Nokia: Running in molasses

Every time I think about Nokia and Symbian, I can't help picturing a man knee-deep in molasses, running as fast as he can. He's working up a sweat, thrashing and stumbling forward, and proudly points out that for someone knee-deep in molasses he's making really good time.

That thought came to me several times during a briefing day that Nokia and the new Symbian Foundation held recently in San Francisco. A recurring theme was a deeply earnest discussion of how big and complex their business is, and how proud they are that despite the complexity they can make forward progress. For example:

Charles Davies, CTO of the new foundation, pointed out to us that Symbian OS has about 450,000 source files. That's right, half a million files. They're organized into 85 "packages," all of which have been charted out in a diagram that will be posted soon on the foundation's website. Davies was proud that the diagram is in SVG format, so you can zoom in on it and see that "this is an architecture that's not just a plateful of spaghetti."

The diagram looks a bit like a plateful of very colorful spaghetti (although in fairness to Charles, that's true of every OS architecture diagram I've ever seen). Anyway, the big takeaway was how huge the OS is.

Davies talked about the substantial challenges involved in open sourcing a code base that large. He said it will take up to another two years before all of the code is released under the Eclipse license. In the meantime, a majority of the code on launch day of the foundation will be in a more restrictive license that requires registration and a payment of $1,500 for access. There's also a small amount of third party copyrighted code within Symbian, and the foundation is trying to either get the rights to that code, or figure a way to make it available in binary format.

Those are all typical problems when a project is moving to open source, and the upshot of them is that Symbian won't be able to get the full benefits of its move to open source until quite a while after the foundation is launched. What slows the process down is the amount of code that Symbian and Nokia have to move. I believe that Symbian OS is probably the largest software project ever taken from closed to open source. If you've ever dealt with moving code to open source, you'll know how staggeringly complex the legal reviews are. What Nokia and Symbian are doing is heroic, scary, and incredibly tedious. It's like, well, running in molasses.

Lee Williams, Nokia's software platform SVP who is moving over to become head of the Symbian foundation, picked up on the theme of massiveness. He said the OS is on 200 million devices, with 200 device types shipped and another 100 in development. With support for five different baseband modems, seven different processor architectures, symmetric multiprocessing, and a broad set of displays, "your options are dramatic and huge."

This sort of infrastructure is needed, he said, because IT, telecom, and the Internet "have merged almost completely.... It's the perfect storm of convergence. There's almost nothing it can't eat or it won't use." He compared its importance to the creation of movable type, color palettes, and the Renaissance.

He noted that some people think the Symbian Foundation is a response to Android and other competitive moves, but said the company can't move that fast, and actually the change was in the works long before Google announced its software.

At dinner, I had a chance to chat with one of the Nokia managers. He was kind enough to let me play around with a pre-release N97 (more on that below), and the discussion gravitated to the iPhone. He told me how excited he is by the many new products Nokia has in the labs but can't talk about yet, and expressed some frustration that people don't understand why it takes time for Nokia to respond to changes in the market. He described Nokia as a giant ship. "It takes a long time to turn it, but when we do..." he said ominously, and then reminded me that Netscape once had a lead over Microsoft before it was crushed.

The problem with talking to the folks from Nokia is that you're never sure what they believe vs. what's the official story they're trying to put out in the market. They're disciplined enough that they can stay on message quite well, and in most conversations they focus on talking about what they're doing rather than asking for feedback or getting into a two-way conversation.

So I'll assume that Nokia was being serious. In that case, let's look at some financials from 1997 (Netscape vs. Microsoft) and 2007 (Apple vs. Nokia):


All figures in millions of dollars.

Don't worry too much about revenue and net income; those are usually tied up by the ongoing operations of each company. The line I want you to focus on is cash. That is your ammunition -- the extra resource available to fund a big marketing campaign, or a new product development program, or an acquisition of an innovative new technology. Microsoft had 46 times more cash than Netscape in 1997, and it wasn't seriously threatened in any of its other core businesses. It could, and did, spend Netscape into the ground.

Apple has about the same cash hoard as Nokia. Much more importantly, Apple can focus that cash on a narrower battlefront. Its situation relative to Windows is relatively safe. Although Microsoft can never be ignored, it is innovating so slowly that Apple can take some profit from its PC business to fund other things. The music player business is also stable; although it's not growing like it used to, no one has come close to matching the integration of the iPod and iTunes. So Apple is free to spend huge wads of cash to establish its new iPhone business. It can pick the countries and vertical usages it wants to dominate, and as long as it doesn't do too many things at once, it can outspend almost any competitor.

Nokia, on the other hand, has battlefields everywhere:
--In mobile phones it's fighting Samsung, LG, and SonyEricsson, and a badly wounded (therefore desperate) Motorola.
--In entertainment smartphones it's fighting Apple.
--In communicators it's fighting RIM.
--In OS it's fighting Google, Microsoft, etc.
--In online services it's fighting Google, Yahoo, Microsoft, etc.

As Nokia EVP Anssi Vanjoki put it recently (link):

There’s a company that says they can index the world; we are going to go deeper - we are going to coordinate the world.

Sweet! He calls out Google and says he'll beat them in their core business. It's a noble effort. I love the company's ambition. But does Nokia have the resources to fight all those battles at once?

If the folks at Nokia really think they are well positioned to crush Apple, they need to go re-read The Innovator's Dilemma. Being big is not a benefit in a rapidly-changing market with emerging segments. A big company can't respond nimbly to that sort of change, and the segments attacked by new entrants are usually too small to justify huge investment by an incumbent. So new challengers like Apple and RIM pop up all around you, you gradually shed little chunks of market share, and you complain that people don't understand how powerful your core business is.

I am not at all saying that Nokia is doomed. They are an outstanding company, with smart people, a great brand, and enormous strengths. But they need to understand that turning the battleship a little faster won't win the war. Nokia's smartphone competitors are not standing in molasses; they won't stay still long enough for the 16-inch guns to be pointed at them. More importantly, the competitors on the services side breed like vampire rabbits. By the time you blow away a clutch of them, three dozen more have hatched and are sucking blood from the other side of the ship.

To succeed in smartphones, I think Nokia needs to start creating the sort of integrated software + hardware solutions that the smartphone winners excel at. And on the services side, it needs to start breeding its own killer rabbits (small entrepreneurial experiments that move fast and die quickly if they fail). So far what I think I see looks like a more design-savvy version of the smartphone business of Samsung (throw hardware at the wall and see what sticks) coupled with an effort to create a 16-inch cannon of services.

That's probably not enough to win in the long run. Nokia still has a lot of time to get it right. But do they really understand what needs to change? I can't tell, because all I usually get from them is monologues on how big their business is and how much cool stuff they have in the lab.

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A few other tidbits from the day...

N97: Second cousin twice removed of the Revo. I got a chance to play with a pre-release N97, Nokia's upcoming qwerty phone. The screen slides sideways to reveal a little keyboard underneath.

The look and size of the device reminded me a little bit of the old Psion Revo, although it's a pretty distant echo. The sliding process of the screen has a very nice feel to it; it's the sort of physical detail that Nokia excels at. Even in a pre-release state, the phone felt nice and solid in my hand.

The software needs a lot more work, but they admitted that. It's a pre-release device. No worries at this point.

As for the keyboard, I thought it was mediocre. The keys, and especially the microscopic letters on them, are a little too small for my taste (I have big thumbs). Typing was slower than I expect on a thumb keyboard. I'd put it about on a par with the Blackberry Storm (that's the Blackberry with the on-screen keyboard). The Storm has bigger letters than the N97, and unlike David Pogue I like the tactile feedback when you tap on its screen, although it is not as good as a real keyboard.

So the N97 has real keys but they're too tiny, and the Storm has bigger keys but they're not real. The tiebreaker is the software -- the Storm is notoriously unstable (it took me about 40 seconds to crash it). I think neither product is ready for the market yet. Unfortunately for RIM, the Storm is already shipping.

The destiny of Trolltech. About a year ago, when Nokia purchased Trolltech, I wondered what they were going to do with it (link). Now we know -- Trolltech's Qt software layer is going to become a graphics layer for Symbian. No word on what happens to Trolltech's other products.

