The Mobile Web is such a dynamic and high growth area of the Web it is very hard to make many firm predictions other than the market will grow very rapidly. In fact the growth of the Mobile Web is so fast that it is now apparent that we are at an inflection point in the development of the Web where the Mobile Web effectively becomes the Web. This year smartphone sales will outnumber PC sales by a significant margin (excluding tablets). PC sales are declining (but not yet in absolute numbers), while smartphone and tablet sales are growing exponentially.
Furthermore the technical distinction between the Mobile Web and the rest of the Web will become increasingly blurred as smart phones and tablets gain the processing power, RAM and disk space of notebooks and so the OS and applications, will to a large extent will become interoperable with notebooks/desktops etc.
However, a distinction will always exist between “Traditional Web” (with desktop or lap top devices) and “Mobile Web” (with handheld devices) because the form factors of these devices make them better at certain uses and tasks than others. In general handheld devices will become synonymous with content consumption and communication/social media (reading, talking, playing, chatting, video and browsing) and notebooks will be more about work/content creation. However, when it comes to work where mobility is needed, such as field based sales and operations, the tablet will now trump the notebook.
In theory the plurality of form-factors, uses and tastes means that there should be a vibrant market of companies providing a variety of products, services, content and advertising platforms, however, the huge advantage of scale economies in OS/browsers, device marketing and advertising platforms combined with the huge advantages of interoperability across different device classes, means that there will inevitably be fierce competition in these technology areas.
The mobile operators who provide the wireless networks are not in a technology battle per se as their platforms are standards compliant, however, the massive new investment into LTE networks will mean that the mobile web will very soon have the same kind of data throughput people are used to on fixed line broadband networks. This will mean rich, data intensive, cloud based services delivered to the smart phone or tablet will very soon become a reality. However, it is predicted that even with LTE the demand for bandwidth will not be satisfied, so once again telecom operators will be looking to ration network capacity, in terms of bandwidth(not likely with wireless networks), data volume, or by data class or application. If some operators sell network capacity based on applications, such as Facebook, as some have done, the perennial net neutrality question will come into play, with all its implications for the Mobile Web market place.
The main areas of competition or “epic battle” for dominance are in: the OS/browsers; the devices and advertising platforms. These battles are best described in terms of the leading players in the market: Google, Apple, Microsoft, RIM, Nokia, Facebook and a group of key manufactures (HTC, Samsung, LG and Sony Ericsson). These companies are so dominant in the mobile web space that most other companies would have to be considered 2nd tier.
Everything starts with the OS … the battle between OS/browsers is really an uneven four way fight between Google, Apple, Microsoft and RIM (Symbian is dying a slow death despite being one of the most widely deployed OS in the world). The main issue is that each OS is a mini-ecosystem of interoperability and each mini-ecosystem needs to appear attractive in order maintain a sustainable population of users and to appear attractive the ecosystem needs to demonstrate benefits vis-à-vis other ecosystems (such as an integrated user experience across all device classes). Each mini-ecosystem (iOS, Windows, RIM and Android) has particular idiosyncrasies that come from the way they have evolved. However, they are mostly tightly controlled in terms of licensing and applications (except Android), but open (mostly) in terms of accessibility to the Web.
Traditionally in the IT industry the OS and browser market was all about selling licence fees, and Microsoft was the main beneficiary, followed by Apple with its hard core fanboy user base. Apple, Microsoft and to a slightly lesser extent RIM favour this closed “licence fee to enter” ecosystem. [Interestingly Windows XP is still the world’s most used OS to access the Internet (across all device classes), which makes the point that the continual media froth of “technology wars” is quite distant from the slow moving mass Web market with the partial exception of the Mobile Web space where the shorter life span of devices means that change is more rapid.]
