Is browsing the mobile data killer app?

Today we have a great case study in how incomplete statistics can confuse people about the use of data services on mobile phones.

A Nokia manager recently gave a talk on the use of data services on mobiles. The presentation said that 63% of packet traffic generated by smartphones is Web browsing. Unfortunately, the presentation is no longer posted, but it was excerpted by Simon Judge's weblog, and subsequently reposted by Russell Beattie of Yahoo, who runs a very high-traffic mobile weblog that's a great info resource. Russell headlined his post, "Browsing: The Mobile Data Killer App."

When I looked at the source data, I couldn't find evidence to support that conclusion. I am not trying to pick on Russell here – the problem is not with his post, but with the incomplete data from Nokia. I'm hoping that when I can finally see the full presentation it'll have better documentation, but the pieces I've found so far are not encouraging.

If you've used a Nokia Series 60 smartphone, you'll know that they're not really all that smart. Most of them are not good e-mail clients because they don't have keyboards, and it's hard to find a lot of third party apps. Browsing is one of the most usable data features in the phones, so I'm not surprised that it's generating most of the data traffic. In the few slides I saw, Nokia didn't tell us the total amount of data traffic generated by the phones, so it's possible that browsing is generating 63% of a very small number.

That possibility is supported by another curious statistic on the slide – only 60% of the users have sent even one MMS (photo) message, and the people who do use MMS send an average of only 1-2 MMS messages per month. That means the average Series 60 phone is generating at best about one MMS message per month. When the carriers subsidized those camera phones to the tune of one or two hundred dollars each, it was with the expectation that they would produce a heck of a lot more MMS traffic than that. At that rate, the subsidy will never pay for itself, and the operators of the world have basically given free electronic cameras to several hundred million people and made no net profit from the exercise.

Simon's weblog also referenced a press release from Telephia, a mobile phone research company, that seems to have some similar statistical fuzziness. It says a survey shows much more aggressive mobile data usage by 3G users compared to non-3G users. For example, it says 56% of the 3G users browse, compared to 39% of non-3G users. 35% download video clips, compared to 11% of non-3G users. And so on. Unfortunately, what the press release doesn't say is what those 3G users did with their phones before they upgraded to 3G. Did 3G cause people to use more data, or did the heaviest users of data migrate to 3G? Without a before and after look at the billing history of the people who switched to 3G, we can't tell.

It's possible that Telephia did track the data usage of individuals, but the press release doesn't say so, and I doubt they did it because running a study like that is wickedly expensive. Without more specific information, we can't tell if 3G is actually increasing traffic and billing, or just giving a new (and heavily subsidized) toy to people who were already using a lot of mobile data.

Again, my point here is not that Simon and Russell are wrong, it's just that you have to ask a lot of probing questions about any industry statistics – especially those that claim to have discovered a killer app.

I'll take that bet

Scott McNealy as quoted by the Register:

"I guarantee you it will be hard to sell an iPod five or seven years from now when every cell phone can access your entire music library wherever you are."

Scott, I guarantee you that even if it's easy for any phone to access your online music library five years from now, most users will prefer to store the music locally so they don't have to pay a big wireless download fee every time they want to listen to Bohemian Rhapsody, and so the song won't stop in the middle when they go out of coverage.

Google Video: Is that all there is?

Google's new video store seems to be up and running. I say "seems to be" because when I looked at it my first reaction was, "Is that it? You guys used a CES keynote to announce that?" The interface is simple, as you'd expect from Google, but in this case simple means simplistic and primitive. The home page features three types of video – for sale, most popular, and random. To examine for-sale videos by category, you use a drop-down menu that lists each series available: classics like MacGyver, Star Trek Deep Space Nine, and Survivor Guatemala. This interface isn't going to scale to handle more than 20 or 30 series, and even now it does almost nothing to invite browsing or easy exploration.

The press has been saying that Google Video sets up a direct confrontation between Google and Apple's iTunes. If this is the best Google can do, iTunes is going to win in a walkover.

I have to assume Google is working on a better interface, but the fact that they made such a prominent launch event for something so disappointing implies to me that their marketing judgment isn't very good these days.

Despite all of that, I think Google Video is incredibly important. Not because it puts Google in the video business (I don't think all that many people will pay to watch videos on their PCs), but because of the infrastructure behind it. Google now has a billing engine.

