneficial to the user.

This is a common theme in many markets. It is also what is happening in mobile.

The Dave’s article, he mentions the allure of Android as the following;

  1. On Android, you can replace the built-in Messages app, while still using the underlying SMS/MMS medium, saving the effort of building a communication service.
  2. Android apps were supposedly easier to build.
  3. Fragmentation was supposedly becoming less of an issue.

The reality

The reality was that allure #1 was a feature that was not well implemented. It was so bad that it was close to unusable from a developer point of view.

  1. Android’s SMS APIs are not well documented. The APIs have also changed over time.
  2. Individual apps can block each other from receiving SMSes. This means that the presence of other apps affects whether your app works or not.
  3. Other issues with MMS make it a nightmare to support.

So the feature was there on Android, but it was very difficult to use in the real world.

There are also other issues described in the post and they basically say the same thing; Android has the features and support, but it’s often not very useful.

The lesson

The lesson is that features which the followers implement are rarely useful. You can’t trust them to have thought out all the issues. Although leaders will also fail sometimes, followers are much more likely to introduce useless features.

Google Plus is an SEO Tool

There was a good article on the New York Times about Google’s spooky social network, Google Plus.

Some quotes from the article;

Thanks to Plus, Google knows about people’s friendships on Gmail, the places they go on maps and how they spend their time on the more than two million websites in Google’s ad network. And it is gathering this information even though relatively few people use Plus as their social network. Plus has 29 million unique monthly users on its website and 41 million on smartphones, with some users overlapping, compared with Facebook’s 128 million users on its website and 108 million on phones, according to Nielsen.

Starbucks, for instance, has three million followers on Plus, meager compared with its 36 million “likes” on Facebook. Yet it updates its Google Plus page for the sake of good search placement, and takes advice from Google representatives on how to optimize Plus content for the search engine.

“When we think about posting on Google Plus, we think about how does it relate to our search efforts,” said Alex Wheeler, vice president of global digital marketing at Starbucks.

How Many Companies Use Lotus Notes

In understanding the process of innovation and technology diffusion, it is important to analyze how long it takes for an outdated and unpopular technology to actually be eradicated from the market.

That is why I am interested in knowing how many companies use Lotus Notes there days.

I’m having difficulty finding credible information, but what I’ll find, I’ll post here.

From the salesforce.com blog;

Well, the reality is that Notes penetrated companies pretty darn well back in the 90’s (like a Nirvana song permeated the radio waves), and the departmental applications sprouted and filled all the holes that IT often couldn’t get to. Love it or hate it, Notes became a mainstay platform of the enterprise. In a recent survey we did of our Dreamforce 2012 attendees, we found that 73% did indeed still use Lotus Notes. And that 70.3% were considering replacing Lotus Notes, the majority within the year.

From an old source but which mentions that companies might not be using Lotus Notes for Email, but for other stuff, which would make a market share comparison rather difficult;

Jim goes on to explain, that by a wide definition of “use Lotus Notes and Domino software” even Microsoft would be a Notes customer.

Google-Motorola Confusion

I’ve been trying unsuccessfully to find any indication of how the Moto G, the low-cost smartphone from Motorola is selling. I’m interested in how well their strategy, that is selling mid-spec smartphones at low-end prices by foregoing profits, is working. I strongly suspect that it is not, but I need data to verify that.

In the meantime, I found this funny article by Rolfe Winker for the Wall Street Journal. It describes very well the almost comical confusion and utter lack of coherent strategy at Google-Motorola. I’ve quoted some parts of it below.

The price cut on the Moto X extends a strategy laid out by Motorola Chief Executive Dennis Woodside to undercut rivals. Motorola’s lower-end Moto G phone, released in November, starts at $179 without a contract in the U.S., compared with $250 for a comparable Samsung device at Verizon. VZ -0.48%

OK. So the strategy is to undercut rivals on price.

Analysts say that low off-contract pricing is likely to have a bigger impact outside the U.S., where a larger share of smartphone users buy their phones directly, rather than by signing wireless contracts.

Now such a strategy will work best outside of the U.S. It won’t make much difference in the U.S.

