IPad 2 - price points are set for competitors

Today, Steve Jobs announced the IPad 2, the feature list and the prices for the new device.

The main features are sitting in the engine, except the so expected cameras (front and back) that are now on board. But the most important part is the price which stays the same.

This now shapes the market for till end of 2011.
No one can sell a successful tablet more expensive than IPad 2. The only reason buying another tablet than IPad 2 is a lower price.
Let's make a tour of the challenged tablet vendors:
- Motorola Xoom equiped with Android : similar feature set as IPad 2, probably less powerful CPU, certainly poorer batteries and higher price. This one is xoomed to fail.
- RIM Playbook : poorer features, probably less powerful CPU, certainly poorer batteries, same prices as IPad 2. They can perhaps survive focusing on corporate market but it will be bloody challenging and they will eat their margin anyway through rebates on volume based deals.
- Samsung Galaxy : Samsung announced a 10.1 inch in MWC and will announce a 8.9 inch at CTIA end of March. Since Samsung did not yet publish any price, they still get a chance.

Let's take the positive angle. What could be a competitor of IPad 2?
- a device in the range of 300$ or 300€,
- 9 inches minimum,
- a USB able to plug any USB webcam,
- a USB able to plug any USB dongle, even 3G/4G,
- decent screen (could be less robust),
- decent CPU (even slower than IPad),
- WiFi only,
- Android 3.0 Honeycomb on board.

If nobody shows up, IPad 2 will have 90% market share at the end of 2011.
This will strengthen their domination of which they often abuse.

Who'll be the first ? Medion, ASUS, an EEETablet, Samsung, LG, Nokia (just kidding for the last one).

Future will say.

Benoit

A hype revival of vintage mobile video communication in MWC 2011

Let's get back to 2004, the hype in Mobile World Congress for the first time in Barcelona is about video communication. Thanks to 3G and embedded cameras in the mobile phones, people can proceed to a mobile video call from their device. It's huge. Telecom operators imagine gateways to enable subscribers to proceed with video call between a mobile and a PC to compensate the low numbers of nascent 3G phones. Two years after, this turns to be a failure. Damned, consumers are not using it.

Several reasons have been given at that time : cameras not powerful enough, screen definition too low, requirement of "high quality real time bandwidth", low willingness to use due to high intrusiveness and, finally, too difficult to take a continuous movie of its own image in good condition for the other party (sun, image stability, etc...).

2011, Mobile World Congress, perhaps one of the last time in Barcelona. The hype is back on ... mobile video communication. What can explain the revival ?

Some progress have been done on the technology side, especially on the devices now much more powerful in terms of CPU, screen and camera. Moreover, Skype, which has largely contributed to popular usage PC-2-PC of video, is everyday increasing its penetration on mobile phones.

However, the major factor could be the support of the magician Steve Jobs through Facetime, the video communication service from Apple. US investors suddenly start to poor money in these technologies. Of course, these "dollar cow-boys" did not necessarily participated to the hype 8 years ago since US was still at that time an underdeveloped country in terms of mobile usage, fighting to make CDMA EVDO operational.

Despite device technology evolutions and financial support, some challenge remain on the way to a large penetration of this service on mobile phone. Video communication still is intrusive and image stability did not significantly improve when you have your mobile in your hand.
Another main hurdle - requirement for a high quality network - will still exist for several years. Watching Youtube, users can benefit from buffering in the device, which is not possible with real time communication. This thus requires a continuous quality and bandwidth, which is challenging for a good quality. Just have a look on your device how many times you switch from GPRS (G) to Edge (E) to 3G (3G) to HSDPA (H) and you will see the stability of the data network, especially when you move one meter in your office or when your neighbor starts watching Youtube (because you share the cell data capacity with your neighbors, you like it or not ;-).
Moreover, in terms usage, some analysts state that consumers would use the service to show what is around. Capability to record a video and send it by MMS or email (on smartphones) exists for years. MMS video traffic is very low due to high price for upload of large volume. Imagine the price range when telecom operators want to guarantee a higher quality all along the call.
Finally, since telecom operators face problems with huge data traffic generated by smartphones and USB dongles, they will normally price the video call higher than voice call. Who is willing to pay more for a good quality video call ? It's true that Skype video calls are used on fixed Internet but using video or not is always the same zero price. Willingness to pay is probably the final killer of mobile video communication.
And if some operators would offer video call service at the price of voice calls in order to maintain price of a voice/video call revenues, they would significantly increase their cost without increasing the revenues. Better use this bandwidth to offer more low consumption services.

