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State of Mobile Computing

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Alex Ferrara
Alex Ferrara

This document summarizes the state of mobile computing and potential investment opportunities. It outlines how the introduction of the iPhone created a new mobile computing paradigm embraced by consumers and competitors. It discusses trends driving adoption like improved performance and lower prices of smartphones, the expansion of 3G networks, and the success of the iPhone breaking down carrier "walled gardens". The document also examines implications for the wireless value chain and opportunities for startups in mobile health, payments, video, and other areas as mobile internet usage grows.

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Alex Ferrara, June 23rd, 2010Mobile Computing RoadmapConfidential
1AgendaState of Mobile ComputingPotential Investment Opportunities
U.S. Wireless Industry is Large and MatureAlmost everyone in the U.S. has a cell phoneU.S. wireless penetration at 91% exceeds U.S. PC penetration (~80%)Soon, everyone in the U.S. will have a SmartphoneSmartphone adoption forecast of 20%+ CAGRSource: ctia.org, Forrester
Three self-reinforcing trends are driving global adoption of mass mobile computing:Moore’s Law continues to drive performance/price improvements in smart phones, netbook PCs, and tablet PCs making them increasingly affordable3G telecom network roll-outs have enabled mobile broadband applicationsThe massive success of the iPhone has broken the carrier walled garden and created competitionamong platformsSmart phone adoption has reached a tipping point; network effects now maintain momentum Why now? Mobile Computing in a Post iPhone World
With iPhone, Apple introduced a new mobile computing paradigm that consumers and competitors have embraced4User Interface Evolution Over Past 30 YearsTextTouchGraphicalUser InterfaceKeyboardFingersMouseInput DeviceConsumers now have in their pockets:Fast processor Larger memory High-res screen Broadband Internet Camera GPSMulti-touch UI Magnetometer Accelerometer Wifi & Bluetooth Good battery lifeSource: Morgan Stanley, T-Mobile
12minutes33minutes28minutes27minutesThis is paradigm is more about data, apps, and content than voice and SMSDaily Usage Breakdown% of Mobile Users Who Consume Digital Content65%Average iPhone user spends50% more time per day, 20 minutes, using deviceAll that extra time is spent on data features and apps48%21%Smart phone consumer value is more about data than voiceSource: Morgan Stanley, iSuppli, CTIA, comScoreMobiLens
Mobile InternetNTT docomoi-mode Launched 6/99 … and it has been a tremendous successiPhone + iTouch vs. NTT docomoi-mode vs. AOL vs. Netscape UsersFirst 20 Quarters Since Launch~85MMMobile InternetiPhone + iTouch Launched 6/07Desktop InternetNetscape*Launched 12/94~31MM~18MMDesktop InternetAOL*v 2.0 Launched 9/94~8MMNote: *AOL subscribers data not available before CQ3:94; Netscape users limited to US only. Morgan Stanley Research estimates ~50MM netbooks have shipped in first 10 quarters since launch (10/07). Source: Company Reports , Morgan Stanley Research.Source: Morgan Stanley, Katy Huberty
One implication is that what were devices are becoming features7There is (or will be) an app for thatSource: Qualcomm
… and unlike the desktop, consumers are willing to pay for apps and content8Wall Street Journal10,000 paid app iPad installs @ $17.29 per month in 60 days$3.3m in total annualized revenue ($2.1m subscription + $1.2m in advertising)WSJ.com, a decade-and-a-half old subscription site, has about 400,000 online-only subscribersIn two months the iPad has added 2.5 percent to that number. The Times of London5,000 copies sold in the first 3 days @ £9.99£49,950 in first 3 days Early but promisingSource: Graphic by Tom Fishburne
How will the paradigm evolve? Looking to analogsAnalogous Market Growth PatternsWe are roughly here>>>>>>With mobile infrastructure adequately developed and Apple as a platform pioneer, activity is increasing among platforms and applications
Mobile Commerce may be around the cornerSource: Morgan Stanley Research
How will this paradigm affect the wireless value chain?10New Platforms(iPhone, Android, Blackberry, MS)ConsumersValue is shifting from carriers to new consumer-centric platforms which disintermediate carriers’ “walled gardens”
Consumers face unprecedented choice of mobile applications and content
Today the value is accruing to consumers and platform vendors
As platforms become more open, value will accrue to consumersSource: Adapted from Anderson & Williams, “Unbundling the Mobile Value Chain”
Evidence Seen in the Success of App EcosystemsSource: Morgan Stanley, Distimo, Nokia, Apple, Google, RIM, NielsenNokia apps exclude wallpapers and ring tonesRIM/Nokia excludes older devices that cannot support App stores
… and in Apple’s stock price performance5 Year Dividend Adjusted Stock Price:Apple, Google, Microsoft, Palm, RIM, Nokia, AT&T, Verizon, SprintApple+500%Google, RIM+100%Everyone ElseMarket cap of Apple now exceeds that of MicrosoftSource: Capital IQ, May 25 2010
… and in recent industry developments2010JANFEBMARAPRMAYJUNApple Ships 2M iPadsGoogle becomes #2 smartphone OSAndroid Hits 100k Activations per Day 18 Months After LaunchHP Announces Palm Acquisition for $1.2biPhone 4 releasedBallmer Takes Over Windows MobileRIM & Intel Announce Separate TabletsIndustry Analysts Increase Estimates53% CAGR for iPhone (2008 – 2013)
23% CAGR for Smartphone (2008 – 2013)AT&T Ends Unlimited Data PlanFTC clears Google/Admob
Apple’s Success has Invited Competition14Worldwide Smartphone OS Market Share by Sales VolumeSmartphone OS/Platform market remains concentrated but increasingly competitive
Android share has increased from 0% to 10% in 18 months
RIM and MSFT also making big investments