The Moto X is sold only in North and South America, and the new lower price is only available in the U.S. for now.

Uh oh. But the lower price is only going to be available for the U.S.

Nice.

P.S.
In the last part of this article, there is a quote from an analyst;

Brand, distribution and product breadth are critical to sales volumes, and here Moto falls desperately behind [Samsung] still.

If this is true and I suspect that it is, we can also expect the sales of the Moto G to also be rather insignificant, adding to the long list of Google branded products that saw major hype, but failed to sell well.

Why Distribution Channels Matter

Distribution channels matter a lot in selling most kind of products.

This is why Google Nexus products fail to sell well, Samsung is so strong in Android smartphones, and why the Moto G is doomed to failure.

Micheal Fisher wrote a great article a while ago about this.

“Should I Trust My Phone Salesman?”

in the United States, manufacturer brands succeed or fail on the backs of the salespeople. And a salesperson who knows nothing about a platform isn’t going to recommend it.

In the US, at least, a phone lives or dies by the retail staff in the carrier stores. Nothing else matters. Not price. Not features. Not apps. If the retail staff doesn’t like you… you die.

I think people are worried that the iPhone is getting ‘sold against’ in stores – that we’re talking people out of the iPhone. And that is true.

Market Leader Mentality vs. Follower Mentality

When comparing market leaders and followers, I often notice large differences in how they view the market and future innovation. These have large implications on their respective strategies and what products they introduce.

Market leaders look for ways to expand the market. They notice new applications that will bring in new customers. They simplify the product so that it becomes accessible to a wider audience. They often redefine the market to look for more room to grow.

Followers look for ways to take customers away from the leader. Instead of expanding the market, they try to attract customers with higher specs and lower costs. They tend to be oblivious to whether the specs are truly useful or not and are more focused on specs that attract the attention of prospective customers.

By market leaders, I am not referring to the companies with the largest market share. I am using this term to identify the companies that define the market and how it will evolve. These are often the companies that initially created the market and are also the companies that have a strong brand. Sometimes a market will no longer have a leader. Sometimes a market leader will not have the largest market share. If a leader is present however, that is the company in which the vast majority of innovation will be found.

What is interesting is that market leaders in a certain industry segment are also often leaders in another. For example, IBM was the undisputed leader in mainframe computing. It also continued to be the leader in personal computing. Even though it found its market share eroded by Compaq and other IBM-clone vendors, it still was the leader in laptop computers with the ThinkPad line. The ThinkPad brand was strong, not because they had the laptops with the highest specifications or because the laptops were the thinnest and the lightest. People bought ThinkPads because they trusted IBM to make the decisions that meant most to people in business. Decisions around the keyboard, pointing device, durability and all the things that do not make sexy specifications. IBM knew what business people really needed and made decisions that really counted for getting work done.

In comparison, IBM-clones were more focused on low-price and high specifications. Decisions were made to bump up the specifications while keeping prices low. The actual usability of the keyboard or pointing device was often neglected, because they don’t add to the specs. IBM-clone vendors had little regard for actual business needs.

When discussing Apple and trying to figure out what their next move will be, it is important to understand that there are these two completely different mentalities in the market.

Apple obviously has the market leader mentality. They have continuously expanded the personal computer market, first the the Apple II, then the Macintosh. After Steve Jobs’ return, the iPhone and then the iPad. All of these products brought new customers and completely new applications to personal computing.

Looking at the smartphone and tablet market, all the other vendors, including Google appear to have the follower mentality. Google copied Apple’s touch user interface and then attempted to gain market share by providing it for free. Google also copied Apple’s AppStore concept which allowed users to download and purchase software easily and cheaply. Samsung copied Apple’s designs and created phones that had very powerful CPUs and large screens; sexy specifications. Both Google’s and Samsung’s penchant for being a follower actually goes back before Android. In fact the original prototypes for Androids were Blackberry clones. Also if you look at the designs for Google Docs, you can easily identify the similarities with Microsoft Office. Google Docs is an attempted clone of Microsoft Office that is free to use.