I had the chance to live the complete previous cycle of mobile video communication. We thought at the beginning that we were very successful since we signed a lot of contracts with major telecom operators but consumers brought us back on earth a bit later.
So, if you are in this business, have fun but do not expect your venture to be funded for a long time. Dollar cow-boys will probably stop soon pooring money in bottomless pit when they will discover the lack of fruits and remaining hurdles of previous experiences.
There are probably much better ideas for new telecom services, focused on low bandwidth for higher profitability of the whole value chain.

Future will say.

Benoit Quirynen

AOL acquires The Huffington Post - capitalism against illusion of freedom

AOL has acquired this week The Huffington Post for $315 millions.

The Huffington Post is a kind of newspaper written by citizen bloggers. AOL expects to sell ad space around what became a popular real estate. As outlined in The Herald Tribune by David Carr, it's funny to see that all these bloggers have created value for Miss Arianna Huffington.

A lot of this content is created by citizens, inspired from other articles in paid newspaper (as this one ;-). Before acquisition, it was difficult to attack a company with no fund. Tomorrow, shooting for the 2.2 $B from AOL market capitalization risks to tease a lot of content providers willing to protect their assets and value their content.

Moreover, now that citizen bloggers know they directly feed advertising revenues of AOL through their posts, they will perhaps not demonstrate the same appetite to contribute ... at least on this particular real estate. Of course, AOL can pay the best contributors but the relationship then becomes commercial with a totally different mindset.

On the other hand, will readers continue to absorb this content the same way since the spirit has evolved ?

Anyway, this move is the demonstration of capitalism against feeling of freedom. And the most cynical is not AOL which pays money but Ms Arianna Huffington who receives money valuing the efforts from a lot of others.

Will citizen bloggers go on supporting this attitude ? Will readers change their behavior ? It's a good test for our whole society.
Future will say.

Benoit Quirynen

France : VAT increase can turn to a free IPhone for consumers

In France, government has increased VAT rate on Internet access from 5.5% to 19.6%. Based on this increase, most of telecom operators (Orange, SFR, Bouygues) increase their price to more or less reflect the VAT increase.

However, according to this site (http://eco.rue89.com/2010/12/30/mobiles-internet-et-si-on-resiliait-tous-nos-abonnements-182755), this price increase is considered as a possible breach on contract. Consumers who contracted a package including a mobile phone with a subscription are now allowed to keep the phone, stop the contract and ... re-initiate a new contract possibly including a new phone. So the expensive I-Phone acquired a few weeks ago within the scope of a contract can become yours ... and you can get a new one, restarting a new contract.

That's where sponsoring (or bundling subscription and phones) of mobile phone for recruiting new subscribers of expensive subscriptions or membership can turn to become very expensive for operators.

In a world of expected continuous inflation during next years, telecom operators would be well inspired to better study their pricing, contracts and bundling strategy instead of applying linear changes. As consumers, we should probably be even more careful reading terms and conditions in the future.

All this clearly benefits to mobile phone manufacturers. Apple, Samsung, Nokia and the likes but also Google through Android could accelerate their sales in France beginning of this year if this trick turns to be applied by a lot of consumers.

Price increases are also announced in Belgium. Will the same apply ?

To be continued.

Benoit Quirynen

Microsoft Surface - which use case ?

This week-end, I had the opportunity to test Microsoft Surface during "salon de l'éducation" (education fair) in Namur - Belgium. Microsoft Surface is a kind of large horizontal touch screen (30 inches) that you can lay on a table.

Touch events are detected through infrared, with the capability to capture a lot of simultaneous events and gestures. It's also possible to lay objects, leading to interactions through NFC or SRW.

The screen size yields quite high definition for pictures but the processor is strong enough to smoothly handle this (far better than IPad Mobile Safari for very large images ;-).

Touch detection and gestures were sometimes hazardous but this can probably be sorted out through more frequent usage (as it is for any new device, especially the touchscreen ones).

Demo applications were quite diverse:
- an interactive map,
- picture gallery,
- quite basic educative application,
- mind-mapping brainstorming application,
- weather forecast (as on all devices),- ...

At this early stage, the price is obviously irrelevant (>10000€). This depends on volume.

Some questions still resist to this demo:
- would people actually use this ?
- in which environment (home, office, hotel, school, restaurants, hospital, industry, war rooms, senior residence, etc...) will it be best applied ?
- for which kind of usage (learning, gaming, collaborative working, leisure, etc...) ?

Since demonstrated in a education fair, I guess some people imagine that small groups of children will interact around this table to learn together. A similar product - but far less powerful- was demonstrated by another vendor, apparently restricted for drawing usage.