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State of Mobile Computing

  • 1. Alex Ferrara, June 23rd, 2010Mobile Computing RoadmapConfidential
  • 2. 1AgendaState of Mobile ComputingPotential Investment Opportunities
  • 3. U.S. Wireless Industry is Large and MatureAlmost everyone in the U.S. has a cell phoneU.S. wireless penetration at 91% exceeds U.S. PC penetration (~80%)Soon, everyone in the U.S. will have a SmartphoneSmartphone adoption forecast of 20%+ CAGRSource: ctia.org, Forrester
  • 4. Three self-reinforcing trends are driving global adoption of mass mobile computing:Moore’s Law continues to drive performance/price improvements in smart phones, netbook PCs, and tablet PCs making them increasingly affordable3G telecom network roll-outs have enabled mobile broadband applicationsThe massive success of the iPhone has broken the carrier walled garden and created competitionamong platformsSmart phone adoption has reached a tipping point; network effects now maintain momentum Why now? Mobile Computing in a Post iPhone World
  • 5. With iPhone, Apple introduced a new mobile computing paradigm that consumers and competitors have embraced4User Interface Evolution Over Past 30 YearsTextTouchGraphicalUser InterfaceKeyboardFingersMouseInput DeviceConsumers now have in their pockets:Fast processor Larger memory High-res screen Broadband Internet Camera GPSMulti-touch UI Magnetometer Accelerometer Wifi & Bluetooth Good battery lifeSource: Morgan Stanley, T-Mobile
  • 6. 12minutes33minutes28minutes27minutesThis is paradigm is more about data, apps, and content than voice and SMSDaily Usage Breakdown% of Mobile Users Who Consume Digital Content65%Average iPhone user spends50% more time per day, 20 minutes, using deviceAll that extra time is spent on data features and apps48%21%Smart phone consumer value is more about data than voiceSource: Morgan Stanley, iSuppli, CTIA, comScoreMobiLens
  • 7. Mobile InternetNTT docomoi-mode Launched 6/99 … and it has been a tremendous successiPhone + iTouch vs. NTT docomoi-mode vs. AOL vs. Netscape UsersFirst 20 Quarters Since Launch~85MMMobile InternetiPhone + iTouch Launched 6/07Desktop InternetNetscape*Launched 12/94~31MM~18MMDesktop InternetAOL*v 2.0 Launched 9/94~8MMNote: *AOL subscribers data not available before CQ3:94; Netscape users limited to US only. Morgan Stanley Research estimates ~50MM netbooks have shipped in first 10 quarters since launch (10/07). Source: Company Reports , Morgan Stanley Research.Source: Morgan Stanley, Katy Huberty
  • 8. One implication is that what were devices are becoming features7There is (or will be) an app for thatSource: Qualcomm
  • 9. … and unlike the desktop, consumers are willing to pay for apps and content8Wall Street Journal10,000 paid app iPad installs @ $17.29 per month in 60 days$3.3m in total annualized revenue ($2.1m subscription + $1.2m in advertising)WSJ.com, a decade-and-a-half old subscription site, has about 400,000 online-only subscribersIn two months the iPad has added 2.5 percent to that number. The Times of London5,000 copies sold in the first 3 days @ £9.99£49,950 in first 3 days Early but promisingSource: Graphic by Tom Fishburne
  • 10. How will the paradigm evolve? Looking to analogsAnalogous Market Growth PatternsWe are roughly here>>>>>>With mobile infrastructure adequately developed and Apple as a platform pioneer, activity is increasing among platforms and applications
  • 11. Mobile Commerce may be around the cornerSource: Morgan Stanley Research
  • 12. How will this paradigm affect the wireless value chain?10New Platforms(iPhone, Android, Blackberry, MS)ConsumersValue is shifting from carriers to new consumer-centric platforms which disintermediate carriers’ “walled gardens”
