Steve Ballmer Is Right: The PC Market Is Getting Bigger

At The Wall Street Journal’s D8 conference in June, Apple CEO Steve Jobs compared the PC to a farm truck, saying that when America was an agrarian economy: “All cars were trucks because that’s what you needed on the farm. Now trucks are one in 25 to 30 vehicles sold.” Whether you think PCs will shrink or grow in importance seems to depend partly on semantics. During the same conference, Microsoft CEO Steve Ballmer countered: “I think people are going to be using PCs in greater and greater numbers for years to come. . . . The PC as we know it will continue to morph form factor. The real question is, what are you going to push.” 

Jobs may not view the iPad as a PC, but we do.

Our view is that the consumer PC market in the US is indeed getting bigger: Over the next five years, PC unit sales across all form factors will increase by 52%. In fact, desktops are the only type of PC whose numbers will be fewer in 2015 than they are today — and even desktops will benefit from innovation in gaming and 3D. We detail our findings in a new report, The US Consumer PC Market In 2015. Clients can read the full report on our Web site, but here are a few key takeaways:

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The Consumer Impact Of An End To "Unlimited" Mobile Internet

Last week, O2 in the UK and AT&T in the US announced an end to "unlimited" mobile data on their smartphone tariffs.

Many have argued -- some discussed with me on twitter last week -- that the impact on consumers will be minimal as very few consumers currently use a greater amount of data than the new data limits. This is only a part of the story. There will be unintended impacts as the new limits will alter mainstream consumer behaviour:

  • The perception of "unlimited" is as important as the reality. Like the word "free", "unlimited" is a powerful word in helping consumers feel sufficiently comfortable to experiment with the mobile Internet. Any sense that a consumer will incur extra costs, or a glacial throttled speed, as a result of using too much data will cause consumers to alter their behaviour. And, as mobile Internet adoption is still relatively small, this could cause a slowdown in usage that will harm the mobile industry. Handset makers will see slower demand for advanced smartphones while operators will see lower revenues, alongside the lower data costs that they so desire.
  • Consumers' expectations have been set by their home broadband experience. Before the arrival of unlimited mobile Internet tariffs three to four years ago, adoption of mobile Internet was tiny. The vast majority of new mobile Internet users never used the older tightly limited mobile data tariffs -- the time when 10Mb was a generous bundle -- but the new consumers that have started using mobile Internet in the post "unlimited" data era have been conditioned by home broadband. In the home, most packages are either unlimited and marketed as such, or so generous with their data limits so as to be effectively unlimited.

 

In a similar vein, I'm unconvinced that the widely publicised AT&T and O2 moves will mean an end to "unlimited" mobile Internet tariffs across the board in Europe. In diverse countries across Europe there is fierce mobile operator competition. The iPhone is non-exclusive in most countries. Other advanced handsets typically enjoy brief periods of exclusivity before being offered on all operators.

This competitive dynamic enables consumers to pick and choose the best offer from the variety available, and so encourages mobile operators to differentiate. O2 showed its hand early with its new iPhone and smartphone tariffs last week, I expect we will see a variety of options from the six operators in the UK that sell the 3GS today or have announced they will sell the iPhone4. In markets with fewer mobile operators -- such as France -- and a lesser competitive dynamic, the range of offers will likely be more uniform.

Google TV Is A Bigger Deal Than You Think

It has only been a few weeks since Google announced it would create a brave, new world with its Google TV platform. In all the reactions and the commentary, I have been amazed at how little people understand what's really going on here. Let me summarize: Google TV is a bigger deal than you think. In fact, it is so big that I scrapped the blog post I drafted about it because only a full-length report (with supporting survey data) could adequately explain what Google TV has done and will do to the TV market. That report went live this week. Allow me to explain why the report was necessary.

