Starting with CES in early January and through the Mobile World Congress last week in Barcelona, the mobile industry has been in a feeding frenzy of announcement activity. At CES, it was centered on Android-powered tablets. During the Mobile World Congress, it was about the big Microsoft/Nokia deal and vendors scrambling to differentiate their Android handsets.
But behind all these announcements, there is a broader shift going on to what Forrester calls the mobile app Internet and the accompanying broader wave of app development and management. We have just published a report that explores the different vectors of innovation and sizes the mobile app Internet from an app sales and services opportunity.
The report looks at the three factors beyond hardware that will drive the market:
Even at $2.43/app, the app market will emerge as a $38B market by 2015 as more tablets and smart phones are sold and the number of paid for apps per device increases due to improvements in the app store experience.
A perfect storm of innovation is unleashed by the merger of mobile, cloud, and smart computing. I see innovation coming from the combination of apps and smart devices like appliances and cars, improved user experience around the apps by better leveraging the context from the sensors in the devices, and enabling the apps to take advantage of new capabilities like near field communications (NFC) for things such as mobile payments.
The consumer appetite for smartphones shows no signs of slowing in 2011 and neither does the growth of the mobile channel at leading retailers. eBusiness leaders, who have been focused on replicating the online store experience on mobile are now turning their attention to new mobile innovations that will not only drive revenue growth for the mobile channel but create an immersive multichannel consumer experience that bridges the gap between online and in-store shopping.
Location-based commerce is one such innovation that is gaining interest among eBusiness leaders responsible for mobile strategy. Some retailers have experimented with third-party location-based services including foursquare and Shopkick to roll out location-aware mobile coupons. A few retailers have innovated further and are developing location services into their own mobile shopping apps beyond the basic "store finder" feature to create new ways to interact with shoppers via their smartphones. With my latest research, Location-Based Commerce: An Evolution In Mobile Shopping, we look at how consumers' mobile shopping habits, location technology available in newer generation smartphones, and mobile push notifications have matured sufficiently to empower a new set of location aware multichannel experiences. Retailers are using geo-fences defined in the vicinity of their brick-and-mortar stores to attract nearby consumers by sending relevant, timely, and location-aware messages to customers' phones.
Today’s deal between Microsoft and Nokia acts as a temporary lifeline for both companies. It gives Microsoft access to the largest handset provider, and it allows Nokia to defray some of its operating system development costs. I have just finished a report, “Mobile App Internet Recasts The Software And Services Landscape,” that will hit the Forrester site on Monday, February 28.
In the report, Forrester states, “The explosion of app innovation that started on the iPhone and then spread to Android devices and tablets will continue to drive tech industry innovation and have far-reaching pricing and go-to-market implications for the industry. Three different vectors of innovation that have been percolating under the surface will combine over the next 3-5 years. Mobile, cloud, and smart computing together will foster a new set of 'intelligence everywhere' apps.”
And based on that research, I believe that deal does not address the biggest issue for both companies – attracting apps and app developers. For Nokia, it now sends the message that Symbian and MeeGo platforms are no longer the long-term app focus. For Microsoft, it creates an eight-to-twelve month void/pause as developers wait to see what the new Nokia hardware looks like.
At the current rate that Apple and Android are recruiting third-party and enterprise app developers, this could mean a gap of 100,000-200,000 applications by the time the first Nokia Windows Phone device ships. This is likely a lead that even the combined resources of Microsoft and Nokia could not bridge.
Bear with me one second. I am not denying the fact that iPhone owners are the heaviest users of mobile services. I am just saying that there are plenty of opportunities in the mobile space on other smartphone platforms and with selected audiences. Mobile is not just about applications or mobile Web sites. Even good old SMS can be powerful depending on the objectives you have set and the audiences you want to interact with.
What’s certain is that iPhone owners can only be a subset of your customer base. Only 2% of European mobile users report having an iPhone as their main mobile phone. Does that mean that there are no opportunities to target more mainstream audiences? Not at all.
A much larger near- and medium-term opportunity exists within other groups — particularly among young consumers, business users, and consumers with flat-rate data plans — as well as, increasingly, with new, competing smartphone platforms. In fact, if you’re not targeting them, you’re neglecting the majority of your customer base — including many consumers who are mobile-savvy but don’t have an iPhone.
Let’s make this even clearer. 96% of European 16- to 24-year-olds do not own an iPhone. Should you avoid engaging with youth via mobile because of that? I don’t think so.
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:
When the Apple iPhone App Store launched a couple of years ago, we saw a flurry of marketing applications released. Some were exceptional. Many were average. iPhone apps were "hot," and consumer brands rushed to build them. They were somewhat expensive with most of the return based on press mentions and buzz. Brands felt that the perception of tech-savviness generated by the presence of an iPhone application would enhance their brand. I think they were right, but soon consumers began to expect iPhone applications. Initally, the iPhone didn't offer much reach. The iPod touch helped build the numbers. Apple's most recent announcement put total sales at over 80 million. Pretty good.
Two years ago, consumers mostly used their cell phones for communication. They also listened to some music and got a bit of weather, traffic and news. Now ... they do just about anything. They shop. They research products. They blog. They look up recipes. Are they doing so in large numbers? No, not yet. Consumers are a lot more likely to do more complex tasks on smartphones like the iPhone. The stakes are much higher for marketers - the potential return is higher with the ability to generate real leads and sales.
Here we are in 2010. Apple recently announced sales of 1 million iPads. Forrester believes that number will at least triple by year end. Apple has launched the iAd platform and promised consumers an engaging media experience that will include advertising, but not be disrupted by it. iAd includes the iPhone platform. iPads add another dimension or canvas that will unleash advertiser/agency creativity. We are now seeing our first marketing (first perhaps) and commerce (secondary?) applications. They are engaging. They offer rich media. They are interactive. They offer opportunities to link to videos, music, social networking sites, and shopping.
George Colony nailed it when he wrote “the iPad signals the future of software”. So where do smart-device app’s go from here? Basically, any application that focuses on saving people time is likely to be a winner but the biggest game changer will come when consumers start to benefit from customized services that save time and money while increasing brand loyalty. For example, here’s a glimpse into how we might see applications for our phones and tablets evolve to make food shopping and preparing meals at home easier…
Let’s imagine the future of a typical suburban home. In our future world we’ll follow Mr. and Mrs. Smith, working parents with little time to spare.