That's nice, but what's it good for? Symbian is adding symmetric multiprocessing to the OS. In a session discussing the change, a member of the audience asked what you'd use symmetric multiprocessing for on a mobile device.

Long pause. "Well, some games use it..." Another long pause.

This is the difficulty of taking a technology-only approach when talking to developers. Although software developers are technophiles, what they really care about is what sort of cool products you can enable them to build. If your feature doesn't let them do something cool, they won't care about it.

(By the way, according to an article here, the benefit will be in performance tuning and battery life -- critical to handset vendors, but sanitation issues to application developers.)

Some alternate opinions. Some other people briefed by Nokia are not as worried as me about the molasses thing. In the interest of balance, here are a few examples:

Commentary from SymbianOne (link).

Fabrizio over at Funambol (link).

SonyEricsson on the event (link). (Never mind, that was a report from 2003. I am so embarrassed.)

Proposition 8 and community review sites: Everyone loses

What happens to a community review site when members of the community use it as a weapon against people they don't approve of? Sites like Yelp and Citysearch are finding out, as users target businesses that supported California's Proposition 8 (the state's recently-enacted gay marriage ban). The results so far are not pretty. They illustrate some of the weaknesses of online reviews, and the complexities of managing a community site.

It's a learning opportunity for any company that relies on online reviews or runs a website that allows user comments. I wrote about it over on the Rubicon site (link).

Mobile data: Be careful what you wish for

The consensus around the industry seems to be that mobile data is starting to take off. Text messaging is still the leading data function, accounting for about 65% of total data revenue, according to Informa (link). But Nielsen reports a steady rise in the number of mobile Internet subscribers (link), and a faster increase in revenue (implying that those who do use the mobile web are increasing their online activity). Young people are apparently important drivers in the increase, with 37% of US adults age 18 to 24 using their phones to access the web, according to the Mobile Marketing Association (link).

The cause is supposedly not just the iPhone and other smartphones; what I'm hearing from multiple companies is that web access and other data usage is rising even on feature phones.

This increased activity is creating an uncomfortable problem for some mobile operators: it's apparently overloading their networks. There have been predictions for years that this could happen -- a report from 2005 pointed out that the typical 3G network would be overloaded if 40% of subscribers used video just eight minutes a day (link). It predicted potential traffic overload by 2007. There have been charges that service problems on the AT&T network in the US have been caused by the iPhone (link).

In the UK, the BBC's popular iPlayer streaming video service is supposedly threatening the economics of even wired ISPs (link -- very interesting article), so it's easy to imagine what it could do to mobile networks if broadly deployed. Supposedly the mobile version of iPlayer for Nokia S60 is set up to stream only over WiFi, but the discussion here (link) points out that restriction is likely to be evaded by enterprising users.

It's very hard to confirm exactly what mobile data is doing to the networks because the operators don't like to discuss this sort of thing in public. But the number of data-capable phones is definitely growing faster than network capacity, so overload is just a matter of time. I've gotten several off-the-record comments from friends in the industry saying that the operators are worried about the problem and are quietly trying to throttle traffic, especially to online multimedia services that consume a lot of bandwidth.

The problem is complicated by the all-you-can-eat data plans that have been adopted by many operators. If you're charging people for the amount of data they consume, their data use becomes self-limiting. But limited plans are unpopular with users, who get practically unlimited data on their PC web connections. When you tell people that they can have the web on their mobiles, they expect to be able to use it like the web they already know.

So the operators are stuck with either throwing out people who use the "unlimited" network heavily, or covertly degrading the quality of their service so they'll stop using so much data. Both practices are very dangerous to their long-term prospects.

The problem is that the people who use a lot of data aren't just the freakish fanatics that the industry would like to imagine them as. They are Internet power users, a group that we labeled the Most Frequent Contributors (MFCs) when we recently researched Internet usage patterns at Rubicon (link). They don't just use a lot of video -- they are generally very involved in all sorts of online activities. Most importantly for the operators, they write the majority of the reviews and user comments posted online.

So, if you kick a power user off your network, or throttle their performance, they are extremely likely to write about you online. Extensively. Where their complaints will be read by most other Internet users. Check out the comments here and here if you want a sample.

Systematically punishing your noisiest customers is not the way to build a sustainable business.


What else can the operators do?

I wish there were some magical formulation that would make users happy and operators financially sound. But there isn't, because the problem is inherent to the way a wireless network operates. And as the installed base of smartphones grows, and video and other multimedia services increase in popularity, the problem is only going to get worse.

The most damaging approach is that one that operators seem to be leaning toward now, covertly throttling traffic. They can probably get away with that for a while, but eventually people online will compare notes, figure out that network performance is being systematically distorted -- and then the class-action lawyers (in the US) and government regulators (in Europe) will be unleashed.

Honesty is the best policy. Ultimately I think there's no alternative to moving to pricing plans that acknowledge the physical limits on the wireless Internet. That, and the operators need to resist the temptation of advertising their Internet as identical to the wired Internet. The MFCs are technically sophisticated, and capable of understanding the need for tiered pricing if it's explained to them clearly and honestly. What causes endless friction is the hypocrisy of calling something "unlimited" and then limiting it.

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Belated thanks to Voip Survivor for featuring my post on app stores in the Carnival of the Mobilists (link).

The Influencers are dead. Or not.

As we continue to sort through the results from Rubicon's recent research on Internet usage (link), we're finding interesting insights on how the web is developing. One insight is around the concept of Influencers.

When we first looked at the results of the survey, we thought they confirmed the Influencer idea. But after some more digging, our thinking has evolved. There are basically two schools of thought online about the influencing process. Some people say a small group of Influencers drive most consumer decisions. Others argue that the Influencer idea is a fantasy, and that ideas spread through society from random starting points, without a hierarchy.

The evidence from our research shows that both groups are wrong in important ways, especially when the web is taken into consideration. That has big implications for how companies market online, so we wrote about it. If you're interested in learning more, you can read the analysis on Rubicon's website here.

Everything you always wanted to know about web community, and then some

It's been a long time since I posted, and I apologize. In addition to doing a bunch of work for clients at Rubicon, I have been preoccupied with a big strategy project we just finished, on online community. We released the results today, and I think you might find them interesting, so here's a summary.

In our strategy work with tech companies, we're frequently asked about web communities -- how they operate, what they can and can't do, and how a company should work with them. The companies we deal with generally fall into three camps when it comes to community:

--Many companies are still learning about online community and don't know what to do or what to expect.

--Some companies have already tried some online community activity, but were disappointed -- often because they attracted only a few enthusiasts rather than the masses of end users they expected.

--And of course some companies run successful web communities, either as a sideline or as their core business. They're very hungry for information on how other communities operate, and insights on what they could do better.

To help deal with all of those questions, we conducted a study of online community in the US. We surveyed more than 3,000 US web users on their overall internet usage, and then dived deep on their use of online communities and what impact those communities have on their lives. I know some of you will be disappointed that the survey is US-only; we'd be delighted to repeat the research in other parts of the world if anyone wants to sponsor it ;-)

Meanwhile, here are some of the key things we learned:

--Small groups of enthusiasts dominate most online conversations, but that doesn't mean online communities matter only to a narrow segment of people. Most web users read community content rather than contributing to it, and are strongly influenced by the things they see there, especially product reviews and recommendations. Those reviews are now second only to word of mouth as a purchase influencer for web users.

--Because most web users are voyeurs more than contributors, if you're running an online discussion, you should think of it as theatre -- it's a performance in which the community leader(s) interact with a small group of contributors for the education and amusement of the rest of us. All the web's a stage, but we're not all players in it. At least not equal players.

--This means companies that turn away from web communities because they're populated mostly by enthusiasts are missing the point. They've mistaken their fellow actors for the audience. If you're running a community, you need to take care of the active participants in a community so that the rest of the audience will watch and learn.

--If a company needs more incentive to work with the Internet, it turns out that the web has also become the number two source of product support information for web users. After checking the manual, web users are more likely to check a company's website for information or search the web than they are to take traditional steps like calling the manufacturer or asking a dealer. That will be comforting to many companies that want to reduce their support costs, since phone support is very expensive. But how many of those companies have bothered to put detailed support information online, and make sure it's well indexed by the search engines?

