Does Android have the advantage in the smartwatch war?

Earlier today, ReadWrite ran an article about two new Android Wear-based smartwatches: LG's G Watch R and Asus's ZenWatch. According to ReadWrite, both watches are significant improvements over previous Android-based smartwatches. The G Watch R has a round face, like the Motorola 360, but unlike the Motorola watch, it uses the entire watch face as the display. In addition, it looks more like a conventional watch, uses conventional watchbands, and has better battery life. The ZenWatch is rectangular like the Apple Watch and has an attractive design, but it uses conventional watchbands, has an AMOLED display and runs Asus's ZenUI user interface on top of Android Wear.

Neither of the new watches has all the features of the Apple Watch, but it's becoming increasingly clear that feature parity really isn't an issue. The watch you buy depends primarily on the smartphone you use--the Apple Watch only works with iPhones, while Android Wear watches only work with Android smartphones. Android smartphones had 84.7% of the worldwide market share (in units shipped) in Q2 2014 according to IDC vs. 11.7% for iOS. That means that about 88% of potential buyers are not in the market for an Apple Watch unless they also want to throw away their current smartphone and switch to an iPhone.

Android smartwatches have another, less-obvious advantage: There are several companies making them, and new smartwatches are being released all the time. Samsung, LG, Motorola/Lenovo and Asus are all making Android Wear-based smartwatches, and each company is on a more aggressive release cycle than Apple. Consider that Apple generally only releases a new version of a product once a year. That makes Apple's upgrades predictable, but it also means that it takes a year for new features to reach the market. In the Android world, on the other hand, smartphone makers are releasing new models all the time, often with features that are intentionally experimental, in order to gauge consumer interest. That enabled Android smartphone makers to get big screens and NFC for financial transactions out before Apple.

The Android smartwatch makers could have the same advantage over Apple. Their watches are evolving continuously, as new features and form factors are introduced, while Apple is a monoculture that will probably only release new watches once a year. That means that if a smartwatch vendor stumbles on a very popular combination of designs and features, Android smartwatch makers can clone the designs and features and get them to market faster than Apple can.

In my opinion, the jury is still out as to whether there really is a mass market for smartwatches. However, the Android ecosystem is in a far better position to take advantage of the market opportunity if and when someone comes up with the "killer app" of smartwatches.

Tablets now generate more eCommerce traffic than smartphones

As more evidence that tablets are overtaking smartphones as devices of preference for mobile Internet users, GigaOm reports on a new study of more than 100 million online shopping transactions by Monetate. The company determined that tablets represented 6.52% of traffic to eCommerce sites in Q1 2012, overtaking smartphones (with 5.35%) for the first time. Tablet traffic increased 348% in the last year, while smartphone traffic increased 117%. 95% of the tablet traffic was from iPads. These numbers compare with a forecast from Adobe that overall tablet traffic worldwide won't exceed that from smartphones until early 2013, and will represent 10% of website traffic in early 2014. GigaOm suggests that the reason for the difference between Monetate and Adobe is that Monetate measures eCommerce traffic, while Adobe is counting all traffic, including traffic to content sites.

Tablets are also much more efficient at converting sales than smartphones: In Q1, visits from PCs converted into sales 3.51% of the time, while visits from tablets converted at a 3.23% rate, and visits from smartphones converted at a 1.39% rate. Other measures, such as pages viewed per session and items added to carts, are also much closer between PCs and tablets than between either PCs or tablets and smartphones. The reasons most likely are the bigger displays and keyboards on tablets.

Tablet use by mobile phone users almost quadrupled in one year

comScore has released some findings from its forthcoming TabLens report on the U.S. tablet market. Here's a summary from the press release:

• Mobile phone users (ages 13+) who also use a tablet almost quadrupled from April 2011 (4.7%) to April 2012 (16.5%). 
• Smartphone users who use tablets increased from 9.7% in April 2011 to 23.6% in April 2012. 
• Feature phone users who use tablets increases from 2.3% in April 2011 to 10.4% in April 2012. 
• Women are slightly heavier users of tablets (50.8% vs. 49.2% for men,) while men are slightly heavier users of smartphones (51.6% vs. 48.4% for women.) 
• Tablet users tend to be significantly older than smartphone users: The heaviest concentration of users of both devices is between the ages of 25 and 44, but tablet users were 28% more likely to be ages 65 and over, and 27% less likely to be ages 18 to 24. 
• 56% of tablet users have an income of at least $75,000/year, compared to 49.3% of smartphone owners. 
• Tablet owners are nearly three times as likely to watch videos on their devices as are smartphone owners--20% of smartphone users said that they'd watched a video on their device in the month of the survey, compared to 53% of tablet owners, and heavy video watchers were more than three times as likely to have watched a video every day on tablets (9.5%) than on smartphones (2.9%).