It has been discussed that Apple should and will offer a larger size screen for the iPhone. This is typical follower mentality. Large screen phones are succeeding in the market and maybe eating away at Apple’s market share, hence Apple needs a large screen phone. This conclusion may or may not be true, but this is not really the point. The point is that because Apple has market leader mentality, it does not really care about specs. What market leaders often care about is whether or not large screens will allow new applications and expand the market as a whole. I doubt large phones will.

When we realize that Apple is more concerned about expanding the market rather than fending of Samsung, then we can make very different predictions. First of all, expanding the market means much more than selling iPhones in China. It means making iPhones and other iOS devices a larger part of our lives. It means truly integrating with cars and many more devices. Importantly, I suspect that it means iPhones should be smaller and lighter so that we can take them along even when we are not wearing baggy jeans or carrying a purse; for example, when we go jogging.

Going further, it is possible that Apple is not thinking of smartphones in the same way as they did in 2007. Steve Jobs introduced the iPhone as a “Phone, an iPod and an Internet communicator”. I suspect that Apple might have gone beyond this definition and moved towards something different. The clue is that they included the M7 chip inside the iPhone 5s. The M7 chip is something that most people would expect to find in a wearable device. It is therefore possible that they now define the iPhone itself as the wearable device that everybody is clamoring about. If so, the direction would be to make the iPhone as small as possible.

Chromebooks Are Competing With iPads

Gregg Keizer of ComputerWorld wrote an article that corrected the misinformation spread by many journalists/bloggers a few weeks ago regarding Chromebooks sales in the “commercial channel”.

The initial report by Stephen Baker of NPD was released on December 23rd, 2013 and mentioned that Chromebooks accounted for 21% of all U.S. notebook sales through the commercial channel for the first 11 months of 2013. The important word is “commercial channel”. Stephen Baker defines the commercial channel as follows;

Baker defined the commercial channel as the distributors — like CDW and Ingram Micro — that many businesses, government agencies, schools and other organizations use to buy personal computers and other devices. His data did not include consumer sales, nor PCs sold by OEMs, such as Dell and Hewlett-Packard, directly to businesses.

I analyzed Baker’s data to find that “commercial channel” is only a fraction of total PC sales in the U.S., and that this report does not directly show Chromebooks gaining popularity in the mainstream market.

The question is then, what does this report mean for the mainstream market. Stephen Baker provides some clues;

“On the subject of Chromebooks versus clamshell notebooks, I don’t subscribe to the idea that [the former] are taking sales from Windows,” Baker said. “In my view, they are just as likely, actually more likely, to be taking sales from Android tablets or iPads, or just expanding the market than they are taking sales from Windows PCs in these business-to-business and education markets.”

What Mr. Baker is saying is that education customers who eventually deploy Chromebooks were not looking at Chromebooks vs. Windows but rather Chromebooks vs. iPad. The decision was whether to purchase large numbers of Chromebooks or whether to purchase iPads. A simple Google search actually pulls up a lot of educators discussing this topic. It apparently boils down to Chromebooks having a physical keyboard, and iPads having a much more immersing experience.

The reference to “expanding the market” is probably about schools deploying computers on a scale so that each student has a computer of their own. This apparently has only become possible with the large reductions in hardware costs and is now a reality for an increasing number of schools. Growing the market is likely referring to how iPads and Chromebooks are helping to make this happen.

As to whether gaining a foothold in the education market will eventually enable Chromebooks to move up-market into general-purpose computing devices, there is very little precedent for that. Apple used to be very popular in education, but that didn’t help it grow market share in businesses or consumer markets.

Apple iPhone Strategy in India

Although I have very little knowledge of the cell phone market in developing countries, it seems quite evident that Apple’s strategy is not to sell cheap phones, but to sell the best phones that you can buy at cheap prices.

Here are two articles that describe the situation;

  1. iPhone 5s, iPhone 5c free in India on a two-year contract with RCom: Report
  2. Cost of Cool in India? An iPhone

From the first article;

Under the subsidy scheme, the 16GB version of the iPhone 5s and iPhone 5c would be available at zero upfront cost, with a monthly fee of Rs. 2,500 for the iPhone 5c and Rs. 2,800 for the iPhone 5s, in lieu of which consumers will get unlimited voice calls, SMS and 3G data. It’s not clear if a fair usage policy would be applicable. Consumers would be locked-in into a 24 month long contract and would not be able to switch their telecom operator before that, according to the report. The non-contract costs for the 16GB iPhone 5s and iPhone 5c are Rs. 53,500 and Rs. 41,900 respectively.