--There are an enormous number of tidbits in the study regarding web use. A few items that stood out to me include:

• -About a quarter of US web users say they have dated someone they first met online.
• -Although Twitter and SecondLife get a lot of press, their audiences are very narrow when you compare them to major social sites like MySpace, Facebook, and even LinkedIn.
• -Yahoo is the second most valued website in the minds of US web users, after Google. It's ahead of major web properties like YouTube and Facebook. All of the negative press about Yahoo sometimes makes people forget how strong its user base is.
  
• -The major social networks are much more satisfying and useful to teens than they are to adults. In fact, satisfaction with the social sites declines steadily after age 14.
• -Since we're coming up on an election in the US, it's interesting to look at political ties on the Internet. Democrats are more active online than Republicans, and say the web has a greater influence on their behavior, including voting.
• -Young people dominate online conversations, with people 22 and under producing about half of all user-generated content and comments. So if you sometimes feel like you're dealing with kids online, it may be because you are.

A full report on the findings is available in PDF format here (link). I know many people don't like to read PDFs online, and besides you can't easily comment on them or link to sections in them. So we've also posted the report online, cut into several sections for easy reading:

Part one summarizes the report, and gives detailed information on the use of community online, and what that means for business (link). This is the section that gives information on community usage rates and the "most frequent contributors" who dominate online conversations.

Part two discusses the leading web destinations in the US, measured in several ways, and discusses the role of community in them (link). This is where you'll find learn about the remarkable membership rate of Classmates.com, the #3 social community site in the US when measured by profiles. We also answer questions like: "Is Facebook more popular than MySpace?" "What do web users value more, Wikipedia or NYTimes.com?" and "What are the top five most-visited types of website?"

Part three talks about the role of community sites in the social lives of Americans (link). This is where we compare Republicans and Democrats online, and look at how different age groups use the social networking sites. We answer questions like: "How many young people lie about their age to get access to websites?" and "How many web users create fake identities online?"


What does it mean to mobile?

I always get that question when I post something that's not directly related to the mobile industry. In part, my answer is that I think this information's useful to anyone who's interested in technology. You're soaking in the internet, and it's good to understand how it works.

But community users don't limit themselves to only PC access, so online community will have a big effect on the mobile industry. It's important to understand what's really happening in the wired internet so you can sort out which mobile web opportunities have the best prospects. For example, I saw a presentation by someone senior at a mobile company the other day, and he was touting the importance of Twitter as a driver for the mobile web. I almost laughed out loud, because I had just been working on our report, and I knew how tiny the Twitter audience is. It's a classic case of people in the tech industry assuming something they use a lot is also being adopted by the masses.

That's not to beat up on Twitter specifically; they have a great base of users. But mainstream they ain't.

The other thing mobile people should think about a lot is the huge role that young people play in the generation of online content. As a group they are vastly more active online than older people. We aren't sure exactly what the cause is. Some of it may be that high school and college students just have a lot more time on their hands, and they spend some of it posting to the web. But probably also some of it is generational. Whatever the cause, it's likely that young users will be some of the heaviest drivers of use of the mobile web, especially the uploading of content and comments.

Not that Apple needs another advantage, but that probably plays to the strengths of the iPhone, because Apple has such a good franchise with young people in the US. It also helps to explain why RIM is trying to reach out to young people. In Europe, I think Nokia and SonyEricsson have a better chance at those users, because their brands are strong with young people. But they'll need the right products as well, which is a subject for other posts...

App stores and APIs: It's the ecosystem, stupid

If you make a web application or mobile platform, one of the trendiest things you can do is add APIs and a software marketplace to it so developers will extend your product. Google is previewing its application market for Android (link), T-Mobile USA has promised a new applications store for its phones (link), and many people I've spoken with believe Microsoft bought Danger in order to get its software store technology.

The idea of encouraging third party developers dates back at least to the early days of MS-DOS, but it was associated mostly with operating systems until Web 2.0 applications took off a few years ago. Google played a big role in that change, by exposing APIs to Google Maps that made it possible to embed maps in other web applications. That helped Google Maps quickly blow past established mapping services like Mapquest, while the installed base of Google Maps extensions made it hard for Microsoft's web mapping product to gain traction.

The drive for web APIs got another big boost when Facebook enabled developers to extend its functionality, driving an explosion of widgets for Facebook that helped it grow past MySpace to become the #1 social network in the US (at least according to Alexa).

The web app people all noticed Google's and Facebook's success and furiously started adding APIs to their products. Today it's unusual to hear about a new web app that doesn't have some sort of API story or future plan to add them.

In mobile, applications have an interesting history. Lately some new mobile players have generated huge attention for their application marketplaces. The chart below shows the one year growth in the developer base for a certain well-known mobile platform:



If you're like most people in Silicon Valley, you probably think that's an Apple iPhone developer chart. But actually it's Palm OS ten years ago, from 1998 to 1999.

Disturbing, isn't it? The idea that a platform could take off like that and then crash and burn...makes you wonder if the same thing could happen to the platforms that are popular today.

And in fact, if you look at the history of APIs on both mobiles and web apps, the failures are more numerous than the successes. If you're a developer trying to pick the right platform to create your apps on, that choice is very dangerous -- you're betting the success of your company on something that has a better than 50-50 chance of failing.

If you work at a web or mobile company creating APIs or an app store, the news is equally disturbing: The odds are that you won't succeed.

So it's very important to look at the history of those failed platforms, to figure out what goes wrong and how to avoid it. When you do that, the answer is pretty clear:


It's the ecosystem, stupid

The success of a developer program is not driven just by the beauty of the APIs or the store, but by how the overall ecosystem works to enable developers to prosper. The two parts of the ecosystem that are most important to developers are the ability to create something cool, and the ability to make money. Coolness gets developers to try your platform in the first place. Most developers, especially the innovative new ones, gravitate to a platform that lets them easily create something cool that will impress their friends. But as those developers get older and more responsible, they eventually get tired of drinking lemon drops with Mark Cuban (link). They need to pay rent, buy food, and do other things that require money. If they can't make money from a platform, they will move away to the next one. So the financials are what makes developers stick around over time.

If the ecosystem breaks down anywhere in the chain, the developer community will eventually collapse. You can see this in process driving the history of some prominent web and mobile platforms:

Facebook. Earlier I said Facebook apps were a success because they helped the company grow. That's definitely true from Facebook's short-term perspective, but if you talk to Facebook developers the story is much more mixed. Some people online say there are lots of ways to monetize Facebook apps (link), but other reports say it's difficult to actually make the revenue come in (link). The online attitude toward this when Facebook's platform launched in 2007 was pretty dismissive. One commentator wrote (link):

The problem of not making money with your app is not a Facebook problem. It's your problem!

That's the right attitude for a developer to take: Control your own destiny. But monetization becomes a Facebook problem if nobody can make money. Developers poured into the Facebook platform like the tide in the Bay of Fundy, but a lot of them couldn't make money and promptly poured back out. I can tell you from personal experience that some are pretty bitter and unlikely to do anything with Facebook again.

Mobile Java's problem was that it's not a real platform. Handset vendors and operators were allowed to break compatibility between their implementations of Java, forcing developers to tweak their java apps almost endlessly, dramatically raising their costs and making it hard to scale their companies. The selling model for Java apps was also seriously broken -- to get prominent placement on a phone, developers often had to cut special deals with carriers. Some of the most successful mobile Java game developers have survived because they're great deal-makers; they figure out how to develop for a big brand that wants to create a mobile presence, or they hook into the promotion of a movie. This business model favors a few companies with the skill and contacts to cut the deals; the current mobile Java world is not an ecosystem that can support huge numbers of developers.

Palm and Windows Mobile both succeeded at first in enabling developers to create a lot of interesting applications. Although both operating systems had technical flaws, they were reasonably open to any developer, and the "write once run anywhere" idea mostly worked. Unfortunately, the marketing and sales model for those applications started out mediocre and got worse over time. There was no software store on device, so users had to go out on the web to find apps. This cut the number of people looking for applications. Those who did look online usually landed in the mobile application stores, which over time took a larger and larger share of the developer's revenue. Eventually, the stores' cut grew to more than 50% of revenue, making development uneconomical for many companies. When sales of Palm OS and Windows Mobile devices failed to grow rapidly, the financial model for many developers fell apart, and the ecosystems faded.