Microsoft introduces Windows Phone 7 and partners' smartphones

Earlier today, Microsoft formally introduced Windows Phone 7 in New York, along with ten new compatible smartphones (nine at launch, the tenth in early 2011) to be offered by sixty carriers in more than thirty countries. Each carrier will sell a different set of phones; AT&T, for example, will offer three models, one each from HTC, Samsung and LG, all priced at $199, while T-Mobile USA will offer one model each from Dell and HTC. (Engadget has a complete list of carriers and the phones they'll offer, and Gizmodo has pictures of all the phones.)

The early reviews for Windows Phone 7 have been very positive. The operating system is a clean break from Windows Mobile and has more in common with the Zune UI than it does with Windows. The phones vary considerably in price and features, but they all seem to perform well, even though Windows Phone 7 uses a lot of animation in its user interface.

Update: Well, some of the reviews aren't quite so good after all: PC Magazine reports that the LG Quantum's slide-out keyboard has a "bizarre" keyboard layout and a balky sliding mechanism. Of more concern is that Windows Phone 7 doesn't want to reconfigure its display properly when the phone is moved to landscape format. The LG Quantum's keyboard forces the phone to be used in landscape format, so unless Microsoft fixes the problem soon, the Quantum and similar phones will be virtually unusable.

As you might expect, there's already a fair amount of "too little, too late" sentiment about Windows Phone 7. Those feelings may ultimately be justified, but Microsoft has done an excellent job of bringing top-notch smartphone manufacturers on board. The big question remains third-party developers. Apple and Google both have tremendous support for their smartphone operating systems, and RIM's BlackBerry, while not as well accepted by the developer community, has an entrenched customer base. The third-party app announcements and demonstrations at the launch event today were nice but far from overwhelming.

Windows Phone 7 smartphones will ship so late this year that they probably won't make much market headway until next year. Developers that are already struggling to keep up with updates on the iOS and Android platform are likely to take a "wait and see" attitude on developing Windows Phone 7 apps; developers of the most popular iOS and Android games may be offered financial incentives by Microsoft to port their applications. There's no rush for them to staff up in advance if they can get Microsoft to pay for the effort.

In the long run, Windows Phone 7 is likely to have more impact on HP and Nokia than it does on Apple or Google. Most developers, given the choice between supporting Windows Phone 7 that runs on smartphones from four manufacturers, or supporting WebOS that runs only on HP's smartphones, are likely to prefer Microsoft's platform. And, at least in the U.S., Windows Phone 7 will be one more nail in Nokia's smartphone coffin.

There were two puzzling aspects of today's announcements: The first was Microsoft's statement that based on feedback from developers and early users, it would release a version of Windows Phone 7 that supports cut and paste in early 2011. You would think that Microsoft would have learned from Apple's experiences with the iPhone and would have incorporate cut and paste from day one.

The second was that Verizon, the largest mobile operator in the U.S., was completely absent from today's announcement. You may recall that Verizon was Microsoft's exclusive carrier partner for the Kin, its feature phone that was a complete marketing and business disaster for both companies. Kin's failure may explain why Verizon won't be selling Windows Phone 7 smartphones any time soon. However, Verizon may also be gearing up to carry the iPhone, as has been rumored by the Wall Street Journal and other sources, in which case it really doesn't need Windows Phone 7.

Piecing the Android tablet story together

I'm trying to clarify a few things about Google's plans for Android and what they mean for future devices. I've written a couple of entries about Samsung's Galaxy Tab, a 7" Android tablet that runs Android 2.2, also called Froyo. At IFA, Samsung demonstrated access to the Android Market using the Galaxy Tab. However, TechRadar.com reported the following quote:

"Android is an open platform. We saw at IFA 2010 all sorts of devices running Android, so it already running on tablets," said Hugo Barra, director of products for mobile at Google. "But the way Android Market works is it's not going to be available on devices that don't allow applications to run correctly. Which devices do, and which don't will be unit specific, but Froyo is not optimised for use on tablets. If you want Android market on that platform, the apps just wouldn't run, [Froyo] is just not designed for that form factor. We want to make sure that we're going to create a application distribution mechanism for the Android market, to ensure our users have right experience."

