Mobile advertising grows while pay for impression ads spend continues to lag behind

As expected more users click on mobile ads (we do not know how many accidently) and mobile ad impressions continue to grow. For example, 2013 in the USA 1/3 of all paid search clicks were mobile but the spend was ¼ of ad budgets. Cost per click actually fell YoY about 8%.

Google and Facebook has mobile as billion dollar business, but it continues to be less lucrative

Apple to favor lower margins

MBA students are taught to leave low margin high fixed-asset business to increase ROA. Steve Jobs defied MBA teachings with unprecedented success. Vertical integration of hardware, software and services is just one example. Tim Cook looks to continue this trend of showing business school how business is done. Recent Apple announcement will offer its operating systems and productivity suite for free. Some view this as assault on both Microsoft and Google.

Apple is in need of a change. Their iPad business growth at 6% YoY well underperforming the market. Tablet competition is more brutal than in phones where Apple has just two viable competitors to worry about. In response to headwind Apple keeps or increases the price for the iPad and MacBook lines giving up software for free. Asymco estimates $½ billion of software revenues will be foregone. Other analysts point out that software has been historically high margin business for which Apple customers were happy to pay for. Also, an opposite move of reducing MacBook and iPad prices by $100 and continue selling software and updates would be a more welcomed move by Apple customers and would mean keeping higher margin business.

Giving out Apple operating systems and productivity suite for free does not necessarily mean increased adoption and high retention with positive economies of scope effects on other business lines, such as iCloud – which also has been underperforming since launch. Microsoft historically offered the operating system and productivity suites at much higher premiums than Apple with more success. Its Windows operating system and Office for Mac are multi-billion dollar businesses, unlike Apple’s. IBM in the past also decided to offer its productivity suit for free and it has not gone anywhere anyway. It will be interesting to see results of this move.

What is next for Blackberry?

What is next for Blackberry?

On paper the offer to buy Blackberry for $4.7 billion looks like a steal for a company with over $13 billion of assets on the books. However, losses have mounted for almost $1 billion per quarter, phone sales declined 25%, revenues fell by over 50%, market share declined to 3%. The deal looks good but buyer has to act quickly to turn business around or sell parts.

 
Blackberry phone business cannot be turned around. As I predicted before Windows Phone solidified its position as global #3 mobile OS, moving to #2 in number of key global markets, displacing iOS countries like India and Italy. Now with Blackberry manufacturing partner is leaving it may have no choice. The mobile market cannot sustain 4 mobile operating systems.

Blackberry has three attractive pieces left:

·         Patent portfolio

·         Messenger with its network

·         Secure global wireless network

Patents alone analysts think worth $5-$8 billion. Messenger is new hot trend with WhatsApp, Viber, Line, Skype and WeChat accumulating huge user bases and turning into billion dollar businesses. Secure global network can be the key differentiator for a device like Kindle or any other iPad challenger. Each piece does not have to be sold to the same buyer. Pieces together can worth between $10 and $15 billion.

Before the end of this year we are going to be talking about each piece sold to a leader or contender in the mobile.

Mobile Productivity Wars

Apple made iWork free for new device buyers, in response Google made free QuickOffice which can edit Microsoft Office files. Google has own productivity suite: Google Apps, which are no longer free since December 6 2012. Microsoft Office is available on Android and iPhone at $100/year subscription.

This dynamic will be interesting to observe what will be happening.

Smart watches are coming back. Are consumers ready?

I used to own Microsoft Smart Watch in mid 2000s. It was a great product for its time – synced my calendar, received notes, displayed weather forecast, stocks, etc. I had to charge it every other day if I wanted it to stay online. Offline watch could operate for a couple of weeks. Microsoft Smart Watches never took off and was shut down in 2008. I stopped using the watch as my phone became much ‘smarter’ and replaced it.

Today market analysts think growth is in smart watches and are coining new term: ‘wearables’. Samsung is starting to sell their Galaxy Gear series. Apple is working on a watch. Even Nissan has their Smart Watch. Either they see huge growth in the segment or cars are not selling well. BI Intelligence thinks this is next multi-billion dollar market. Their projection is based on smartphone and tablet penetration reaching 3.7 billion and 4-5% attach rate resulting in 300M unit sales and 5 years from today. Juniper forecasts 36M sales for the same year.

They all could be wrong. Let’s look at value smart watches add: service beyond displaying time and date, connectivity and information. Smart phones do those tasks much better and I can’t see consumers parting with phones any time soon. No all consumers will buy both watch and phone. Phone with its functionality replaces watch and not the way around.

I think that Smart Watch market growth will be limited and not reach majority at least any time soon.

Why I will not buy new Kindle Paperwhite

I like my Kindle – it is simple to use and Wispernet sync is fabulous. I like that it connects to Wikipedia and dictionary. Archiving is nice. It is not perfect for me however. I would have liked to have color screen. I would have liked to scroll though pages and chapters. Books suggestions are not relevant to my interests and my language.

The new Kindle has scrolling feature I’ve been waiting for however not color screen. If you read an illustrated book, especially one that requires you visually see things, such as Da Vinci Code, it is hard to do on black and white. New Kindle has several features that encourage children to read. Color screen would attract kids as much as if not more than those features.

iPhone sales growth up and iPad plummet

To me this is a surprise. We've read much about uninspiring iPhone 5 and iOS7 design that Apple adopted from Microsoft. However in the Q2 sales have grown by 20% YOY, but overall growth trend is downward.
iPad YOY sales growth is minus 15% in the same quarter. To me this is surprising as in tablet segment, especially 10 inch form factor, Apple position has been stronger than the competition. Unlike smartphone segment there is no clear number two device emerged as of yet.

Facebook mobile ads revenue is trying to catch up with mobile users

Facebook mobile advertisement revenue continues to grow, however, mobile ads revenue share (40%) is much lower than share of mobile users of Facebook (70%). I command Facebook for growing mobile ads revenue to respectable numbers having no mobile ads just a year ago. The challenge of reaching full potential in monetizing mobile user remains. Average revenue per user (ARPU) of mobile Facebooker is only $0.30.

Blackberry reports quarterly loss, phone shipments are behind competitiors

Blackberry stock is down 1/4 after the company reported loss for the last quarter.
subscriber base reduced by 4 million or 7%. Company shipped 6.8 million phones which was about 13% higher than in previous quarter. What is scary is that Blackberry is losing subscribers; users are leaving Blackberry ecosystem at accelerated pace.
The company remains distant fourth behind Microsoft, Apple and Google. To me it will be interesting for how long the phone maker will continue to exist as in my opinion the market cannot sustain 4 ecosystems, however compatibility with Android helps.
 

iOS 7: Siri dump Google search for Bing

Enemy of my enemy is my friend. Apple and Microsoft are not exactly in love however the hatred towards Google made Cook make change to run Bing search behind Siri. The move is better the users and the market where 99.9% mobile searches via Google where there is little innovation due to monopoly its position