What to look for in an ecosystem

If you're a developer looking to find a viable ecosystem, or a platform vendor looking to build one, here are the things to look for.

How easy is it for developers to create something cool? How powerful are the APIs? Can the platform be programmed using standard development tools? Eclipse seems to be the preferred platform among much of the web app crowd, and it's free.

Is the platform programmed in a language that's obscure or difficult to use? This has long been one of the big barriers to Symbian native app development.

How do applications get visibility? Is the store displayed at the first level of the smartphone? How easy is it for users to navigate the store? Online stores like Handango are notoriously hard to navigate; the user experience is about like walking through a flea market.

Can good apps rise to the top? In some software stores, the developer has to pay for prominent placement on the store. This is incredibly corrosive to the ecosystem. The big software companies with money to pay for placement are often the least innovative. So users see an app prominently featured, try it, are disappointed, and never try another one. If web search worked this way, there's a good chance that the web as we know it would never have developed. The practice of pay for placement is a self-defeating, regressive tax -- it penalizes most the small developers who are most likely to create compelling new apps that make a platform more successful.

Ideally, placement on the store should be based on independent user reviews, so the best new apps can rise to the top naturally.

What are the terms of business? Can a developer bill for an app through the user's phone bill? Forcing people to input their credit cards separately slows adoption of software. Can the developer choose different forms of payment? Developers should be enabled to experiment with freeware and subscription payment systems, just as they do on the web. How much of the developer's revenue does the store keep? The ideal cut is no more than 20%.

Are there restrictions on the application's functionality? This is a sore point for iPhone developers. Apple won't allow intermediate platforms that run other applications. So no Java, no Flash, and no emulators like StyleTap's Palm OS emulator (link). This also inhibits other developers who want to expose APIs within their applications.

What is the overhead for security? Some platforms require applications to pay for a new security certificate every time the app is revised. The cost is typically a few hundred dollars, which doesn't sound like much to a big operator or OS company, but is a huge burden to a small company with several apps. They're basically punished every time they fix a bug, which is very unwise -- you want developers to fix bugs instantly, because that increases user satisfaction and reduces support calls. Basic security certificates can and should be issued automatically by the software store, at no charge.

How big is the user base? This will be a more and more important issue over time. For a developer, the ideal platform would let them sell to the whole base of mobile phone users, not just one brand or model.


Room for improvement

Based on those tests, no mobile platform offers an ideal ecosystem today. Apple probably comes closest at the moment. Here's how I'd grade it:

--Power: A-. The iPhone APIs give developers a huge amount of power, and there was a lot of delighted commentary on the web when the APIs were first revealed. But there is a learning curve for iPhone development; Apple has its own tools and its own variant version of C. And support for some typical OS features (such as cut and paste) is missing.

--Store: A-. The store is built into the device prominently, so apps are easier to discover. And there is a user-driven rating system. Developers can bill through Apple's iTunes system; not as convenient as billing through the carrier, but not bad. Apple takes 30% of revenue, which is not ideal, but is better than the 50% or more cut that burdens mobile app developers elsewhere.

--Terms: C+. There are significant, ambiguous restrictions on what a developer can do on the iPhone. The most onerous terms restrict the ability of developers to add functionality to applications and create software that run other applications. The terms cause a lot of confusion among developers; I'm on a mailing list for iPhone developers where they have been trying to figure out whether they can download content to an iPhone app. The answer: it's unclear as to whether content is a form of functionality, and you should ask Apple's lawyers. That is an incredibly intimidating message to app developers. It feels far too much like doing business with the operators.

--User base: Incomplete. It's relatively straightforward to make money from iPhone apps today because the number of developers is still relatively low. But over time, I think it's unlikely that Apple will be able to grow its user base at the same rate as the developer base is growing. If that happens, life will get much less pleasant for iPhone developers.

The ideal mobile app ecosystem would have the API power of the iPhone and the discovery experience of the iPhone store, coupled with business terms that allow add-on APIs like Flash, Java and Google Gears, all working across a much larger base of devices.


What it all means

If you're a software developer and some platform vendor or web company comes around evangelizing their software store or their APIs, you should evaluate the overall ecosystem they're providing, not just the store or APIs alone. If they haven't thought through issues like billing and discovery, it's a big warning sign.

If you work for a platform or web app company that wants to create a developer community, you need to plan the whole ecosystem and make sure it'll all work. This is especially important for a mobile company that wants to compete with the iPhone store. The way to fight iPhone for developers is to create a superior ecosystem. Apple's weak point is the business and technical restrictions on its developers, and the limited reach of the iPhone APIs. If another vendor -- say, Nokia or Google or Microsoft -- can pair a great store and powerful development with more openness and broader reach, they might be able to give Apple some serious competition. Elia Freedman had some good suggestions on ways to start (link).

____________

PS: Thanks to MobHappy for including my post on smartphone share in the Carnival of the Mobilists (link).

Conference time

I'll be doing the Grande Tour des Conferences in the San Francisco area next week. Let me know if you'll be in town and want to meet. My contact info is here.

On Monday, I'm speaking at Mobile Web Megatrends in Berkeley. My topics are:

Mobile data: Convergence or divergence?
The press is predicting a clash of the titans as Apple, Google, Nokia, and a host of other players all try to dominate the smartphone market. How is the battle likely to turn out? Will one company dominate the market? And where should a mobile app developer invest?

and

Apps for mobile devices - What happens next?
Apple's iPhone app store is getting a lot of publicity, and some industry players, such as TMobile USA, are rumored to be working on something similar. What's the future of mobile applications? Will the market grow explosively? What are the barriers to growth? Can a competitor beat the iPhone app store, or is everyone just going to play catch-up?

The speaker lineup is interesting, and I'm looking forward to it.

On Tuesday and Wednesday I'll be at the Tech Crunch conference in San Francisco (not speaking there, just taking notes). On Thursday it's CTIA, and then on Friday I'm an un-panelist at the Mobile Jam Session at CTIA. The folks at WIP have set up some very interesting discussion sessions.

I'll be posting some notes on what I hear, both here and at Rubicon's website.

Does anybody really know what smartphone market share is?

An article in Wired online this week had a chart showing US smartphone market share (link). The chart gave more detail than I've seen recently from other research companies, so I thought it was worth reproducing the data here:



The source is Nielsen Mobile, formerly Telephia. The interesting thing about them is that they do much of the service quality monitoring for the operators, so they have much more direct access to mobile usage information than folks like IDC and Canalys, the people usually quoted for smartphone share.

Wired was focused on Palm's loss of market share, which is indeed striking (but not exactly news). But take a look at the chart again; there are a couple of other items that I think are more newsworthy.

The first surprise is that Nielsen shows Apple in fourth place in smartphone share. That's wildly different from what Canalys, the source usually reported, has been saying (link). Here's how they compare for Q4 2007:




What in the world is going on here?

I'm not sure, but I have some guesses. Canalys doesn't directly measure market share, it receives self-reported shipment reports from the manufacturers and then adds them up. That means Canalys measures shipments into the channel rather than sales, and it depends on the hardware companies to be honest.

Riiiight.

Nielsen Mobile doesn't explain on its website exactly how it measures share, but apparently it's using a mix of survey results and the usage data it gathers from the operators (link). So its numbers should reflect current usage of phones rather than shipments. If Nielsen is measuring installed base share, rather than share of current sales, that might explain the difference. Although in that case, share should not be changing as fast as Nielsen shows. So I'm still confused.

If anybody can shed more light on the source of the difference, please post a comment. I've also asked Nielsen, and will let you know if I hear anything.

The conflict in the numbers underlines how ridiculously useless the publicly-available third party sales numbers are in the mobile phone market, and how little attention the press is paying to the inconsistencies. Apple's share varies from 8% to 28%, and no one even notices. Hey, we got a pretty chart and it confirms what we wanted to say, so don't ask questions.

If you want more information on the problems with mobile market share tracking, I wrote a detailed post here (link).

I said there were two newsworthy things about the Nielsen numbers. Can you spot the second one?