Collaborative learning will certainly evolve and is a very nice topic to study. However, I'm not sure Microsoft Surface  (and its competitors) will play a massive role in this market.
As human beings, we naturally prefer to watch screens with at least 30° angle. Moreover, the size of the screen naturally limits number of persons who can interact. So I only see this as applicable for some restricted usages, preventing rapid significant price decrease.
Just feel free to contradict with good use cases !

Let's be fair. Even if this device would perhaps not have a bright future, let's recognize that Microsoft invested and contributed to explore this track, helping the world to progress on a very positive and promising topic.

To be continued ...



Benoit Quirynen

Content is king, cross-device digital rights is key ... for e-paper as well

The limited number of e-books available on IPad pushed me to install Amazon Kindle app on this device.
In my humble opinion, IBooks reading experience is better but reading Winnie-the-Pooh starts to be boring ;-)

Moreover, thanks to Amazon, I can choose to read it on several of my devices where Kindle app could installed (IPad, IPhone, PC, Android systems, etc...). Even if reading a book on a phone is not convenient at all, at least I feel that my digital rights are respected. If I loose or break my IPad and wants to buy back a Samsung tablet equipped with Android, I'll have access to my library of e-books.

Cross-device digital rights is a MUST HAVE for publishers moving to digital world. Apple can not lock readers to his devices using content created by others. It tried it in the past with music. It had to extend afterwards to deliver MP3 versions of music.

You will argue that I could read some books on iBooks and some others on Kindle. And you are right. But today, in my mind, I can accommodate the user experience of Kindle and prefer to have future-safe digital rights. So next time, I'll first search on Kindle.

For newspaper, I also experience the "content is king" assertion. I subscribed to a newspaper quite limited application - even painful from a user experience point-of-view. However, I renewed my subscription to keep access to the content which I find useful.
On the side of cross-device digital rights, I'm blocked. Even if I have a subscription on my IPad, I can not read it through my Android phone. I consider this as unacceptable since I already paid for accessing this content.

When will iBook be open, when will newspaper support cross-device digital rights ?
To be continued ...

Benoit Quirynen

Kinect - a first step to reconnect Microsoft with youngsters ?

Microsoft has announced a 240M$ writeoff in their last financial announcement due to KIN mobile phone project cancellation. What appears to be a huge amount for any company is just a drop in the ocean of Microsoft revenues.

This week, Global Equities Research analyst have downgraded the note of Microsoft, not for this writeoff but for what sits behind. Microsoft is losing ground on Office battlefield in education, public and call center sectors (which represent 10%). Moreover, companies more and more give the choice to employees to choose a MAC or a PC.

But the tough statement does not sit in immediate market share or price erosion. As outlined in a previous post, it's much more dangerous long term than short term. Analysts outlines the danger : "Microsoft is unable to connect with the new generation of users. This could cause problems down the road." KIN phone cancellation is just an additional proof point. Microsoft software appears as old-fashioned for youngsters.

But Microsoft is not yet dead. Thanks to huge cash and some current projects, Microsoft certainly can recover if they play the right card. This reconciliation card can be found in 3 packs : mobile, Internet and games.

In the area of game console, a commercial name - Kinect - has been assigned to the "Natal research project". Thanks to Kinect XBox add-on (yes, it works with an existing XBox), you can live a kind of Wii gaming experience without the need of a Wimote. First Kinect Games are announced before Christmas.

On the techno side, even if Kinect could be a huge technological step forward for visual movement detection, it lacks the vibration feedback proposed by game console accessories, Wimote and ... mobile phone games.

On the business side, Kinect still applies the old gaming business model - a game console partnering with top game editors. We address within another post the missed opportunity : a "Kinect app store" linked with a decent "Kinect developer program" for any developer to leverage the assets of this technological breakthrough.

Even if the experience is nice and movement detection accurate enough (still to be proven ...), this project can only be a first step. It will certainly not be sufficient to reconcile Microsoft with a generation. Still a long way to go for Steve Ballmer, much more in terms of mindset than in terms of technology, before Microsoft becomes hype within communities of digital natives.

To be continued ...

Benoit Quirynen

Racer mobile phone - the name of the winners not written in the press release

Racer, the new Android phone sold below symbolic threshold of 100 UK Pounds, produced by ZTE and distributed by 3-UK, has been announced this week. This is probably an important milestone in the mobile phone history. Funny enough, the name of the true winners is not written in the press releases.

