This week, the iPad app world is frantically sorting through some recent changes in its environment. Last Monday, Apple quietly altered its app approval policies in a way that will make publishers much happier. Specifically, Apple has relaxed control over whether apps can access content paid for outside of the App Store’s purchase APIs. The company has also allowed publishers to price however they want, both outside and inside of the app.
In the same week, FT.com released a subscription-based HTML5 web app intended for iPad users that bypasses Apple entirely, giving the publisher its own path to market that does not depend on or enrich Apple directly. The coincidence of these two events is not lost on most of us industry observers and is the topic of a Forrester report issued by my colleague Nick Thomas last Friday. In it, Nick explains why the FT’s move is probably the first of many such moves by the most recognized publishers, even with Apple’s newly announced policy reversal.
But while publishers figure out their next steps for their content apps, there’s one app that no one is talking about but I believe everyone should have their eye on. It’s the Amazon Kindle app. This app violates even Apple’s revised policies and will soon face a day of reckoning when Apple's June 30th deadline for compliance comes up.
I don’t claim to know Amazon's plans, but I will claim to tell Amazon what it should do:
That's right, I said eReaders. True, it looks like a tablet, runs like a tablet, and delivers a lot of the value that tablets deliver, but the Nook Color's 1.2 upgrade (which is actually a step up to Android 2.2; don't let the numbers confuse you too much) is really a foreshadowing of the future of eReaders, not the future of tablets.
First, the facts. With the new upgrade that will be gradually pushed out to all existing Nook Color devices for free over the next few weeks (or you can download now at www.nookcolor.com/update), the folks at B&N have added some very useful features: an integrated email client, Flash 10.1 support, a curated Android app store (see sidebar), and an improved user experience through a myriad of tweaks. These upgrades make the Nook Color look more and more like a tablet, with a very attractive $249 price point to boot.
Must the iPad now cower in fear? No, not really. Because even at this price point, the Nook Color remains a smaller, less powerful tablet than the iPad. And as we've seen, the range of competitors coming in after the iPad's territory are coming in at higher prices with more powerful features (for example, last week I dropped $529 for an LG G-Slate from T-Mobile with 3D video camera and 4G data plan). The tablet market is gradually moving into higher-power features, not lower-power experiences.
This is Peter O’Neill and I had a very busy Forrester Marketing Forum last week in San Francisco: two presentations (well, two halves, I suppose, because I was the co-presenter) plus dozens of one-on-ones with Forrester clients. While I would have preferred to talk about differentiation in the customer lifecycle, the theme of my first Forum presentation and my most recent report, the incorporation of social media into the marketing mix continues to be the hottest topic for most tech marketers. It was exciting to be able to share our brand new Tech Buyer Social Technographics data which has just come in. BTW, the level of social media activity in European buyers is still ahead of American buyers – I will be presenting the European data in my planned Forrester teleconferences on May 9th: once in German for local clients, prospects and press; and once in English for other Forrester clients.
Today, Amazon announced the Amazon Cloud Drive. I think it is the first salvo in a series of steps that will lead Amazon to compete directly for the primary computing platform for individuals, as an online platform, as a device operating system, and as a maker of branded tablets.
Much of the attention is going to the Amazon Cloud Player, announced at the same time, which enables customers to stream music stored in Cloud Drive – Forrester’s Mark Mulligan blogged about that for Consumer Product Strategists (Amazon Beats Apple and Google to the Locker Room). But the general purpose design of Cloud Drive, combined with the long-term opportunities for personal cloud services, lead to a really interesting set of possibilities and insights into Amazon’s long-term strategy for Vendor Strategists trying to sort out the technologies and players of next-generation personal computing platforms.
Tablets are a red hot topic since the launch of Apple’s iPad more than a year ago. Tablets are the most visible aspect of a broader topic on the minds of vendor strategists – the consumerization of IT. Consumerization is defined variously as using personal devices for work, pay-per-use payment models, spending personal money for work-related cloud services, and employee self-provisioning of IT capacity outside the oversight of IT. In our annual Forrsights Hardware Survey, Q3 2010, we asked IT infrastructure buyers responsible for supporting end user computing about a variety of topics related to consumerization of IT and learned that:
The IT organizations in 26% of enterprises (firms with 1000 employees or more) were planning to implement or had implemented general purpose touchscreen tablets such as the Apple iPad. Of that total, 4% reported they’d already implemented, and 17% were already piloting by Q3, 2010, approximately 6 months after the launch of this brand new category. SMBs, firms with 999 employees or less, were lower at 18% planning or implemented.
Only 2% of firms, large and small, reported implementing or piloting bring-your-own-PC models, despite several years of hype among the desktop virtualization software vendors about this model. We expect this PC deployment model to grow, but it’s not a broad trend yet.
Firms are using more consumer-style Web applications on PCs, with 84% firms increasing their use of Web applications. But they’re not abandoning locally installed applications. 55% of firms are increasing or staying the same on their use of installed applications, while only 4% are seriously reducing use.
At yesterday’s HP Summit 2011, CEO Leo Apotheker made a public case for personal cloud — online services that work together to orchestrate and deliver work and personal information across personal digital devices (such as PCs, smartphones, and tablets). For people planning strategy at vendors, what are the implications of personal cloud? End users will need help getting access to their information across their devices seamlessly.