That's right, since the iPhone was released, RIM has been gaining share. So much for the folks who predicted at the launch of the iPhone that it was going to take the smartphone market away from RIM. Instead, at least in the first round of competition, we see what you'd expect from a segmented market -- RIM appeals to some customers, Apple appeals to a different group, and both companies do well.

I can't wait to see what the numbers will look like in six months, after the iPhone 3G has been out for a while. Although probably Canalys and Nielsen will still disagree wildly on what's happening.

Only 10% of Japanese people know how to use all the functions in their mobile phones

A Japanese survey of mobile phone users, translated by What Japan Thinks, reports that only about 10% of Japanese mobile phone users say they have mastery (or a good command) over all the functions of their mobile phones (link). About 75% of users say they have mastered less than half of the functions in the phone.

The most confusing functions were e-wallet, applications in general, music player, and Internet access.

What Japan Thinks concludes that few people in Japan "are really comfortable with their phones," which I find reassuring because it says that people in Japan aren't all that different from everyone else on the planet. In many countries there's a tendency to believe that people in Japan (and Korea) use mobile devices so differently from everyone else that there's nothing useful to learn from them. It's as if they're on a different planet. But the reality is that even in Japan, a phone overloaded with features and cryptic menus is confusing to anyone except the most dedicated technophiles.

It is interesting that so many mobile phones in Japan have e-wallet, applications, music, and Internet built in. That's a result of the aggressive rollout of integrated phones and online services by Japanese mobile phone operators -- the real driver that I think makes the Japanese mobile market so different.

(By the way, in case anyone's interested, another survey determined that 14 percent of Japanese cats won't go to the bathroom if someone's watching [link]. Who knew?)

Hypenotized by Apple

Watching the cloud of hype around last week's release of the new iPhone, I was struck by the way Apple's psychological influence over the tech industry continues to grow. I'm having trouble thinking of any recent technology product, let alone a smartphone, that got such heavy coverage for both its announcement and its initial shipment.

Apple's PR miasma is also starting to twist the thinking of people in the tech industry who ought to know better. Apple's gradually becoming the yardstick against which other tech companies are measured -- and since Apple is such a unique company, it's almost impossible for anyone else to measure up.

Case in point: A recent commentary by a CNET reporter, writing about RIM (link):

"There is no RIM hype machine and when a new BlackBerry is released, hardly anyone in the major media outlets care. And if they don't care, neither will the average consumer who doesn't know too much about the tech industry and won't read columns like this; they rely on the NBCs of the world to get by. So if RIM wants to more effectively compete against Apple, it needs to do everything it can to follow the Steve Jobs formula: secrecy, compelling products, and a great PR team. If it does, look for RIM to not lose as much ground as you may think. But if it doesn't, Apple will run amok."

Problem number one with this thinking is that Apple and RIM don't sell to the same markets. RIM's core is middle-aged business professionals; Apple's is hip twentysomethings. I'm not saying there is no overlap, but I've spoken to plenty of RIM users who would be embarrassed to carry a music-playing, video-watching hunk of eye candy like the iPhone into a business meeting. It's like announcing to a client, "I spend my work time on YouTube."

The second problem is that Apple's skill at PR has somehow turned into an excuse for reporters not to do their jobs. The implied message in the CNET article is, "if you don't put on a spectacle, the press will ignore your products." Excuse me, but isn't the press's job to dig out the real value and separate it from the hype? Don't we pay you (or sit through your ads) to look past the PR and fancy speeches and advise us on what really matters? If we just wanted someone to echo the latest hype, we could get all our news from blogs.

But the third problem is the one that worries me the most. Apple is almost uniquely good at marketing. Its communication power is a combination of longtime company history, Steve Jobs' personality, and a culture that values perfection in marcom. Any tech company that makes its goal to match Apple's flash is going to look bad by comparison.

If anyone from RIM is reading this, please listen to me closely. I beg of you, don't be chumps. You're Canadian, for God's sake. You don't do sexy. You do humble and inoffensive.

Steve's from California. He's a pop culture icon from the '70s; the Madonna of technology. If you try to imitate him, you're going to look like mom and dad pogo-dancing when Rock Lobster comes on at a wedding reception.

Not pretty. Not pretty at all.

Which brings us to Microsoft's latest marketing plan.

Word on the street is that Microsoft is planning a huge advertising campaign this fall to pimp its image. Microsoft executives say they have finally tired of taking all that abuse from the Mac vs. PC ads, and they're going to fire back with their own cool advertising this fall.

Remember what I said at the start of this post about Apple twisting the minds of tech company managers? They have done an incredible number on Microsoft, the sort of thing I used to dream about when I worked at Apple.


Welcome, Microsoft. Seriously.

When I was at Apple, one the competitive team's central goals was to goad Microsoft and Intel into targeting us in public. We used all sorts of tactics to irritate them. We printed bumper stickers that read "Honk if your Pentium has bugs." We hounded them in online discussions. We did press and analyst tours demonstrating all sorts of annoying flaws we'd found in Windows.

The whole idea was to get them so pissed off that they would lash out at us in public. Because we knew that when a market leader attacks a challenger, it just makes the challenger more credible.

So what is Microsoft doing? It's attacking the challenger. Microsoft VP Brad Brooks specifically called out Apple in a recent speech (link):

"There are a lot of myths out there in the marketplace today, a lot of myths around Windows Vista...we know the story is very different than what our competitors would like our customers to think.... Windows Vista is the safest OS in terms of security vulnerabilities in its first year of operation, safer than any other commercial or Open Source OS in its launch. Now, I don't hear Apple making claims about security around a product that is that great.... The other big thing that's different this time around is that we've got a pretty noisy competitor out there. You know it, I know it. It's had an impact, been a source of frustration for you, but today, that line, we're going to start to challenge. We're going to get our story back out into the marketplace.... We've got a highly vocal minority out there in Apple. They kind of look at this and say, hey, you know what, you're kind of boring with the mundane message; it's not cool. They tell you it's the "i-way" or the highway. Well, you know what--we think that's kind of a sad message."

Macintosh share is still just a small fraction of Windows' share, but Microsoft is treating Apple like not just a challenger, but as the opinion leader. Microsoft is responding to Apple's marketing, and what's worse, it's bragging about it in public. What an incredible turnaround from Steve Jobs' first days back at Apple, less than ten years ago, when Bill Gates appeared on the big screen and Jobs publicly kowtowed to him.

It's easy to say what Microsoft shouldn't do, but a lot harder to say what they should do. They do have an image problem, and they do need to do something about it. Here's my take: Apple has always been the cool one, and always will be. Microsoft has traditionally been the safe one. Not as flashy as Apple, but dependable and prudent; the choice that'll never get you fired. That's why 80% of the public has chosen Windows over the years. Rather than trying to act cool, which is destined to end in embarrassment, I think Microsoft should apologize for the problems with Vista, give a timeline for fixing them (I think many of them actually are fixed by this point), and then move heaven and earth to make sure people see them deliver on that promise.

The ironic thing is that Brooks actually did some of that in his speech:

"We had an ambitious plan. We made some significant investments around security in this product. And you know what, those investments, they broke some things. They broke a lot of things. We know that. And we know it caused you a lot of pain in front of your customers, in front of our customers. And it got a lot of customers thinking, and even yourselves and our partners thinking, "Hey, is Windows Vista a generation that I want to make an investment in?" "

That's not a bad start, but in today's Apple-soaked industry atmosphere, the snide comments on Apple dominated the coverage. The best example was the Wall Street Journal's business and technology blog, which headlined its article, "Microsoft Ready to Hit Back at Mac Guy" (link).

So now every Microsoft ad in the new campaign is going to be judged on whether or not it's as clever and cool as an Apple ad. I'd like to ask for a show of hands -- who thinks Microsoft can out-cool Apple?

Anyone?

And as for RIM, well, I'm sure you could do a better job of PR than you do today. But don't try to be sexy. A message more like, "real men use a thumb keyboard" is probably the ticket for you.

========

Thanks to mjelly.com for featuring Mobile Opportunity in the latest Carnival of the Mobilists.

The end of the dream

No matter how it works out in the long run, the purchase of Symbian by Nokia marks the end of a dream -- the creation of a new independent OS company to be the mobile equivalent of Microsoft. Put a few beers into former Symbian employees and they'll get a little wistful about it, but the company they talk about most often is Psion, the PDA company that spawned Symbian.