The announcement indicates an important smart complementary offer; 3UK granting a volume data bucket of 150MB for top-up on a prepaid account.

3UK and ZTE are obviously mentioned in the press release.

Through this launch, 3UK, desperately tries to attack its strong competitors with an appealing offer for youngsters. Vodafone, T-Mobile/Orange and O2 are able to follow when they decide. If the phone is a success, it's just a question of months to come back to a similar balance between telco players on the island.

On the other hand, ZTE makes a step towards a position in the top-5 mobile phone manufacturers but there is still a long long way to run.

Funny enough, the name of the big winners of this important milestone is not written.

Android is mentioned but Google is not. Through its "free licensing model", Google will win the scale battle with Apple. Google copies the Windows model used by Microsoft against Apple during last century. Google does not directly produce cash through this kind of offer. But advertising inventory (display and search) will indirectly grow at an higher pace and this growth is directly linked to G revenues.

The name of the other winner is Facebook, with the same logic of increased inventory, since target of this phone is most probably youngsters, heavy Facebook users. This can be extended to myriad of mobile phone application providers.

Names of losers are rarely written in press releases.

We can not say that Apple will loose with this kind of move but it defines the borders of a profitable corner.
Apple, luxuriantly trapped by the very high value of his brand and its vertical approach - mandatory to change the game at the beginning but limiting the scale during next phases of growth -, will loose against Android in terms of mobile OS market share. As a consequence, iAds, advertising initiative from Apple, will then probably be restricted to high-end brands while Google presents a universal inventory for any brand, any shop.

This announcement now materializes another level of danger for Nokia. Lost in Symbian, Meego, Linux mobile OS announcements, Nokia is still the number one but does not manage to tease interest of developers for applications - the next criterion for people to buy a phone.

Moreover, the whole telco market could start to see ARPU (average revenue per user) declining faster at this stage. Through this offer with such a pricing for device and data, number of data users could reach a tipping point where messaging traffic could start to significantly migrate from charged SMS to free instant messaging.

This only if the Racer phone is good and is a commercial success.

To be continued ...

Benoit Quirynen

Steve Jobs has broken a thermometer. Who will offer a new, more reliable, reference ?

During last 2 years, analysts presented a lot of reports about mobile Internet usage based on AdMob public reports. Now that AdMob is thrown away from iPhone, what will be the new reference ? GSMA has a unique opportunity to take a position.

AdMob is regularly reporting Mobile Internet traffic trends for the mobile sites - traffic per device manufacturer, per country, etc... - based on measurements on mobile sites where it delivers banner ads. The last part of the sentence is important because it naturally brings a bias to the statistics. AdMob mainly delivers banner ads for small mobile Internet websites, typically with an insufficient size to maintain an internal advertising agency.

Typically, since AdMob has a very low footprint on main mobile service provider portals (Orange World, Vodafone Live or Vodafone 360) or on successful internet sites (flickR, yahoo, Google, news, etc...), these reports were probably minimizing the mobile Internet traffic generated through feature phones (Nokia, Sony Ericsson, Samsung, Lg). Typically, due to broader "phone designed content" and/or preferential tariff, owners of feature phones were more used to crawl telco and well-known portals. This possible bias did not prevent analysts to create expensive reports from this free input.

Does this create a small or a tremendous bias ? Nobody knows the exact relevance of these reports in the past. But these reports will for sure loose any value for next issues, now that AdMob, on one hand, has been acquired by Google - a mobile OS vendor - and, on the other hand, will be prevented to deliver ads on iPhone.

So, through these drastic T&Cs, Steve Jobs has broken a thermometer. There is now a need for a new reference. GSMA could certainly become this reference.

Association of mobile service providers could aggregate local reports collected by all their members, measuring traffic in the network, on the neutral path between device and mobile web site. Perhaps these reports (aggregated measurements !) already exist but they are then published with a serious lack of impact. Mobile service providers could play the role of neutral party, providing totally unbiased reports, guiding the whole industry : device manufacturers, web designers, application developers and even end-users in the choice for an efficient phone. These measurements could even be monetized through more advanced reports sold to large Internet players, specialized analyst offices or governments willing to measure "digital divide".

Moreover, at the contrary of some other available measurements created in some countries (ComScore, Nielsen, national advertising associations, etc...), mainly done for advertising purpose, these GSMA measurements would also measure traffic on "ad free" sites.

Will the community of mobile service providers take this unique opportunity to become a reference or will they leave other players become a reference in their own garden ?

To be continued ...