  • 13. Consumers face unprecedented choice of mobile applications and content
  • 14. Today the value is accruing to consumers and platform vendors
  • 15. As platforms become more open, value will accrue to consumersSource: Adapted from Anderson & Williams, “Unbundling the Mobile Value Chain”
  • 16. Evidence Seen in the Success of App EcosystemsSource: Morgan Stanley, Distimo, Nokia, Apple, Google, RIM, NielsenNokia apps exclude wallpapers and ring tonesRIM/Nokia excludes older devices that cannot support App stores
  • 17. … and in Apple’s stock price performance5 Year Dividend Adjusted Stock Price:Apple, Google, Microsoft, Palm, RIM, Nokia, AT&T, Verizon, SprintApple+500%Google, RIM+100%Everyone ElseMarket cap of Apple now exceeds that of MicrosoftSource: Capital IQ, May 25 2010
  • 18. … and in recent industry developments2010JANFEBMARAPRMAYJUNApple Ships 2M iPadsGoogle becomes #2 smartphone OSAndroid Hits 100k Activations per Day 18 Months After LaunchHP Announces Palm Acquisition for $1.2biPhone 4 releasedBallmer Takes Over Windows MobileRIM & Intel Announce Separate TabletsIndustry Analysts Increase Estimates53% CAGR for iPhone (2008 – 2013)
  • 19. 23% CAGR for Smartphone (2008 – 2013)AT&T Ends Unlimited Data PlanFTC clears Google/Admob
  • 20. Apple’s Success has Invited Competition14Worldwide Smartphone OS Market Share by Sales VolumeSmartphone OS/Platform market remains concentrated but increasingly competitive
  • 21. Android share has increased from 0% to 10% in 18 months
  • 22. RIM and MSFT also making big investments
  • 23. Winning platforms are consumer-focused with rich content and applicationsSource: Gartner
  • 24. While iPhone & Android Shipment Shares Remain Low, They Have a Disproportionate Share of Web Usage15Global Smartphone Share of HTML Mobile Page View / Mobile Internet + App Usage / Unit ShipmentsNote: Net Applications collects data from ~160MM monthly visitors on mobile devices that render full HTML pages and JavaScript. Visits to WAP pages are excluded. Source: AdMob Mobile Metrics Report (3/10), Net Applications (5/10), Gartner (Q1:10).
  • 25. Mobile Developers Face Important Considerations16Google AndroidAdvantages:Native services and more open platform
  • 26. Java and Eclipse IDE Considerations:Hardware profile fragmentation
  • 29. Fewer countries supportedHTML5 Mobile WebAdvantages:Open
  • 30. Ultimately it will be necessary to supportConsiderations:Not widely supported today
  • 31. Lack support for native services (e.g. gestures, local content)Apple iPhone/iPadAdvantages:Tight integration with native services and media library
  • 32. Growing audience across many countries
  • 33. Predictable platform release cyclesConsiderations:Proprietary platform
  • 35. No Flash / 3rd party SDKs
  • 37. iAd Payment tollAndroidMay 2010Source: Google, Admob
  • 38. Mobile Platform Competition and a Dynamic Ecosystem Create Opportunities for Innovative Startups and VCMobile computing growth is creating a land grab among Strategic buyers…Mobile M&A Transactions Announced in Last 9 Months17… and generating interest among VCsFinancings in Last 60 days
  • 39. 18AgendaState of Mobile ComputingPotential Investment Opportunities (Redacted for Public)
  • 40. Mobile healthMobile applications for eldercareMobile paymentsOnline videoMulti-device synchronization & staging (e.g. Evernote, Dropbox)Retail/ecommerceMobile enterpriseHelping carriers avoid becoming dumb pipesPotential Investment Opportunities (Redacted for Public)
  • 41. Thoughts or Comments?Contact me at alex@bvp.comThank You