Psion never got much attention in the US, but it was a pioneer in the PDA market in the UK, and even to this day I think the Psion Revo is one of the two coolest-looking PDAs ever made (the Palm V is the other one).


The Revo

Psion explored many ideas that eventually turned into major new consumer electronics categories, but it failed to follow up on them. The company was effectively dismembered when Symbian was formed, and many of its best people drifted off to other companies. Now Symbian itself is transitioning to something very different, with most of its people absorbed into Nokia. What the Psion veterans talk about wistfully is how many smart people worked at Psion, how many great ideas the company fumbled, and how successful many of the people have been in the tech industry post-Psion. In this sense, Psion is similar to many other tech pioneer companies that assembled staffs of very bright people, taught them how to work together, and then blew apart like exploding stars, scattering the elements of new companies across the industry. This process dates back at least to Fairchild Semiconductor, which trained the founders of many of the most prominent semiconductor companies (link). You can find similar networks of former employees from places like Apple, Netscape, and Palm. I think Yahoo is in the process of forming a network now, and some day there's going to be a dandy one made of former Googlers.

What makes the Psion story different is that many of the Psion veterans had to leave the UK, or join non-UK companies, in order to become successful. Some are in other parts of Europe, some are in the US, and some are in London but working for foreign companies. This is a source of intense frustration to the Psion folks I've talked with. They feel like not only their company failed, but their country failed to take advantage of the expertise they had built.

There's a big body of academic research on why Silicon Valley has been successful in sustaining itself, and part of the reason is that the Valley recycles companies very efficiently. Failing companies do not last long, but in the process the brightest people and ideas are rarely lost, they are just shuffled around into new configurations.

About a year ago, Andrew Orlowski of the Register wrote an amazing article on the history of Psion, and how company culture and government philosophy failed to take advantage of it to grow a new industry. It's the longest piece I've ever seen in the Register, almost the nucleus of a book, and it's well worth reading. It didn't get enough attention when it was published, and I'm embarrassed to say that I never posted a link to it. So I'm glad to remedy that now. If you want to understand the context what happened to Symbian, and learn a bit about how the tech industry works, go read it here.

If you want to hear more about what Symbian is morphing into, two of its executives have just started personal weblogs in which they are commenting on the migration to Symbian Foundation (among other things). It's an interesting move, and it seems symbolic of the transition they're trying to make into the open source world. Previously Symbian had a company blog that several execs contributed to; now the execs have personal blogs where they talk directly to the industry.

David Wood (Symbian's EVP of Research) link.
John Forsyth (Symbian's Strategy VP) link.

Symbian changes everything, and nothing

[With a correction made on June 26.]

The Symbian Foundation announcement today is a fascinating change in business strategy, but I'm not sure if it will help or hurt Nokia in the long run. I think something like this was probably necessary just to clean up the mess in Symbian's ownership structure. If Nokia can make the new structure work, it'll be a milestone in the use of open source by large tech companies, but I'm not sure it helps Nokia win the smartphone war.


What happened

--Nokia is buying Symbian. Everyone currently working at Symbian becomes a Nokia employee after the deal closes. Nokia said it will spend the next six months deciding "how we will use the unique talent we are gaining."

[By the way, the buyout by Nokia is a change I said was possible two and a half years ago when it first became clear that some of Symbian's owners wanted out (link). I am astounded that the change took so long. I looked back at my old post a few months ago and thought, "wow, I really got that one wrong." Now I am relieved to say that I was not wrong, I was merely prematurely correct ;-) ]

--Symbian OS will become free. Nokia's Symbian-related assets, including both Symbian OS and the S60 interface, will be contributed to the new Symbian Foundation, a nonprofit that will control the Symbian platform. So Nokia writes the code and then gives it to the foundation for free.

Founding members of the foundation include: AT&T, LG, Motorola, Nokia, DoCoMo, Samsung, SonyEricsson, ST Micro, TI, and Vodafone. It's very interesting to see some operators in the mix, especially AT&T.

The foundation will open source the new Symbian platform over a two year period. So eventually Symbian will be available for free.

The new Symbian Platform will have a broader scope than the current Symbian OS. It will include:

-An application suite (previously controlled by licensees)
-Runtimes (including Webkit, Flash, Silverlight, and Java; previously licensee-controlled)
-UI framework (formerly controlled by licensees)
-Middleware
-OS
-Tools, SDK, and application signing (previously shared between Symbian and licensees)

--UIQ is dead. SonyEricsson's UIQ technology, and NTT DoCoMo's MOAP, both of which are user interface layers written on top of Symbian, will also be contributed to the foundation, which will incorporate pieces of them into S60. The new Symbian foundation partners said at the press conference, "We will reposition UIQ in the new ecosystem." That's seems to be a face-saving way of saying, "UIQ is dead." Confirming that, UIQ announced immediate plans to lay off more than half its employees (link).

These are huge changes, even though they'll take a couple of years to implement. We won't get the first release of the new merged platform until 2010, although the partners say S60 and native Symbian apps will continue to run in the future, so they hope many more developers will create Symbian apps today in anticipation of future growth.

--Nokia will continue to control Symbian development. This is my interpretation, not something they announced. Technically, control over Symbian and S60 passes to the new Symbian Foundation, with product plans controlled by a managing board and councils made up of foundation members. This makes Symbian sound independent. But Nokia will employ most of the people maintaining and extending Symbian and S60, and could divert them to other Nokia projects if it ever dislikes the direction of the foundation. More to the point, the whitepaper explaining the new foundation says, "device manufacturers will be eligible for seats based on number of Symbian Foundation platform-based devices shipped, with the other board members selected by election and contribution" (link). So Nokia as the dominant shipper of Symbian devices gets the most seats, and can then control the election of additional board members. Symbian contacted me on June 26 with a correction: "Five Foundation board seats will be allocated to handset vendors on the basis of volumes shipped using the Symbian Foundation platform. There will be a maximum of one (1) board seat per company." So Nokia gets one board seat, and does not control the foundation.

The right phrase for this, I think, is puppet strings. But I don't mean that in a bad way; it would have been insane for Nokia to actually give up control over its smartphone OS. Just don't have any illusion that the strings have been cut. They've merely been relocated, and in fact I think Nokia now controls things more directly since it owns the Symbian development team. Added June 26: Nokia has given other companies a formal say in the feature set, with less official control by Nokia than it had when it held about 50% of Symbian, but perhaps more practical influence because it now directly employs most of the people doing the engineering. So I think Nokia gave up the official veto it had over Symbian's actions, and replaced it with a practical one.


What does it all mean?

I don't know.

The announcement is so complex, and so many things are changing in the mobile market, that it's very difficult to predict how everything will turn out. Also, the whole thing depends on crisp implementation. Even the most brilliant strategy fails if you can't execute on it.

You can't say that Nokia lacks guts. The foundation members said at the announcement that it is one of the largest open source announcements ever, and I think that's true. It's a very interesting, aggressive move for Nokia, and I respect that. There are precedents for a big company acting as a sugar daddy for an open source software project, but I don't think it's ever been done with a project that is as central to the parent company's operations as Symbian is to Nokia. It will be fascinating to see if Nokia can really work effectively through the foundation model. I presume they have thought about this a lot and feel the risks are well controlled.

I'm having trouble seeing the big picture of how this changes the world, though. I suspect the announcement is actually half cleanup and half power move. The power move is that it challenges Android, and could help harness the energy of the open source community to support Symbian. The cleanup is that the ownership situation of Symbian was unstable and had to be changed eventually, and SonyEricsson clearly wanted to get out of the UIQ business. The creation of the foundation solves all of those problems at once. My guess is that since Nokia is paying most of the bills, the other foundation partners were willing to go along with it. The Symbian investors get some money from Nokia, and can sit back and wait to see what the foundation delivers.

Here are some other issues and questions that stand out to me:

Symbian gets its UI back. Years ago, Symbian took itself out of the user interface business, allowing Nokia and NTT DoCOMo to develop their own UIs, and spinning out the UIQ interface team. The company declared that it had been a mistake to ever go into the UI business. So it was amusing to hear Symbian at today's press conference saying how disruptive it was to have multiple user interfaces, and how great it is to have them unified.