Benoit Quirynen

Apple versus Google : the battlefield behind the last keynote

Last Monday, THE pope of communication presented the next episode of world's media religion. Behind the official announcements, Steve Jobs has left a few mines in the way of his old friend but definite current Google enemy. What are these mines ?

During last keynote of Apple last Monday, June, 7th, Steve Jobs presented the iPhone 4 and iOS4, the new version of the Apple mobile operating system. Brilliant as usual, Mr Steve sold us the new version of his "more than smart" phone, a marvelous assembly of technology to make the product, not just a bit better but simply the best on earth. But this new announcement also reveals other versions of other products. Less visibility does not mean less impact.

Of course iOS4, new name and new version of iPhone Operating System, becomes multi-task and thus recovers Android on this side.

It's now time for Safari 5 with some interesting features presented here. This new release of the browser contains a few dangerous mines for his fierce competitor Google.

And surprisingly, some of these mines have been set in cooperation with old enemy Microsoft. This new version of Safari is optimized to make use of hardware accelerator of Windows. Yes, you don't dream. Steve Jobs forgives Microsoft about the old OS battle between MAC OS and Windows. Moreover, Safari 5 is now enhanced with Bing search build-in in the smart search field. And 20% of "Safari new feature" page is eaten by a "Bing screen". An "hibernatus" frozen in early 90's could not believe it.

Beyond agreements with old Microsoft enemy to fight the new Google enemy, Apple proposes the top of the browsers for developers. Thanks to new smooth and nice effects supported through evolution of standard HTML5, developers have the possibility to redesign websites to bring user experience the next level. This evolution also mines the way of Adobe Flash. The set "Javascript + HTML5 + CSS3", by default embedded in the browser, dangerously recovers flash capabilities. Developers also get the possibility to develop extensions and to benefit from a better "Web inspector" debugging tool.

More important in the war for consumer eyeballs, these Safari 5 enhancements will also please consumers.

And when Google, a few years ago, presented Chrome as the fastest browser in the world, Steve Jobs could not accept a defeat on the user experience side. Safari 5 not only now proposes a large pallet of rich media capabilities to consumer. It also embeds the mechanic to improve speed and become fastest browser, through DNS caching and evolutions of Nitro Javascript engine.

Thanks to Safari reader, reading articles also becomes a pleasure, removing distracting "Christmas tree ads" proposed inline with content. If spread as a feature in other browser, this one can hurt Google Display revenues (mainly flowing through DoubleClick). On this one, Google will not be the single player to be hurt. This could also lead to collateral damages for publishers, these currently collecting this way small but critical revenues during this crisis period. We come back on that matter in this post.

Now that Google is fighting Apple on Mobile OS, Apple also positions its browser in the battlefield. Lousy Microsoft, through his slow and proprietary developments of Internet Explorer, has opened the door for new entrants. A browser is the critical entry door to consumer universe.

Through this Safari 5, Steve Jobs now tries to recover Chrome. It's not a minor evolution. Even release numbering scheme suggests this release as a major evolution (moving from Safari 4.0.x to 5.0.x).

But mines are not only positioned on the technical or functional areas of the battlefield. As we all know, Steve Jobs also sets his own strict conditions in the T&Cs for developers. And article 3.3.9 is actually an even more dangerous mine for Google. This section restricts developers to only transfer user information, with prior user consent, to independent advertising partners. An independent advertising partner, according to Apple's terms, is a partner which does not develop mobile operating system or mobile devices. In other words, since Google develops Android as the open mobile operating system, Google may not leverage any more its latest major acquisition AdMob (just blessed by FCC). AdMob was the leader in promising mobile advertising on iPhone. Through this Apple restriction, this November, 9th Google acquisition for $750M could turn to be a pure loss. AdMob has been acquired for the inventory and dominant position on iPhone, not for his technology. And Apple announces that he will become a significant player in the advertising display business through iAds. Still a long way to run on this side however.

The war for consumer eyeballs on connected device has rarely be so fierce. Eyeball generate revenues from a mix of hardware devices, software apps, content and advertising. Through latest evolutions, Apple and Steve Jobs attack on all these dimensions. Thanks to "coopetition" with Microsoft, Apple is now positioned as a rich browser to be taken into account on all devices, including PC. It offers a multi-task mobile operating system supporting competition from Android on mobile handset front. And Steve Jobs even transforms Apple into an advertising company, leveraging rich interactive mobile display capabilities of its new successful IPad tablet and on his iPhone jewelry.

Search engine and social networks are the only main missing weapon in Steve Jobs' current arsenal.

Does he need it ? When is the next major acquisition ?
To be continued ...

Benoit