Some thoughts on mobile

2013-06-01

People tend to lump smartphones and tablets together as “mobile”. This can be misleading. Ask people who run internet companies and they’ll tell you that user behavior on tablets is far more similar to user behavior on desktops/laptops than it is to user behavior on smartphones. That said, the software on smartphones and tablets is similar, as are the discovery mechanisms (mostly app stores) and monetization techniques.
Microsoft is running ads making fun of the iPad for being a “consumption” device. Here’s what Steve Jobs had to say back in 2010 about creation (“productivity”) on the iPad:

We are just scratching the surface on the kinds of apps for the iPad…I think there are lots of kinds of content that can be created on the iPad. When I am going to write that 35-page analyst report, I am going to want my Bluetooth keyboard. That’s 1 percent of the time. The software will get more powerful. I think your vision would have to be pretty short to think these can’t grow into machines that can do more things, like editing video, graphic arts, productivity. You can imagine all of these content creation possibilities on these kind of things. Time takes care of lots of these things.

If you go back and look at the history of productivity apps you’ll see that each major user interface shift led to new classes of productivity apps. Back in the 70s and 80s, when computers had text-based interfaces, word processor applications like Wordperfect and spreadsheet applications like Lotus 1-2-3 were invented. In the 80s and 90s, when graphical interfaces became popular, presentation apps like Powerpoint and photo editing apps like Photoshop were invented. If the historical pattern repeats, productivity apps that are “native” to the tablet will be invented.

App stores have had a few important effects: 1) They take 30% of revenue, which scares away most big companies (e.g. Microsoft) and also startups/venture capitalists. Not many businesses can survive an immediate 30% haircut. 2) They’ve led consumers to expect very low prices for software. It’s hard to imagine charging $30 let alone hundreds of dollars for software through app stores (although some mega-hit games do get near these levels with in-app purchases). This is why many big software vendors are scared. 3) The discovery mechanisms (e.g. top download charts) tend to have a rich-get-richer effect, making it very hard for software to grow from niches, as they often did in the past. Just as in the movie industry, the trend is toward creating blockbusters that appeal to everyone. The emergence of new app discovery mechanisms (e.g. FB & Twitter) might alleviate this problem.
The best entrepreneurs understand these dynamics and have been exploring “attach” business models, which basically means charging for something outside of the app store, like offline products/services (e.g. Square, Uber), online services (e.g. Spotify, Dropbox), and sometimes even hardware. Most of the companies that have succeeded (= generate real revenues/profits) on mobile were either desktop incumbents (e.g. eBay, Amazon, Facebook) or have attach business models.
Fans of Apple and Google have been arguing lately about which company is winning mobile. Apple has more profits, but Android has more users. But what really matters is when and if developers switch over to developing for Android first, or even Android only. For now, iOS users tend to monetize much better than Android users, more than making up for the smaller user base. The switch to Android first hasn’t happened yet, but at least based on conversations I’ve had with entrepreneurs, it seems likely to happen in the next year or two.
Mobile has had a big effect on b2b software. People want to use their personal iOS/Android devices at work, and many people now have computers with them all the time who didn’t before. This has created opportunities for 1) traditional b2b software that is mobile friendly, 2) companies that support mobile devices for businesses (e.g. mobile security, compliance etc), 3) brand new categories of software for users who previously used pencil and paper for various business tasks.

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