Google has sought to disrupt this closed platform approach with Android OS for the handheld market (though there is now Chrome OS too!). Google did this as it thought it would accelerate the adoption of Adwords as the primary Web advertising platform. In addition it is an effective defensive move against the closed shop world of Apple and Microsoft (undercutting the growth of these closed ecosystems as the “free” price point of Chrome/Android is hard to beat). Google is always concerned about access to user data for search and targeted advertising revenues and the prospect of the mobile web being dominated by closed platforms did not work for them.
Google has been very successful with the international adoption of Android (now the world’s largest Smart phone OS at 33%-36% penetration depending on source). As a result of this plurality of OS/browsers in mobile web Adwords should be more important as search, should once again be the main navigation tool. However, the interesting thing about the Mobile Web is that the relationship between CPM and PPC changes in that content networks probably have the edge over search as handhelds are more biased towards consumption/social media/communication and in any case users are more “spoon-fed” by their apps.
It may be that in Google’s determination to keep Microsoft and others from dominating mobile OS as well as preparing for a location based advertising mobile future (Google concentrated mobile web efforts around location based services on Google Maps and associated tools/features) that it didn’t plan for the apps revolution and lost sight of the potential value of social networks in the Mobile Web. In addition Google’s assumption that applications will increasingly become cloud based and all devices with a standards compliant browser will automatically be interoperable, may be short-sighted and leave Android without key features around interoperability of devices (though someone is probably making an app for that!).
Nevertheless, I believe that Google’s huge investment in Android and LBS has not yet had the chance to show a return. I would expect that Google will be a key player in the Mobile Web, particularly with respect to LBS.
Apple as always is doing its own high-profile, premium positioned, heavily marketing thing, and will continue to develop its own closed ecosystem, and this will always attract a certain market, but it will not be to everyone’s taste or budget. Apple is very well positioned for the Mobile Web as the brand has been partly re-designed around digital consumption ever since the launch of iTunes Store and later with the App Store spinoff. Digital consumption is a disproportionally large part of the Mobile Web and the very effective way Apple has found to leverage its iTunes Store and App Store to sell its premium product is a case study in marketing (it is strongly rumoured that Apple is about to launch a large screen device/TV – if true this will be yet another strand of Apple’s “content sells product strategy” as well as its drive for a seamless user experience across device classes).
Further exploiting its closed ecosystem Apple has recently launched its iAd network to leverage “in app” advertising which is exactly the kind of development that Google would not want to see happening. The big lesson from Apple is that it is not necessary to have even a third of the market to make huge profits and by being focused on the brand and vision and giving customers enough perceived value, great commercial success can follow.
The power of Microsoft and its vast installed base of Windows PC’s and Xbox’s should not be underestimated, despite their dismal failure in the Mobile Web so far. Windows Phone 7 is a big improvement and its Xbox Live and Windows Office interoperability will be a significant pull for many. In addition Microsoft’s tie-up with Nokia for WP7 is very significant as it effectively knocks out two competitors (Symbian and MeeGo) and hands Microsoft a huge marketing advantage. Nokia most likely had the scale to forge ahead with MeeGo, but lacked the vision and conviction. So although Nokia is still the world’s largest handset manufacturer (by a long margin) with the biggest base of smartphones and has the brand/marketing reach to continue to dominate the smart phone market it is likely that it will slowly decline as it is now been reduced to “only” a handset device manufacturer. Microsoft’s fortunes in the mobile web are likely to improve as it builds on Nokia’s marketing machine as it sells WP7 licences and pushes Bing on mobile.
RIM’s USP for many years was mobile email that integrated seamlessly with MS Outlook. RIM managed to build a large and profitable company on this USP, but unfortunately for RIM that is no longer a USP (even if the email is really secure). Like Apple, RIM has many loyal customers that will continue to buy Blackberries but unlike Apple RIM does not have such an extended ecosystem stretching into multiple devices and rich content stores. However, RIM is fighting back with the launch of the Playbook, an app store (that now accepts Android apps), a mini ad network and most importantly a brand new OS (which has multi-touch built-in). As with Apple, I expect that if RIM keeps to the vision and gives enough customers what they value they will continue to grow and keep profitable in this fast expanding market.