Some have expressed surprise that Google would even care about TV in the first place. After all, Google takes nearly $7 billion dollars into its coffers each quarter from that little old search engine it sports, a run-rate of $27 billion a year. In fact, this has long been a problem Google faces -- its core business is so terribly profitable that it's hard to justify investing in its acquisitions and side projects which have zero hope of ever contributing meaningfully to the business (not unlike the problem at Microsoft where Windows 7 is Microsoft). So why would Google bother with the old TV in our living rooms?

Because TV matters in a way that nothing else does. Each year, the TV drives roughly $70 billion in advertising and an equal amount in cable and satellite fees, and another $25 billion in consumer electronics sales. Plus, viewers spend 4.5 hours a day with it -- which is, mind you, the equivalent of a full-time job in some socialist-leaning countries (I'll refrain from naming names). 

Google's goal is to get into that marketplace, eventually appropriating a healthy chunk of the billions in advertising that flow to and through the TV today with such painful inefficiency.

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What's The Future Of Application Stores?

At the beginning of this year, we stated that application stores would continue to flourish, but none would replicate Apple's success in 2010. So far, it has been quite easy not to be proven wrong on this one. Android Market and, to a lesser extent, RIM's BlackBerry App World are growing fast in the US, while Nokia's OVI is performing quite well in some regions. Windows Marketplace is likely to benefit from end-of-year Windows 7 sales, while Samsung Apps are not yet really marketed, not to mention LG's efforts. The Wholesale Applications Community (the operators' alliance) has not yet launched. Global operators have yet to significantly launch their own multiplatform stores. Both approaches (the vertically integrated from handset manufacturers/OS players and the horizontal layer added by operators) are likely to continue to expand this year, making it even more complex for brands and companies launching their own applications. Many of them are starting to realize that there is a world outside of Apple's iPhone and that their app will be lost in a back catalog of more than 200,000 apps if they don't market it. They are starting to wonder how to break the Apple App Store ranking algorithm, how much to invest in the life cycle of their application, and which stores they should target to distribute their products and services. I see a couple of key issues that need to be tackled to seriously address this market opportunity:

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How Do I Get My Customers To Download My Mobile Application? -- ESPN Case Study

I get this question a lot from clients, and I saw a good example today so . . . I thought I'd share. How should we promote our services? Should we use TV? Online? Banner ads on cell phones? What is most effective? The high-level answer is "yes." Most of our clients are pursuing using their existing media -- whether it is ATMs in the case of Bank of America, the Web site for Walgreens, or TV ads by ESPN. Many are also using banner ads on the devices with which their devices are compatible. For example, they buy iPhone ads because the audience is right, and they can connect into the App Store on the application page.

 

Was watching ESPN this morning and saw a commercial advertising mobile TV in preparation for the World Cup.

What they did right and what I liked:

1) Used their existing media (TV) to promote mobile services. They also used an "event" (= World Cup) as a catalyst to promote their mobile TV service. With the World Cup being played in South Africa, there will be games at night, during the work day, and at many other times when people are unable to sit in front of their TVs.

2) The ad on TV gave the viewer context. "When would I use this application?" "Where would I use this application?" The TV ad shows the person switching on mobile video when he gets out of bed, is in the bathroom brushing his teeth, parking his car, and at work. They also demonstrate the quality of the application with zoomed-in views of the video service.

Watching Video While Brushing Teeth

Watching TV at Work

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Windows 7 Tablets From Computex Don't Go Far Enough To Unseat iPad

As Apple announces it has sold more than 2 million iPads (no indication of US/global split), would-be competitors are unveiling their tablets at Computex in Taiwan. With so many products in the mix (and so few on the market), it can be hard for a product strategist to keep up with it all. So here’s Forrester’s quick guide to the tablets that are taking on Apple in the near future (note: this list doesn’t include devices that may have a tablet form factor but are primarily eBook readers, such as Acer’s planned 7” Android tablet. It also excludes tablets that are more rumor than reality. And I know just by putting together this list I will leave some off, and if that’s the case leave a comment and tell me which ones you think I should add. Okay, enough caveats!):

Tablet competitors to iPad: Archos, Asus, Dell, ExoPC, LG, MSI

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