I haven't been able to find all the details on how Google's billing works, but so far it looks fairly well thought-through. You can read a couple of articles here and here. The owner gets 70% of the revenue, and Google keeps 30%. That's a bit high; I think the right cut is 20%. The minimum price for a video is five cents, which really impressed me. The credit card companies don't like to process charges that small, so I don't know how Google's doing it, but it's a very good thing because it encourages impulse buying. It looks like we're finally going to get an Internet micropayment system with critical mass!

Google also reserves the right to take a bigger cut of your revenue if you consume an unusual amount of resources (I presume that means if your video is so popular that Google has to buy a new server to host it). The exact circumstances in which Google will take more are not spelled out, which makes me deeply uncomfortable.

Questions aside, the terms are a lot better than what mobile software companies get from online stores like PalmGear and Handango, which can keep 50% or more of your revenue. And that's my point. Now that Google has a billing mechanism, it can apply it to any form of electronic content – software, photos, e-books, music, articles, analyst reports, and so on. I think you could eventually see purchasing built right into search results – along with the option to translate a web page, you could have the option to buy a piece of content.

The next logical step is for Google to tie the billing engine to Google Base, so people can sell any electronic file through Google. This is potentially very powerful. Think of a small software developer looking to sell an application. Today they need to either sell through an online store (which takes a huge cut) or set up their own e-commerce site (which is a big pain in the neck). It's going to be enormously tempting to just offer your stuff through Google instead.

The Google vs. Apple video competition will be interesting, but ultimately I think video's a sideshow. Google's gradually setting itself up to be the middleman for anything that can be shipped electronically. I think that's the real importance of the Google Video announcement.

Thanks for the award!

I'd like to thank the folks at PDA 24-7 for naming Mobile Opportunity one of the two best mobile-related weblogs of 2005.

This would probably be a good time to say what I'm hoping to accomplish with this blog. I set it up as a way to share what I've learned about mobile computing, plus any other interesting tech-related information I run into in the course of my consulting work. So you're going to get a mix of mobile and non-mobile information. I'm not trying to advocate any particular company or product; I just want to help grow the industry and help users make well-informed decisions.

I'm trying for quality rather than quantity. I expect to post one or two times a week on average. Blogger produces an RSS feed, and I think that's a great way to read the material since I'm not posting every day.

I have received one report of a validation problem with my feed. I use Bloglines, and I know the feed works fine there. But if you run into problems, please contact me via the address here. Also please let know if you have questions or want to suggest any topics for me to cover.

Thanks for visiting.

Does the mobile OS matter?

Yes and no.

But mostly no. It doesn't matter the way the OS companies want it to.

Recently two telecom analysts in Europe published essays saying that there isn't going to be a winner in the mobile OS wars. The UK research firm ARC Chart wrote, "far from the market consolidating around one or two of major OS platforms, the number of middleware systems for which applications can be developed for is actually increasing.... The mobile OS story is no longer simply about a war between Microsoft and Nokia."

(Actually, the story was never simply between Microsoft and Nokia, even if you're watching only the European market. But that doesn't invalidate their main point.)

Then analyst Dean Bubley chimed in: "Let's face it, heterogeneity in mobile phone OS is permanent. At the bare minimum, Nokia will continue to champion Symbian, Motorola will push Linux, HTC is making a good living with Windows Mobile, and assorted proprietary OS's continue to make traction because consumers don't care.... OS diversity is a baseline. Most manufacturers recognise this, and most mobile operators as well."

Unfortunately, ARC Chart went on to theorize that middleware software platforms are going to take on the standard-setting role that the OS was supposed to play. They cite products like Brew, Savaje, and Action Engine as examples.

I don't think so, not if they behave the way the mobile OS vendors have behaved. I think the most important words were Dean's: consumers don't care. I wouldn't make the statement so categorically, but I think it is true that most customers don't care. Here's why.


The PC fallacy

As I mentioned in my post on the Myth of the Smartphone Market, one of the most common mistakes made by people in the mobile industry is assuming that their market will work like the PC market does. More often than not, it doesn't. If you use PC assumptions and PC reflexes to run a mobile company, chances are you'll lose your shirt.

This is why people who've worked a long time in the few really successful mobile data companies, like RIM and Palm, sometimes come off as smug and dismissive when they get advice from outsiders. If you approach them from a PC perspective, they'll tune you out faster than I tune out country music when I run into it on the radio.