The reality is that OS companies have traditionally created the UI along with the rest of the OS because they need to be coordinated closely, and because developers want to work with one consistent interface. So the real mistake was getting out of the UI business, and Symbian has now corrected that.

What will happen within Nokia? At the press conference, Nokia was asked what happens to its internal S60 development team (which is rumored to be larger than Symbian itself) once the merger is complete. Nokia said vaguely that it's going to spend six months working out all those integration issues, and what it will do with the multiple geographic locations. It's hard for me to believe that working out process won't result in some layoffs. I hope I'm wrong; I have friends at both Nokia and Symbian, and layoffs would be incredibly painful for the Symbian folks, many of whom have spent most of their careers there.

The fate of the people is just one of the open questions about what the merger means to Nokia. Another is the fate of Trolltech, the development tool that Nokia purchased recently and said would unify app development across Series 40 and S60. Will it be contributed to Symbian? And what does the open sourcing of Symbian mean for Nokia's use of Linux?

How does Nokia differentiate its software? The theory behind S60 was that Nokia would have its own user interface, helping to differentiate its phones from other Symbian vendors. Now that S60 will be given away, how will Nokia differentiate? The Symbian Foundation says licensees will be able to create a "differentiated experience" on its unified UI framework. Lord only knows what that means. Maybe Nokia has decided the UI is not a point of differentiation at all, and plans to focus on something else (web services, perhaps?)

Will the change in Symbian really drive more developers? As the Symbian partners pointed out repeatedly in the press conference, they have already sold 200 million phones. If that's not enough to excite developers, how will adding another 200 million -- or even 500 million -- do it? Although Symbian now has a nicer long term story, I don't think most developers were paying attention to that. They respond to user excitement and the chance to make lots of money. The new Symbian strategy doesn't directly drive either one.

What does it mean to Apple? I think it's probably good news. Although the Symbian partners could theoretically bleed Apple by sharing investments that Apple has to fund for itself, Apple competes on speed and elegance, not cost control. Nokia and Symbian will now spend the next six months sorting out how they'll integrate and rationalize their organizations. No matter how much they try to avoid it, this will slip schedules and force people to revisit plans. And the other Symbian licensees have to wait two years for the new OS. That gives Apple a long, long time to build up its iPhone business. The Register put it very bluntly in its commentary on the Symbian announcement (link):

"Apple must now see a clear road ahead for world dominance...it's now Apple's business to lose."

Wow, from new entrant to industry leader in just a year. That sort of stuff must drive Nokia nuts.

Is Google happy or upset tonight? My first reaction is to say that Google should be worried because there's now another very credible operating system being given away for free in competition with Android (or there will be in two years). What's more, the leading mobile handset companies all participated in the Symbian Foundation announcement. That makes it harder for Android to get licensees. But the new open Symbian OS is two years away from shipment, giving Google lots of runway to get established (that's what I meant about execution determining the real impact of the announcement). Also, the governance system for Android is a lot simpler than Symbian's. While the Symbian committees must debate and agree on product plans, Google can just decide whatever features it wants to add, and toss them out there. In theory, Google should be able to move much faster.

Besides, there is the question of why Google really created Android. One school of thought says that Android was just a tool to bleed Microsoft and force openness in the mobile ecosystem. If that's the goal, then the opening up of Symbian is a kind of a triumph for Google. Nokia is, in many ways, doing Google's work for it. Which brings us to...

What happens to Microsoft? Here's the weird thought for the day: Microsoft is the last major company charging money for a mobile operating system. The throwback. The dinosaur. How many companies are going to want to pay for Windows Mobile when they can get Linux, Android, or Symbian for free? This is Microsoft's ultimate open source nightmare, becoming real.

Thoughts on the 3G iPhone announcement

Apple's 3G iPhone announcement today was probably the minimum necessary to please the community. The real news was the things that weren't announced:

--No tablet device (again).
--No major changes to the form factor of the iPhone.
--No other major product announcements.

Apple has made its Macworld and WWDC keynotes into a specialized form of performance art, complete with cleverly-dropped pre-announcement hints, and often some sort of surprise at the end of the speech. Apple's own past successes have now raised the anticipation for the keynotes so high that it's a disappointment if some sort of major surprise doesn't happen.

Check out Engadget's live blog of the speech if you want to see the result (link). It's littered with whining like this:

"We love what you've done here, but we're yawning."
"Man, these demos are crazy boring."
"Man, please let this string of demos end!"
"Another developer demo. Ugh."
"Wow, we heard Apple's stock is down almost $5 since this keynote started. Maybe they should just demo their top three and keep going."
"Someone, wake us when Steve's back."

I didn't actually attend the talk, so I don't know how boring all those demos were. But I think it's fair to remind people that the WWDC is a developer conference. It is traditional to do a fairly large number of app demos at a developer conference, because that's a low-cost way of rewarding your developers.

Apple discussed some other interesting things in the keynote. Here's what stood out to me, with some comments:

The "lower" pricing. This was completely necessary. AT&T claimed in an interview with the New York Times that $199 is a magic price point for smartphones (link). They're right, it is. But as the Times pointed out in another article, the price cut isn't actually as meaningful as it sounds -- AT&T is making up for it by raising the price of the iPhone data plan by $10 a month, with a two year contract requirement that will apparently be rigorously enforced. So to get that $200 discount on the purchase price of the iPhone, you pay an extra $240 over two years.

You're actually losing money in the long run, but now the iPhone is priced in the same way as every other phone on the market, making it more comfortable to buy. That figures to help iPhone sales -- especially in Europe, where the unusual price structure for iPhone caused a lot of complaints.

If they really do enforce the contract, that will probably put an end to the widespread practice of buying iPhones in the US, unlocking them, and shipping them to places like China. But the iPhone is getting much stronger international distribution, with up to 70 countries in the works according to Apple. We have no way of knowing how well the contracts will be enforced around the world. Chances are there will be gray market leakage from somewhere.

Notification vs. background processing. One of the critiques of the iPhone is that it doesn't allow third party applications to run in the background, without being visible to the user. Apple said this is to prevent background applications from hurting performance, the way they do on Windows Mobile. But that's a very disingenuous explanation -- Windows Mobile manages memory very strangely, often leaving things in memory whether they run in the background or not. You could create a very efficient architecture that still allows background processing.

Apple says it has solved the background problem by setting up a notification server that can wake up applications on your iPhone and pass incoming messages to them. I don't know how that looks on screen -- since Apple won't run apps in the background, does that mean they'll suddenly launch on screen and start operating on their own? Creepy. And although notification does some of the things you'd want from the background, it doesn't do them all. For example, some developers want to write background applications that would perform tasks automatically, whether they are pinged by an outside server or not.

All in all, it's interesting that Apple's establishing a messaging server for iPhones. Combine that with Apple's new MobileMe service, and Apple is gradually creating a lot of back end infrastructure for the iPhone. In the long run, Apple could build many innovative new services around that infrastructure.

I wonder if they'll charge developers a fee for passing messages through the Apple infrastructure.

When do the developer limits come off? Apple bragged in the keynote that there were 25,000 applicants to the iPhone developer program, but the company admitted only 4,000. In other words, they seriously pissed off 21,000 developers. Not the sort of thing I would brag about, but this is Apple and they can sometimes operate on a different set of rules.

The question is, when (if ever) do the other 21,000 developers get into the program? As far as I know, Apple was silent on that issue. If they were about to open up the program, you'd think they would have announced that.

The application demos skew toward consumers. Four of the applications demonstrated during the keynote were games, one was a consumer news applications, one was a social network product (Loopt), one was consumer shopping (eBay), one was consumer blogging (TypePad), one was sports information, and two were vertical medical. Although Apple talked about enterprise at the start of the keynote, the apps they chose to demo tell you everything you need to know about who Apple sees as the iPhone's buyers.

What happens next? The iPhone is only a year old, and it generally takes 18 months to design a major new device. So the 3G iPhone we saw today was probably already in early development when the original iPhone was launched. We could see more radical hardware change this fall, but I think it's more likely that would wait for Macworld 2009.

What happens to iPod pricing? I was surprised that the price of the iPod Touch didn't change today. It now looks more expensive than the iPhone, and it lacks GPS. I would not be shocked if the Touch ends up getting a price action this fall.