Facebook is so pervasive that it is hard to imagine the Mobile Web without it. Facebook and other social media sites will become increasingly important ad networks and app stores taking potential revenue from the likes of both Apple and Google. Although there is an indication that Facebook penetration has reached saturation point in some advanced economies it is only likely to increase in importance in the short to medium term as it expands across the world and innovates its offering. The dominance of Facebook is such that it will adversely affect the revenues of other players and may even impact the debate on net neutrality (there are already some mobile broadband packages offering Facebook only). It is hard to predict the next moves in the struggle for advertisers and apps between Apple, Google and Facebook, but I am sure that all three will continue to thrive in this fast growing market.
Interestingly it is the network operators (mobile operators) whose technology choices are limited between one standards compliant telecoms vendor with another that are in the driving seat when it comes to how things may play out in the battle of the ad networks. Net neutrality is vital if an even playing field is to be maintained in the ad network space. Since the network operators control the access to the network they are in control, and having worked for several network operators, I can safely vouch that net neutrality is a very un-rewarding principle indeed! There is massive commercial temptation (and some very good technical capacity reasons) to charge differently for different classes of traffic or even charge differently for access to certain applications (I have even made several recommendations to do so). In such a situation the powerful content and social media sites will benefit at the expense of the rest. Mobile Web is therefore in danger of becoming a strange subset of the Web dominated by social media sites and a handful of content publishers. This would indeed be Google’s nightmare (except when the content came from You Tube), so on reflection they were very, very prudent in having pushed Android so hard.
Samsung, HTC, LG and Sony Ericsson are all leading device manufacturers with the principal agenda of maximising the sale of devices. These companies are all vital to the success of both Android and WP7. However, companies such as Samsung, Sony and to a certain extent LG have a wider agenda as they produce so many products (from smartphones to TV sets) that they are looking at offering interoperability across varies product classes to lock consumers into their brand. In some cases this will benefit Google and other cases Microsoft, depending on the OS chosen, but in any case it will be one less customer for Apple or RIM. In addition Sony has its new handheld Playstation Vita that connects to the PlayStation Network. Again, this is an example of following a certain distinct vision with a quality product that will win loyal customers.
However, despite all the competition it should be remembered that most companies are co-dependent, because they mostly operate in different parts of the ecosystem (for example a combination of Google, Samsung, Vodafone, WPP Group and Zynga). Unfortunately, successful co-dependency does not make it to the tech press headlines.
In addition the Mobile Web market is growing so rapidly it will be able to sustain several OS, numerous device manufactures and many, many advertising platforms/networks. This is well illustrated by the fact that all the companies mentioned above are profitable and in some cases, extremely profitable. The world market for Mobile Web products and services is incredibly vast, but until now most of the technology and marketing innovation has come from just one country: the USA. As a result news about the USA market dominates the tech press, but that will change. China Mobile has more subscribers than the US has people and once the Asian market starts to adopt smart phones in large numbers the market dynamics will change again. In fact I have personally seen a lot of innovation now emerging from Asia and I fully expect this trend to rapidly accelerate once the local market has developed sufficiently (which it will do very soon).
Predicting which companies will prevail in such a fast moving and growing market is like gambling as it is impossible to know all the facts (for anyone). At one time and for many years Apple seemed destined for the dustbin of history. Ten years ago very few people would have predicted that the market cap of Apple would be bigger than MS and IBM combined! Ten years ago no one would have predicted that Nokia could be mortally threatened in its core business by a search engine company!
As always the more successful companies will be the ones that bring the greatest perceived value to their customers and in this respect I believe that Google’s patient approach with Android and its LBS strategy is yet to pay off. Apple and Facebook may be grabbing a lot of positive headlines now, but Google is still an incredibly well prepared to exploit the Mobile Web. Microsoft and RIM are also far from spent forces. In the next two/three years I fully expect the main players of the Mobile Web to be thriving, though they may be joined by new entrants from Asia.