One of the most basic assumptions of the PC world is that one OS eventually wins. Even if two operating systems start out even, one of them eventually gets a little better sales. Seeing a better chance of selling applications on that platform, more developers concentrate on it. The higher number of apps brings in more customers, who draw more developers, who attract even more customers. The process feeds off itself, and pretty soon one OS has 90% of the market and the other is called Macintosh.

For years almost everyone (including me) assumed the same effect would operate in mobile devices. But does it? Let's look at the evidence.

At the end of the century, the Palm OS took a commanding lead in mobile application development. The company's developer base grew from about 3,000 registered developers in 1998 to 23,000 in 1999 to 130,000 in 2000. The application base grew at the same rate, vastly outstripping everything else on the market. By all the rules of the PC market, this should have been the end of the game. As licensing increased the base of Palm OS devices, every other mobile platform should have been wiped out of existence.

But it didn't happen.

There are a lot of reasons why. Microsoft and Nokia were both willing to endlessly subsidize competing platforms, for example. But another key factor was that the "network effect," the bandwagon process in which a leading platform sucks up all the customers, simply didn't work. The users didn't behave the way they were supposed to.


It's the solution, stupid

What are the two most successful smart mobile devices on the market today? iPod and RIM Blackberry. What operating systems do they run?

Uh, well...

Last I heard, the iPod runs a mashup of software from Portal Player and Pixo. RIM runs its own embedded OS (I don't know if it's proprietary or derived from an outside product), plus Java. Neither of them have fully mature software platforms with a large range of third party applications, and yet they outsell the products that do.

"Wait," someone might object. "Those products just sell the best because they work best. If someone had a really good product on an open operating system, it might sell the best." And that's exactly my point. In PCs, the industry-standard operating system can propel even inferior hardware designs to leading sales (ask any Mac owner). The PC OS generates demand. In mobile devices, the "solution" – the device's main functionality – is usually what generates demand. The mobile OS doesn't matter. Or a more accurate statement would be, something else matters a lot more.

This wouldn't be as much of a problem if the mobile device companies were good at creating mobile data solutions on their own. Then they'd pick the OS with the best plumbing and build a great product on top of it. The OS still wouldn't matter to most users (it would be equivalent to a no-name embedded RTOS, something like TTPCom's Ajar or OpenWave's client software), but at least you could count on it to be an element in the best mobile devices.

Symbian has tried to follow this route. It's owned by mobile phone companies, and they generally don't want it to have anything to do with creating end-user value – the phone companies, particularly Nokia, view that as their turf. The restrictions are so tight that Colly Myers, former head of Symbian, says the company shouldn't have even tried to create a user interface for its product.

But most mobile device companies, especially the big ones, are terrible at creating integrated hardware-software solutions. They're hardware companies, not software companies. The mobile operators are little better; they generally understand voice but not data. So you get a three-way traffic jam of OS vendor, hardware company, and operator (if the device is a phone), none of whom are in a position to architect the whole solution and make mobile data sing.

I do think there's hope for an application platform to establish itself as a standard in the mobile world, but it needs to be structured and managed differently from anything that's on the market today. I'll write about that later this month. In the meantime, the industry needs to understand that smart mobile devices today are basically appliances. Most people buy them to solve one major problem in their lives, and they'll favor the device that is the best solution to that particular problem. Blackberry is the best solution for mobile e-mail, so people buy it even though it sucks at almost every other function. iPod is the best solution for mobile music, so people buy it even though it can't do much of anything else.

There are a relatively small number of users, like me, who care so much about having a multifunction mobile device that we'll pay more and compromise on other features (such as weight and simplicity) to get it. The Palm OS ones are very loyal to Palm OS, and the Windows Mobile ones are very loyal to Windows Mobile. Although we're very noisy on the web, we're actually a relatively small percentage of the population. There aren't enough of us to create the sort of mass horizontal market the consumer electronics and phone companies are looking for.

Does that mean mobile operating systems are dead? Nah, but if the OS companies want to have a major impact on the market, they need to step up to providing full solutions to major user problems, rather than just plumbing. Picture a version of Windows Mobile that includes a well integrated system for downloading and playing music. Or a version of Palm OS that comes bundled with a great corporate e-mail solution and software to handle attachments. Those mobile software products could sell well. What's dead (or at least uninteresting and low value) is mobile operating systems that try to succeed by just being great infrastructure. That worked in PCs, but it won't work in mobility.

Is it safe to buy Palm or RIM devices?

