Goin' Mo-bile!

If you have a BlackBerry, have you checked your email on it while at your office? If you have an iPhone, have you viewed weather, news, or YouTube while at home? If you use an Instant Messenger, have you found yourself using Text Messaging on your phone more frequently? Have you listened to music or watched a video on your phone? How many photos have you taken with your phone in the past month—instead of a camera—and sent to a friend or uploaded to Facebook? Have you used your phone lately like you would a Personal Navigation Device to locate a store and provide directions? If you answered yes to any of these, welcome to the mobile revolution.

This revolution is in full swing despite the global recession. Sales of expensive smartphones are growing, while sales of lesser phones are stagnant in the developed world (note: the developing world has now begun the first wave of the mobile revolution with entry-level and ultra-low cost devices, so new markets will fill demand for basic mobile phones). While Nokia, Samsung, LG, Motorola, Sony Ericsson, and others can supply the developing world with lower margin handsets for years to come, they have to work fast in order to catch up in the smartphone game, where the iPhone and BlackBerry continue to increase market share. And it has not helped matters that handset manufacturers have to deal with mobile carriers. Most carriers think they will control the flow of subscription services, advertising, and transactions on their data networks. Seems logical enough, but they may want to ask any executive with an ISP—cable company, telecom, or independent—“so how did that strategy work out for you?” Even the handset manufacturers expect a piece of the mobile data economy, and this impacts their desire to innovate in ways where they might lose control of these revenue streams. They should ask Dell, H-P, Gateway, and other computer manufacturers how much they are making in e-commerce revenue from Amazon, advertising revenue from Google, and subscription revenue from Salesforce.com.

Only the first two chapters of the mobile revolution have been written so far—first we all got cell phones and then we got basic data service—so how can we predict the next chapters? I suggest that analogies to the Internet revolution are worth exploring for clues. The native mobile application ecosystem popularized by the iPhone reminds me of Netscape’s Navigator browser. Do you remember what the Internet was like BEFORE the Web browser? As a user experience, it sucked. The browser made the Internet accessible to the masses, and led to an explosion in creative applications. While mobile websites ending in .mobi were an early attempt to cope with the form factor of a mobile phone, using a browser on a phone seems as arcane and clunky to me as FTP and Gopher seemed once we had Netscape. The native mobile app eliminates the need to type a URL and “surf.” Regardless of whether I have a phone with a keyboard or a touch screen, I want to minimize typing and surfing... I want what I want, and I want it now. I still have a little patience at my desk, but when I am standing on a street corner, I want to access applications and information on my phone quickly and easily.

So who will be the winners and losers in the mobile revolution? Obviously, the mobile handset manufacturers that deliver quality smartphones will be big winners. If any handset manufacturers want to believe they can maintain market share by continuing to develop slick clamshells and flip phones with cool sounding brand names, but aren’t cutting edge smartphones, they will be losers. The market will consist of smartphones and ultra-low cost devices. The good news is that the big winners will be consumers and businesses globally, as modern communications are brought to the developing world and the developed world enters the next chapter of the mobile revolution, taking modes of interaction and commerce to new levels of productivity and creativity.

I don’t think we can give Pete Townshend credit for envisioning this revolution in The Who’s 1971 hit song “Goin’ Mobile”, but maybe it will be My Generation’s anthem.

Control of the App Store

Apple is in the enviable position of deciding which native mobile apps get approved and which do not for the iPhone, right? Maybe, but before answering this, we need to understand the significance of Apple’s role and responsibility in the ecosystem of native mobile applications. Let’s start with a little history…

In the early days of consumer Internet usage, the online world was split principally between two consumer experiences: AOL and the World Wide Web. AOL subscribers liked that they were receiving an edited version of the Internet. Everyone else recognized that while the unedited Web was both a mystery and ungoverned, it was far more interesting.

Then Yahoo! and other search engines emerged to catalog websites, which made navigating the Web far easier. These search engines reduced the value proposition of an AOL subscription. As broadband access emerged from cable and telecom companies, free instant messengers like ICQ and free email like Hotmail became popular, and more interesting dot-com companies appeared that were not reliant on AOL for eyeballs, consumers increasingly chose “web surfing” over the closed AOL model.

The Web’s open ecosystem essentially developed absent of regulation or taxation, despite several well-intentioned, but misguided attempts by governments and activists. The global impact of this open ecosystem has been profound and has transformed the way we live, work and communicate.

Fast-forwarding to today, Apple’s iTunes App Store has become the gateway to the mobile web for iPhone users, and so far this platform is driving innovation within the whole mobile web ecosystem. Market share is small but growing for the iPhone (1.5% of all mobile handsets and 10.8% of smartphones). What is even more impressive is over one billion mobile apps were downloaded to those iPhones within the first nine months of launching the App Store. Yet in the midst of this great consumer technology success story, Apple is contending with bad publicity, some frustrated customers, and many angry developers. This is a direct result of Apple’s so-called “enviable position.”

I do not believe Apple wants to be in the business of providing an edited and sanitized version of the mobile application universe, and clearly their customers and developers do not want that either. Every time Apple either bans or approves a controversial mobile app, they are risking a negative reaction from some group. As long as Apple maintains control of the iTune’s App Store approval process and even the functionality of the App Store itself, they risk losing customers to devices that work with applications not approved by the App Store and that work with application stores with better search and review tools. In other words, trying to be like AOL is a dangerous strategy.

Nevertheless, Apple must contend with maintaining carrier relations and a robust user experience, so it may not be so easy to abdicate control. Also Apple’s revenue from the App Store is beginning to look significant, and it is hard to imagine giving that away. AOL enjoyed years of profits and market dominance by taking an early lead; however, they eventually lost their relevance to consumers. Can Apple build enough market share in the mobile ecosystem and then chart a different course? Maybe. At least they understand the competitive forces at work within the mobile industry and have the benefit of history to consider their strategic options; whereas, AOL experienced several sea changes in the competitive landscape when online business models were brand new and untested in the marketplace.

Whether or not Apple is successful long term at sustaining a competitive advantage with the iPhone, they are currently driving consumer adoption of this new interactive medium—much like AOL drove consumer adoption of the Internet—and this new medium will alter how (and where) we use the Internet in our daily lives.