As for when we'll see the long-rumored larger-screen iPod/iPhone, your guess is as good as mine. Fall is the best time for introducing new products, because it's right before the holiday/new year buying season. If the product exists, that would be the time to announce it.

Nokia goes for 1% market share in the US

Okay, I'll admit in advance that this is going to be a pretty snarky post, but it never ceases to amaze me how badly Nokia handles itself in the US market. In Europe and most of the rest of the world, Nokia operates like a fighter jet, incredibly nimble and powerful. But in the US, it's more like a biplane. An old biplane. With holes in the wings. Nokia's market share in the US has dropped from 20% to 7% in the last two years (link), and sometimes I wonder if it's trying for 1%.

Case in point: Nokia's "Open to Anything" ad campaign featuring people who have created software for Nokia N95 smartphones (link).

It features, swear to God, a guy who created a self-hypnosis application for the N95, someone who created a bad breath detector, a man in the Witness Protection Program who created a location-aware app to track the hit men chasing him, a ditzy woman who uses the phone to track fertilizer schedules for her plants, a jealous wife who created a lie detector, and a flake Jewish photographer who glued together two n95s to create a 3D camera.

"You've never really seen a bris until you've seen a bris in 3D." --Nokia's website

They're all fantasy applications from obviously fake people, but beautifully animated in an elaborate Flash-driven site.

From time to time, I've talked with Nokia employees who were confused about why people don't buy more application software for their Nokia S60 smartphones. There are a lot of reasons -- lack of awareness that they can do it, lack of a built-in software store on the device, incompatibility between various versions of S60, etc. But one huge reason is because no one has ever made a compelling case to most users on why they should care about smartphone software.


The triumph of creativity over business sense

The Open to Anything campaign is a great example of how Nokia's hurting itself in the applications business, and in the US market in general. I'm sure Nokia's intent was to do something light-hearted to draw attention to the N95, and if you view the ads as standalone short films they are moderately witty. You see this a lot in online marketing lately -- a creative agency will create humorous websites (often with video) designed to draw traffic from bored web surfers. But unless the ads also align with your strategy, they don't drive sales. In Nokia's case, they actually do harm:

--Once again, Nokia is communicating that its users are freaks and morons, which in the US is not the way to build a loyal following. Nokia has a long habit in the US of positioning itself as the preferred phone of people who lack social skills. At least this time there aren't any sluts in the ad (link).

--The benefit of an open phone is not that you can write your own apps, it's that you can buy applications created by others. Almost no one wants to create their own apps. So we're being told that N95 users are not only freaks and morons, but they are freaks and morons who have programming skills -- an even narrower demographic.

--Since the argument for why users should care about applications has not been made, showing a bunch of nonsensical applications actually makes people less likely to take an interest in mobile apps at all. It trivializes the whole idea of mobile software, at a time when Nokia claims it is trying to make itself into a computing company that can compete with Apple and Google.

Meanwhile, Apple's ads depict its users as smart and hip, it puts its CEO on stage with real developers showing lustworthy iPhone applications, and it plans a built-in software store for the iPhone. Care to guess which platform is going to get more user and developer loyalty?

I'm tempted to start taking bets on when the iPhone application base will be larger than S60's. Unless Nokia wises up quickly, it won't take long.

WiMax gets closer and further away at the same time

A strangely cryptic article in the New York Times today announced that several companies had banded together "to build the first of a new generation of nationwide wireless data networks" in the US (link). I read it and thought to myself: what, another new vaporware wireless technology? I couldn't make sense of the article, so I went to the websites of some of the companies involved. It turns out the announcement isn't a new vaporware wireless technology, it's my favorite old vaporware wireless technology, WiMax (link). Sprint finally figured out what to do with it.

The announcement was both interesting and supremely frustrating. The interesting part was that Sprint has brought several promising investors into WiMax, including Google. That's right, Google is launching a wireless network, if only as a minority investor. (And it got a sweet deal, which I'll explain below.) The unbelievably frustrating part is that Sprint has pretty much slipped the deployment plan for WiMax by another two years. It's hard to get excited about a new technology, no matter how great the investors, when I have zero confidence in the companies' ability to deliver.


Here's what was announced:

Sprint and several companies have banded together to buy Clearwire, the other wireless company that had been building a WiMax network in the US. Clearwire will be merged with Sprint's WiMax division, the company will be managed by a mix of Clearwire and Sprint executives, and will be headquartered at Clearwire's site in Washington state.

Investors in the merged company, to be called Clearwire, include Google, Comcast, Intel, TimeWarner Cable, Bright House Networks, and Trilogy Equity Partners. Intel and Comcast are investing about $1 billion each, TimeWarner and Google about $500 million, Bright House $100 million, and Trilogy $10 million.

Google gets to be the preferred search provider for both Sprint and Clearwire, will provide apps (including Gmail, YouTube, and Maps) for bundling with devices, and Clearwire will sell devices running Google Android. Google and Clearwire will also partner to develop advertising, applications, and create the operating principles for the network (link). Google said it will work with Clearwire to create:

An open Internet protocol to work with mobile broadband devices...and implementing other open network practices and policies....The network will: (1) expand advanced high speed wireless Internet access in the U.S., (2) allow consumers to utilize any lawful applications, content and devices without blocking, degrading or impairing Internet traffic and (3) engage in reasonable and competitively-neutral network management.

Intel will provide WiMax chips (which it was doing anyway), and Sprint, TimeWarner, Comcast, and Bright House will all become Clearwire resellers.

The new company will be 51% owned by Sprint, and its governance structure is so nuanced that I won't even try to explain it here.

As part of the announcement, Sprint slipped in an estimate that the new Clearwire network will reach 120 million to 140 million people by the end of 2010 (link).


What it means

Death to the Xohm. On a personal basis, the most exciting part of the announcement is that Sprint is apparently dropping the brand name Xohm, which it was using for its WiMax services. I am very sympathetic to the troubles that companies have finding brand names that aren't already trademarked. But even by my lowered standards, I thought Xohm was a bizarre name. To me, it sounded like something you'd read in a bad science fiction novel. The Xohm would be a race of homicidal crustaceans bent on destroying humanity.

"Captain, the Xohm have deployed a quantum weak force destabilizer!"

"Good God! That could rupture the very fabric of space-time!"

Google gets a wireless network. The company that made out like The Xohm in this deal is Google. For just $500 million (little more than gas money for the corporate jet in Google terms), the company gets preferred placement for its services on both Clearwire and Sprint; a showcase for its apps, advertising, and OS; and the opportunity to design the business model for a national wireless network. No wonder Google didn't bother to bid seriously in the recent US wireless spectrum auction -- why build a network when you can play with one for a tenth the price?

Comcast, Time Warner, and Bright House all get quadruple play options. They can pair Clearwire services with their current cable businesses to deliver advanced bundles of wireless services, Internet access, telephony, and television.


Will it succeed?

The reaction to the deal on some prominent tech blogs seems to range from lukewarm (link) to intensely negative (link). But I think there's a lot to like about it. The involvement of Google means we're very likely to get a pretty much open ecosystem on a major wireless network, which Silicon Valley has been collectively screaming about for years. The size of the investments mean there is a lot of money available to build out the network. People ought to be dancing in the streets here, but instead most of them appear to be either yawning or throwing spitwads.

I'd be out there dancing myself if it weren't for the slip in the schedule. A year and a half ago Sprint announced that its WiMax network would reach 100 million people by the end of 2008 (link). Now Sprint says that by the end of 2010 the network will reach 120-140 million people. So in the last 18 months, the schedule has basically slipped by 24 months. It's going backwards. At this rate we'll have passenger rockets to Pluto before we have WiMax service.

Hopefully the management of the new Clearwire will be dominated by people from outside Sprint. I want to believe that they can build out this network; we need it both for the service itself and as an example of how to grow an open mobile ecosystem. But it's very hard to trust people who have missed their targets as badly as these guys have.


Some other interesting commentary on the deal:

Muni Wireless on the cable companies' motives for investing (link).
Fierce Wireless explains the ownership structure (link).
Sprint's amazingly complex press release (link).

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Thanks to Xellular Identity for including last week's post on Adobe in the latest Carnival of the Mobilists (link).