The question was familiar, but it was the first time a reporter had asked me to go on the record since I left PalmSource. She said, "Given all the uncertainty about Palm, should people avoid buying their products?"

I asked what uncertainty she meant.

"You know, all the uncertainty about what they're doing with Microsoft. It's the same as RIM Blackberry, where people say you shouldn't buy because of the uncertainty about their patents."

I'm glad to say that my answer today is the same as it was back when I worked at PalmSource: buy what you need and don't worry about what people say.

If you look for uncertainty, you can find it for any mobile product on the market. Symbian's losing licensees. Microsoft has lost licensees (and missed a few shipment deadlines). Both platforms are extremely dependant on single hardware companies -- Nokia for Symbian and HTC for Microsoft. And for every device there's always a new model or a new software version about to obsolete the current stuff.

Obviously, if a company's on the verge of bankruptcy, you should be careful. But Palm is profitable, and they know how loyal Palm OS users are. They have a huge financial incentive to keep serving those users as long as the users want to buy.

RIM is a slightly more intimidating issue because you never know what the government might do. One week RIM's on the brink of ruin, the next week the patent office is about to destroy the whole case against them. This sort of unpredictability doesn't encourage innovation and investment, which I thought was the whole point of the patent system. What we have now seems more like playing the lottery. But I don't think it's going to lead to a shutdown of RIM's system. If NTP destroys RIM's business, there won't be anything left to squeeze money out of. I think what you're seeing now is brinksmanship negotiation from both sides. It's entertaining, but not something you should base a purchase decision on.

Yes, you can get yourself worked up about risk on a particular platform if you want to. But that level of risk is miniscule compared to the near certainty you'll be disappointed if you buy a "safe" product that doesn't really do what you need. There's much more diversity in the mobile market than there is in PCs. One brand often isn't a good substitute for another, and a product that's appealing to one person may be repulsive to another.

If you're an individual user, you could easily talk yourself into buying a device you'll hate every day. If you're an IT manager specifying products for your company, you could easily end up deploying products that employees won't use.

The safest thing to do is ignore the commentators and buy the device that best meets your needs.

NTT DoCoMo buys 11.66% of Palm OS. Watch this space.

When I worked at Palm, I was always amazed at how different the mobile market looked in various parts of the world. Although human beings are basically the same everywhere, the mobile infrastructure (key companies, government regulation, relative penetration of PCs, local history) is dramatically different in every country, and so the markets behave very differently. Even within Europe, the use and adoption of mobile technology varies tremendously from country to country.

And then there's Japan, which has its own unique mobile ecosystem that gets almost completely ignored by the rest of the world, even though a lot of the most important mobile trends started there first (cameraphones, for example).

I try to keep tabs on Japan through several websites that report Japanese news in English. Two are Mobile Media Japan and Wireless Watch Japan. They both post English translations of Japanese tech news, and you find all sorts of interesting tidbits that are almost completely beneath the radar in the US.

Case in point: at the end of November, NTT DoCoMo announced that it is raising its ownership of Access Corp from 7.12% of the company's stock to 11.66%, for a price of about $120 million. That's right, the same Access that just bought PalmSource. So DoCoMo, one of the world's most powerful operators, now owns 11.66% of Palm OS and the upcoming Linux product(s). This story got passing mentions on a couple of enthusiast bulletin boards, but I didn't see anything about it anywhere else.

It's possible that the DoCoMo investment has nothing to do with Palm OS or Linux. Access provides the browser for a lot of DoCoMo phones, and it frequently subsidizes suppliers in various ways for custom development. But $120 million is a lot for just customizing a browser…

DoCoMo is a strong supporter of mobile Linux for 3G phones, and you have to assume that Access is in there pitching its upcoming OS. I can just picture the conversation: "You already get the browser from us, why don't we just bundle it with the OS for one nice low fee?" Meanwhile, Panasonic just dropped Symbian and plans to refocus all its phone development on 3G phones and mobile Linux. You have to figure Access is talking to them as well.

I don't think most of the mobile observers in the US and Europe realize how intense the interest is in mobile Linux in Asia. A lot of very large companies are putting heavy investment into it. I'm sure this is why Access was willing to pay more than double PalmSource's market value to buy the company.

It's going to be very interesting to see what Access does to make that investment pay off in 2006.

(PS: In case you're wondering, I have no ties to PalmSource/Access and no motivation to hype their story. I just want folks to understand that the mobile OS wars aren't even close to over.)