Monday, 8 November 2010

The battle for mobile phones

It's crystal ball gazing time again, this time in the mobile phone market.
I've recommended a phone once before, but I was wrong. Sorry about that. I'm right this time though, honest.

That LG, which I described in my previous post has been replaced by an HTC Desire HD and it's partly the experience of LG's effort that has inspired this post.


I'm going to stick my neck out and try to predict where the cards will fall in the new world of smartphones...

Never mind the individual companies in the market right now, there are three types of company currently trying to gain the upper hand on (and the most revenue from) that clever little device in your pocket.

- The manufacturers. HTC, Nokia, Apple, Motorola (please God, not a Motorola)...

- The carriers. Vodafone, O2, Orange...

- The operating system providers. Apple (again), Nokia (again), Palm, Google...


I'm not going to write an essay on Android vs. the iPhone OS. There are loads and you've read them already. Either that or you got bored before you got this far.

Let's keep it relatively short and sweet - out of the three above, who's going to win?

On simple handsets - the ones that make calls and send texts and not much else - the carrier wins. It's a small prize, but they can try to bundle in other services (home phone, broadband etc.) and can market to you in a limited way through texts. The manufacturers have got very little potential to play with because the person who uses this sort of phone really doesn't care who made it, or what it can do beyond occasionally sending a text or two. It also doesn't have an operating system worth getting excited about because it only needs basic functions.

The big prize is the smartphone. The one where you can be sold games and applications and be shown lots of adverts for lots of shiny new things that you need to buy right now. That you can actually buy right now, on your phone.

Control of the smartphone is through the operating system that it runs. This is what controls the ad platform and dictates who gets the revenue from the app store.

The carriers drop out of this fight in the first round. They don't make operating systems for phones, they pay to plaster their branding over operating systems that other people build. You might get a smartphone with a Vodafone logo on it, but Vodafone won't get the new revenue streams, just the money they've always got from carryng your calls (and texts and data.)

It's not a bad place to be. In the Gold Rush, prospectors gambled on the chance of making a lot of money, but some people made guaranteed fortunes. They sold picks and shovels to the prospectors...


But back to the theme in hand: Who gets the new revenue that has opened up in the mobile market? It's whoever makes the operating system. My prediction is that the traditional handset manufacturers still attempting to make an OS for their smartphones - Nokia , Palm and RIM - are doomed to fail.

They don't have the critical mass to succeed because their OS, with its limited distribution, won't attract so many software developers to their app store. For developers, the potential market (and revene) from programming for a Nokia is smaller. As a user, you want the phone that does all of the things that you need and that means lots of apps.

What about Apple? Well, they're obviously different. Apple are succeeding where Nokia aren't and the difference is that they're coming into the market with an expertise in building software as well as hardware. Reception issues aside, building the handset, or getting a manufacturer to build you one, is easier than building an OS now that Apple have set the useability bar so high with the iPhone OS.

Handset manufacturers used to be able to compete back in the days of the N95, when good was good enough, but not any more.

So we've got a battle between two OS manufacturers - Google and Apple - who have just been joined by Microsoft with Windows Phone 7.

Google are going to win. Again.

iPhone OS is brilliant. It's an amazing bit of software. But in terms of holding the largest market share, it's not going to win for two key reasons: It's only available on iPhones and iPhones are expensive.

Smartphones will come to mirror the PC market - they are fully fledged computers now after all. In the PC market, Apple has around 5% market share globally and 11% in the US. They're running the same strategy in mobile phones that they run for computers - high end, beautiful products at a premium price - and they'll end up with about the same market share.

So we're down to Google and Microsoft building an OS running across many handsets, which allows allows developers to reach a large market with their software. In this shootout, I'm backing Google. Microsoft seem incapable of producing simple, easy to use software that runs fast - which is the pre-requisite on a phone - and I can't believe Windows Phone 7 will be any different. Try Skydrive for a recent example, though you might have to wait for it to load. It's so close, but just not right. Neither is the New Busy.


I'm aware that I've missed out Blackberry. Blackberry, in my humble opinion, are the next Nokia, and by that I mean that they're screwed. Their handsets used to have the USPs of a proper keyboard and push email but the first of these has gone and the second is not far behind. RIM also suffer from Nokia's problem that an ok user experience is no longer good enough - the Blackberry interface is barely passable.

Dell has just dumped Blackberries in favour of handsets that use wireless connections (free) rather than RIM's servers (expensive) and I can see other businesses going the same way. Most business users don't really need instant email away from the office; a handset that stores up replies and sends them when it finds a wireless connection is more than good enough.

And that will do for today. I'm off to play with Google Goggles.

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