The Galaxy Tab runs Froyo, yet it had access to the Android Market at IFA. Other vendors have claimed that their tablets have access to the Market, only to back away from the claim once they start delivering products to reviewers and customers. I find it difficult to believe that Samsung would announce something as important as support for Android Market without confirming it with Google.

The key seems to be that the Galaxy Tab can work as a conventional, albeit huge, smartphone. That's how Samsung can make the Android Market available to Galaxy Tab users. However, if you take Mr. Barra's comments at face value, Froyo isn't optimized for tablets. At IFA, Samsung said that the Galaxy Tab will be updated with Gingerbread, the next major version of Android, when it's available. However, previous experience shows that it can take a good deal of time for manufacturers to update products with the latest version of Android.

The Galaxy Tab might be a safe purchase, but for risk-adverse consumers, the best course of action might be to wait until vendors are shipping tablets with Gingerbread already installed.

Samsung's Galaxy Tab to be announced in the US this week?

According to FierceWireless, Samsung will formally announce its U.S. carrier partners and launch date(s) for the 7" Galaxy Tab Android-based tablet this Thursday, September 16th, in New York. Bloomberg reports that AT&T, Sprint and Verizon will all carry the Galaxy Tab, and that the price of the device will be $200 to $300, depending on carrier subsidies. According to Bloomberg, AT&T and Sprint have decided on their subsidies, while Verizon is still uncertain.

The Galaxy Tab can be used as a smartphone, but given its size, most customers are likely to keep their existing phones. If carriers require a full phone account in order to get a subsidized Galaxy Tab, it's likely to lose a great deal of its potential market. On the other hand, if the carriers offer both reasonably-priced data-only subscriptions along with conventional voice and data plans, interest in the tablet should translate into significant sales.

Previous reports indicated that the Galaxy Tab will ship next month in Europe, and that it will ship in the U.S. in November, in time for the holiday sales season.

Android beats iPhone in consumer adoption in Q1 2010

According to the NPD Group and the San Francisco Chronicle, sales of smartphones running Android moved into second place in the U.S. for the first time, beating iPhone OS but still behind RIM's BlackBerry. (RIM's sales share has been flat or has fallen for the last four quarters.) Android has been taking market share away from both iPhone and RIM for the past two quarters. Here's a chart from NPD Group:

Keep in mind that the NPD survey covers only consumer purchases, not large corporate purchases. If it did, RIM's numbers would undoubtedly look better. It's unclear how iPhone would fare, but I suspect that it's outselling Android into the corporate market as well.

So why is Android now beating Apple for new sales in the U.S. consumer smartphone market?

1. Android phones are available from all four major carriers, while Apple's iPhone is still exclusive to AT&T
2. There are a variety of Android phones with different designs and price points
3. Verizon has been running "buy one, get one free" promotions with Android phones that are getting a lot more units into customers' hands
4. Potential iPhone customers may be holding off on purchases until the announcement of Apple's new phone next month

Apple still has a large lead in applications over Android, and the iPad's success has focused developers' attention on the iPhone platform. However, momentum may shift to the Android platform if Apple continues to restrict options for development tools, Google's partners continue their sales gains, and Google itself delivers a strong Android platform for tablets. HP is rumored to be planning to launch a Palm WebOS-based tablet in Q3, and if they do, that could breathe some life into the WebOS platform. And, Microsoft's Windows Phone 7 is scheduled for release in Q4, and that could also impact the smartphone industry. What's very clear is that it's now a three-platform contest, and it could become a five-platform race by early next year.

HP buys Palm, but why?

Earlier today, HP announced that it will acquire Palm for $1.2 billion, a 23% premium over Palm's market value prior to the announcement. HP has more than enough cash on hand to complete the transaction without issuing more stock. The question is, why did HP buy Palm? What value do they see in the company, and what does this mean for the future of Palm's products?

Many people don't realize that HP has sold smartphones for some time under the iPaq label, but the company has miniscule market share. Growth in most of HP's businesses has been slowing; it needs to get into new markets, but it was getting no traction in smartphones by itself. By buying Palm, HP gets an existing line of smartphones sold through all the major U.S. mobile operators, along with some international distribution. The distribution agreements might actually be more important to HP than the existing Palm hardware line itself.

HP has said that it will increase Palm's R&D investment, and that it plans to port Palm's WebOS operating system to more devices. However, I wouldn't be at all surprised to see Palm go back to its previous strategy of offering phones with more than one operating system, when it sold different models that ran Palm OS and Windows Mobile. We could easily see Palm phones that run Android and Windows Phone 7 alongside WebOS-compatible models. This would make the Palm product line more appealing to mobile operators.