RCom will reportedly offer the subsidy scheme to credit card users and has tied up with banks, including ICICI Bank and HDFC Bank for the same to ensure that consumers don’t dishonour the contract.

A major reason for the success of Apple’s iPhone in first world markets is the operator subsidy model that allows customers to pay a small (or no) upfront cost for the phone and pay a fixed monthly amount in exchange for services, under a contract that ties them up with the operator for a fixed period. Operators have always been hesitant to offer subsidy schemes as India is majorly a pre-paid subscriber market and it’s hard to ensure that people will honour contracts due to a lack of a centralised credit check system.

Judging from this article, it seems that what was holding the subsidy scheme back was the lack of a credit check system. Apparently, if a good credit check system is in place, then even developing countries can move to the subsidy model.

A subsidy model will enable Apple to sell iPhones at high prices, but still make them affordable to consumers. Effectively, the carriers will pay for the iPhone.

From the second article;

Making the phones cheaper, without appearing to be cheap, is enticing a new category of young, brand-conscious Indians, like Chaithra Nayak, to switch to the more expensive iPhones.

The tactics described in the second article are financing, trading-in of the customers older phone and subsidies.

This is a good example of Apple “Thinking Different”. While everybody else thinks Apple is doomed for not offering a cheap iPhone, Apple seems to be taking a totally different direction. Apple’s strategy is to either use financing or to get the carriers to subsidize the price, and Apple seems confident that even developing countries will eventually move in this direction.

It’s taking time, but I think it’s working.

ブラウザの使用率シェアのバイアス

以前に「ブラウザの使用シェア統計はどれが正確か?」という書き込みをしました。ブラウザの使用率統計としてしばしば引用されるNetMarketShareStatCounterのどっちが信用できるかについての内容でした。

NetMarketShareもStatCounterもアクセスログ分析ツールです。Google Analyticsと同じようなものです。そしてNetMarketShareやStatCounterのツールが導入されているウェブサイトのすべてからデータを集めて、ブラウザの使用シェア統計を算出しています。

しかしここが大きな問題です。ウェブに関わっている人は一人残らずGoogle Analyticsのことを知っていますが、NetMarketShareにしてもStatCounterにしても、全く聞いたことがない人が多いのではないでしょうか。

それもそのはずです。Wappalyzerというブラウザ拡張機能を使って調査されたデータを見る限り、68%のウェブサイトはGoogle Analyticsを導入しているものの、StatCounterはわずか2%のサイトしか導入していないのです。NetMarketShareはこれよりもさらに導入数が少なくなっています。つまりStatCounterおよびNetMarketShareはウェブ全体から見ると極小さい標本サイズしかなく、なおかつ標本の中にバイアスがある可能性が高いからです。

したがったこのような統計を使う場合は、そういうことを心にとめる必要があります。私は以下のように注意しています。

  1. シェア(何%)の絶対値は信用しません。例えば2013年12月時点でInternet Explorerのシェアが57.91%というのは基本的に信用できません。またChromeの16.22%も絶対値として信用しません。原則として傾向だけを見ます。
  2. 複数の国を合算した数値は信用しません。国によって標本サイズが違うからです。StatCounterはこのあたりを公開していて、例えばトルコの標本サイズが異常に高いことがわかります。したがって合算した数値よりは、個々の国の数値の方が意味を持ちます。それでも個々の国を見るのではなく、複数の国を見て傾向を判断することが必要です。
  3. 時系列の変化はある程度信用できますが、実際にグラフを見てみると不思議な挙動が起こることが頻繁にあります。したがって時系列の変化も鵜呑みにできません。

一方でこのようなバイアスを全く考えないで記事を書いているブロガーが非常に多いので、そういう記事は眉唾ものだと思って良いでしょう。