One type of information ripe for help from personal cloud services is contacts or address books. Every person using a mobile phone (251 million in the US, most of which can do email) confronts the issue of how to get all their work and personal contacts into a new mobile phone. Can they simply sync with an existing source? Do they have to export? Or <shudder> re-key them?
We’ve been researching how many people are actually using a sync service or would be interested in using one. The market for contact or calendar sync is vastly underserved today: Only 4% of North American and European information worker respondents (those using a computer 1 hour or more per day) report that they used a website or Internet service that required a login for contact and calendar synchronization, integration, or enhancement for work (Source: Forrsights Workforce Employee Survey, Q3 2010).
Yet, when Forrester asked US consumers whether they identified with the statement, “I have several electronic address books and can't always find the contact I want when I want it,” only 4% chose that as a frustration or concern that they experience with the information they’ve stored in their PCs, devices, online services, or mobile phones (Source: North American Technographics® Omnibus Online Survey, Q4 2010 [US]).
At first blush, the decision by Warner Bros to rent movies on Facebook seems a little out of place. Sure, people watch a lot of video (mostly YouTube) on Facebook, but they don't go there to watch two hour movies, right? Well, for now they don't, but with some tweaks, they could start doing so very soon.
As my colleague Nick Thomas said yesterday in his blog post about Facebook's potential as a premium content platform, the future of traditional and social media are likely to be intertwined. Most of us, myself included, have been imagining them blending in the living room, where viewers can access Facebook on any number of devices while watching a movie on the TV. But would people be interested in exactly the reverse? When I checked in on Facebook I found the first evidence that the answer is yes.
You see here that within 11 hours of being posted, 1,914 people liked the idea of watching The Dark Knight on Facebook. This is compared to the 1,433 people who have liked the App Edition of Dark Knight that was announced nearly a month ago. (Don't try this at home; for some reason, the post announcing Facebook viewing has since been removed and I can't check for more recent numbers.)
Most of the hype in advance of today’s Apple media event is rightly about a new iPad. Sarah Rotman Epps will post on her blog about the new iPad for consumer product strategists after the announcement. I’m focused on the published reports that Apple’s Mobile Me service will be upgraded. I cited Mobile Me as an example of emerging personal cloud services in a July 2009 report, and I’m working on a follow-on report now. Mobile Me is Apple’s horse in a contest with Facebook, Google, Microsoft, and others, to shift personal computing from being device-centric to user-centric, so that you and I don’t need to think about which gadget has the apps or data that we want. The vision of personal cloud is that a combination of local apps, cached data, and cloud-based services will put the right information in the right device at the right time, whether on personal or work devices. The strengths of Mobile Me today are:
Synced contacts, calendar, Safari bookmarks, and email account settings, as well as IMAP-based Mobile Me email accounts, for Web, Mac, Windows, and iOS devices.
Synced Mac preferences, including app and system preferences.
Mobile Me Gallery for easy uploading and sharing of photos and videos.
The most important outcome of this week’s emerging tussle between Apple and Google is that we are about to have an intense and financially difficult conversation about what a fair price is for delivering customers to developers, publishers, and producers. Economically, this is one of the most critical issues that has to be resolved for the future of electronic content. Very soon, a majority of consumer experiences (that which we used to refer to as the media) will be digital. But not until the people who will develop those experiences have unambiguous, market-clearing rules for how they can expect to profit from those experiences.
The question comes down to this: Is 30% a fair price for Apple to charge? I must be clear about my intentions here. I do not employ the word “fair” the way my children often do. I am not whining about Apple’s right to charge whatever it wants. Apple may do whatever is best for shareholders in the short- and long-run. I argued yesterday that Apple’s recent decision does not serve its shareholders in the long run. Google announced One Pass yesterday – hastily, I might add – in order to signal to Apple and its shareholders that monopoly power rarely lasts forever. But none of that questions the ultimate morality of Apple’s decision or its rights.
I use the word “fair” to refer to a state of economic efficiency. A fair price is one that maximizes not just individual revenue, but total revenue across all players. Such revenue maximization cannot be achieved without simultaneously satisfying the largest possible number of consumers with the greatest possible amount of innovation.
Yesterday Apple announced its intention to tighten its hold on the payment for and the delivery of content through its successful iTunes platform. (I’ll leave off the I-told-you-so; oops, too late.) Apple will require that all content experiences that can be paid for in an Apple app must be purchasable inside the app, with Apple collecting its 30% fee. The app can no longer direct you to a browser or some other means for completing a transaction. Crucially, the in-app purchase offer must be extended at the same price as the same offer made elsewhere. Though the announcement of the subscription model was the triggering event, the policy extends to all paid content.
I do not believe this is where Apple will stop – I personally expect them to eventually deny the delivery of content paid for outside of the app without some kind of convenience charge. But my personal expectations are irrelevant here, because what Apple has done already is sufficient to make providers of content aggressively invest in alternative means to reach the market.
Subscription content services are the lifeblood of the content economy. A full 63% of the money consumers spend on content of all types comes through a renewable subscription (I’ll be publishing this data from a survey of 4,000 US online adults as part of a bigger analysis next month, hang tight). Most of that subscription revenue goes to pay-TV providers, but 17% of it goes to newspaper and magazine publishers, including their online or app content experiences.