Will we see tablets running WebOS? Perhaps, but I wouldn't count on it in the near future. A lot of development work will have to be done to make WebOS work well on tablets, in the same way that Apple had to significantly rethink its iPhone OS to make it work well on the iPad.

Finally, will HP's acquisition of Palm make a big difference in the number of applications available for WebOS? Developer interest will be driven by sales of Palm's phones, not the acquisition of Palm by HP. If Palm's market share increases significantly, more developers will write for the platform, but the acquisition isn't going to open the app floodgates by itself.

Nexus One: First round, not the ballgame

After all the speculation and hype surrounding the launch of Google's first smartphone, the Nexus One, has come the reality: According to Flurry, which measures usage of smartphone applications, only about 20,000 Nexus Ones were sold in the first week. In my opinion, this is because customers have to purchase the phone directly from Google, even if they buy the subsidized T-Mobile version; it's not available in stores. Google's "the buck stops somewhere else" customer support plan is drawing criticism: For hardware problems, customers have to contact HTC, for software problems, Google, and for network problems, T-Mobile. Mobile subscribers are used to getting all their support from the carrier, and they expect Google to fill that role, but they're coming away frustrated and disappointed.

One one level, it appears that Google didn't think out the launch of the Nexus One very well. However, I believe that Google wants to become a mobile carrier, not just a supplier of software, services and advertising. The question is: What kind of a carrier does Google want to be?

They're probably not going to want to buy an existing carrier; that would be too expensive and carry too much baggage. Nor would they want to become a MVNO (mobile virtual network operator); at least in the U.S., no one has been successful reselling one of the major wireless carrier's services. Their best choice, and I think the one they're pursuing, is a combination of broadcast television bandwidth and the "white space" between television channels.

The FCC, which earlier was saying that it was likely to force broadcasters to give up bandwidth for broadband services, has now backed down and asked for voluntary participation. If broadcasters can see a financial upside to ceding bandwidth, they're much less likely to continue to fight proposals to use the white space between channels as well, for which they would have gotten nothing. By assembling bandwidth from existing television stations while using white space for other markets, Google and other companies could build broadband data services to rival the major mobile operators.

Google wouldn't even have to build out the network itself; it could invest in a company that plans to do it and reserve a portion of that company's bandwidth for itself. Once the network goes live, Google could sell its own wireless data service, probably at a fraction of the price of the major carriers, and offer voice as a VoIP service (which makes sense, given Google's acquisition of Gizmo5, a VoIP provider, last year.) Merging Google Voice and Gizmo5 would enable Google to offer a robust voice service without the massive infrastructure of the big mobile operators.

Once Google gets all of this in place, its own phones will work primarily on its network. It might offer dual-network versions that work on GSM or CDMA networks in the areas where Google doesn't have its own service, just as Sprint sells adapters and routers that connect to Clearwire's WiMax network where it's available and Sprint's own 3G network where it isn't.

The best way to look at the Nexus One is as the first step in a much longer-term strategy, and its customer service problems as "teething pains" on the way to becoming a mobile carrier.

Google's Nexus One: Darwin at Work?

Google formally announced its Nexus One smartphone yesterday, and the trade press, many of whom had weeks to play with the phone prior to the announcement, was free to tell what it thought of the new phone. The verdict seems to be that it's the best Android phone to date, and a worthy competitor to Apple's 3GS. Now, we're going to see if Darwin was right.

Apple's iPhone is an excellent example of a closed ecosystem--everything is controlled by Apple, especially the pace of change. In the Android ecosystem, Google has limited control, in that it controls the pace of new Android operating system releases, but since Android is open source and anyone can build compatible devices, we're seeing a rate of change faster than anything in the Apple ecosystem. The Motorola Droid, which was the best Android smartphone, was supplanted by the Nexus One in just a few months. Motorola already has the next generation of the Droid design in testing, and other players, such as Samsung and Sony Ericsson, are hard at work on their own products.

The only real advantage that Apple has left is its lead in applications, which is still substantial. My suspicion is that Apple is going to try to change the topic of conversation later this month to its new tablet computer, which will likely use the iPhone's operating system. If that happens, Android will once again be playing catch-up. Nevertheless, the iPhone/Android battle is an excellent laboratory for testing evolutionary theory: Is a controlled or an open ecosystem better at producing valuable innovation? Apple's closed ecosystem has led the pack so far, but it's Android's turn to demonstrate the value of openness.