Editor's Notes

  1. 1. iPhone computing paradigm is as significant as Windows 3.0 and the WinTel monopoly was for desktop computing in 1990 and Mosaic/Netscape was for internet adoption in 1995All created new platformsConsumer have in their pockets.Immediate boot time, battery lifeiPhone 4960x640 pixels or 320 dpi is greater than anything on the marketGyroscope$199 price point3. Many new products have followed the same paradigm including Nexus One, Motorola Droid, HTC Incredible, Sprint EVOiPhone 3GS,600 MHz processor,256 MB RAM, 16GB – 32GB storage,480 x 320 pixels,3.0 Megapixel camera
  2. Growth drivers include declining costs and feature set improvementsDays to reach 1m units iPhone and iPad are faster than blackberry (300), iPod (360), Netbooks (180)iPad took 60 days to hit 2m unitsiPhone has sold 50m units
  3. First true mobile computing device
  4. WSJ app is free to WSJ.com subscribers. WSJ has 64,000 of those.WSJ app is free and Apple only gets their vig if sold through App Store so no rev share with Apple for nowWSJ gets $400k for 4-month advertising deals
  5. iPhone success has led to the rise of new platforms that are disrupting the mobile value chain 1.) Platforms are not coming from carriers but rather Apple, GoogleHow will this new paradigm affect the existing value chain?2 key points 2.) Value is clearly shifting to platforms. Carriers are generally on the losing end, but leading carriers may benefit from price elasticity effects as prices fall but volumes increase (kindle, iPad, other data devices) 3.)Open vs. closed. If/when platform become more open value will accrue to consumers
  6. Apple generating $18bn in revenue from iPhone last year and $6.1bn in revenue from iPhone/iTunes/content in Q1. Total $50bn in revenue.Growth drivers include declining costs and feature set improvements40% of Apple’s revenue is now iPhone or iPhone related#2 product after Mac
  7. Also worth noting that Google and RIM have performed reasonably wellApple has created $150bn of value, market cap of Google
  8. Growth drivers include declining costs and feature set improvements
  9. Explain #siPhone success has given Apple a lead but has also paved the way for competition and Apple’s “closed” model may be an Achilles heel. Apple has grown from 5% to 15% market share by sales volume.Android is experiencing rapid adoption and is now #2 platform after RIM. Android seeing 100k activations per day less than 18 months since launch.As competition increases among platform vendors the industry will move towards an open mobile web. Importance of HTML5.
  10. Consumer usage patterns also imply further share gains for iPhone/Android
  11. These are very different platformsBattle for developer mind share and most devs want to program for iPhone or Android or HTML5Itunes link provides benefits to iPhone, Android lacks a similar forcing functionAndroid is highly fragmented - 60 hardware platforms - More than 60% of Android users have v1.6 or earlierApple’s iTunes integration results in a smoother OS upgrade path - Only 5% of users have not upgraded to OS version 3.0 - 85% of iPhone users have one of the two latest OS
  12. Admob was founded in 2007Quattro founded in 2006, series A in 2007Siri was founded in 2007Only 31 VC backed deals acquired in Q1, 2010 for $5.5bn, $900m via IPO (Venturesource)Boku has raised $38m in the past yearIt is a provider of infrastructure products that enable mobile operators to deliver multimedia services such as video, Internet access, voice-over-IP, e-mail, mobile TV, photo sharing, and gaming to their subscriber