Tuesday, February 22, 2011

The Mobile Battleground

The mobile wars are raging at full swing right now. The key players include Apple, Google, RIM, and Microsoft. The battle lines have been drawn based on the mobile operating systems but there are in fact, at least three fronts:

1. Devices
What’s a little puzzling is how the smartphone manufacturers expect to compete. Today, HTC, Samsung, LG and Sony-Ericsson all ship smartphones with the Android operating system which means that they all have the same functionality and applications. For now, the phone features are still distinct as they have different sizes, cameras, or expansion slots but within a year, they will all likely be identical. The Windows Phone 7 phones will face the same challenge as I have already described in my take on the Microsoft-Nokia partnership. Clearly, only Apple and so far RIM have a differentiated strategy as they own the hardware and operating systems and don’t license it to other vendors. HP could be in the same boat but they have yet to ship a device.

2. Apps
It’s all about the apps, baby. Actually, it is about application developers since they are the ones who have to be compelled to build their apps for the respective mobile operating system. Maintaining the apps for the multitude of OSs is very costly and so most developers want to focus on 1-3 systems. The spots 1 and 2 are today firmly in the hands of Apple and Google and therefore position 3 is highly contested by RIM, Microsoft and HP. RIM has some lead based on their market presence but Microsoft has more experience in courting developers and so the game is on. HP has no market share, no developer ecosystem and no applications to speak of - a tough hill to climb.

3. Services
Besides applications, most mobile operating system vendors have a deeper agenda - they want to provide online services that consumers use on their mobile devices. Mobile devices are the key to some of the consumer spending online whether it’s by selling content or advertising. And the consumer power and profits associated with these services are just as compelling as the mobile market itself. Apple has clearly figured it out first and that’s why the company is today making piles of money on mobile devices and on selling music and movies. Google is leveraging its power in search to drive consumer advertising and even RIM figured out that the free BlackBerry Messenger is a very powerful service that drives consumer demand for its devices.

The table below compares the consumer stack of key contenders. It shows not only who provides which service but also contrasts it with the leader in each respective category:

Comparison of the consumer stack among the mobility players.
 The color represents the heatmap - the darker the color, the stronger a given vendor is at that particular service of the consumer stack. As we can see, Apple and Google have a pretty solid position with most services covered and many of them strong. Microsoft has made big strides towards having most bases covered but many of them are lacking on traction. What’s also interesting is that, in so many areas, the leading service is provided by a vendor without a mobility agenda. This hints at possible partnerships - the way RIM has embraced Facebook and Twitter by developing their own BlackBerry apps. I expect that more such partnerships and even acquisitions are likely.

The consumer stack is an important factor in the mobility war. The mobile vendors want to take advantage of their strengths but they will need to be careful not to overtax the users. Google, for example, wants to leverage its search-based advertising but too much of that will be a turnoff for mobile users. Microsoft wants Windows Phone 7 users to live in Windows Live but since this service has relatively low adoption, they must not lock the users to their own consumer stack. The vendor who gets it right will reap the benefits on both ends - making money off the devices as much as off the services. Just like Apple does with iPhone, iTouch and iPad and the music and movies content.

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