All That I Know (About Technology)

Every other month or so I get another comment from Joe Koufman, the VP of Business Development and Marketing at Engauge, on how Android is gaining ground on Apple’s iOS. These reminders are actually friendly — Joe and I have been at it ever since I wrote late last year about whether developers should embrace the Android OS. Joe knows that I’m passionate about my iPhone as he is about his Android. And we’ve spoken on numerous occasions about how Android is available on smartphone devices by multiple mobile equipment makers where Apple’s iOS is only available through AT&T (well, at least until the upcoming rumored announcement by Verizon this December) so the deck is stacked in Google’s favor.

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Financial information for publicly traded companies always provides a wealth of information, especially if you’re searching for clues as to where the technology is going. That’s why I love looking at quarterly earnings announcements from big technology companies, like Apple, IBM, Google and Microsoft.

Last night, Apple announced their 4th Quarter 2009 earnings and reported that their quarterly revenue hit almost $10 Billion dollars. [If you're trying to gain some perspective on these numbers, you should consider that Microsoft recently posted revenue of $13.1 Billion for the same quarter (which ended June 30th, 2009).]

I ran across a few interesting stats in the earnings report and the analyst call transcript:

• 7.4 million iPhone handsets were sold in the past quarter, a rise from 5.2 million iPhones sales in the prior quarter.
• Nearly 21 million iPhones were sold in the fiscal year, which ended in September 2009.
• There are more than 85,000 applications for the iPhone in the iTunes store.
• iPod sales were down nearly 8% for the quarter to 10.2 million units.
• iPod Touch sales also grew strongly during the quarter, up 100% year over year.

What does this mean to Technologists?

POINT #1: Apple is in a dominant market position.

They’ve reached this position via the introduction of the iPod and the iTunes Store. Over the years, everyone and I mean everyone (eg: Amazon) has tried to develop an interface with music library/music store capabilities but none have been able compete with iTunes.

POINT #2: Demand for apps in a packed iTunes apps store remains strong.

Soon after the introduction of the iPhone, Apple established a Developer Program that allowed technologist to create custom applications for the iPhone platform. The program required developers to pay a fee to distribute their application in the apps section of the iTunes store. The apps were valuable to iPhone users because they could personalize their device and be more productive (eg: I can check my Starbucks card balance and the weather while listening to my favorite song). But Apple also limited the number of apps by instituting an application approval process that required new apps to be vetted before they were made available to the public. By restricting the iPhone platform (that is in wide demand), they further fueled the fire of marketers who wanted to interact with these iPhone device users.

POINT #3: Exclusivity agreement with AT&T has driven iPhone innovation.

Apple launched the iPhone in the US by establishing an exclusive relationship with AT&T. While the relationship has received plenty of criticism (source), the exclusivity agreement has benefited Apple in that they were able to focus on a single platform and deliver innovative features for that platform. They avoided marginalizing the features of the iPhone by not having to deal with integration issues that come with having to support a device on the networks of multiple carriers. Additionally, the infrastructure investment has driven AT&T to improve their customer support by providing a more robust network for a smart phone devices.

BOTTOM LINE:

Apple provides a growing platform with a broad user base. Developers that are considering mobile applications will first need to build for the iPhone if they want to have the broadest reach. But because of the fierce competition, developers have to recognize that their app has to stand out in an already crowded market place. The good news is that Google and other competitors (aka, Microsoft) are courting developers to their mobile platform because they recognize the importance of mobile. One effective strategy that developers can employ is to look for alternate mobile platforms as a means of getting some initial buzz. By establishing a foothold in these platforms, Developers can build further recognition for their application on the iPhone platform. As part of this strategy, developers will have to utilize a platform that allows them to code their application in one language that can be compiled into a language that’s compatible with each platform. [NOTE: each mobile platform requires different programming languages/programming skills]. Otherwise, they will not be able to create and distribute their application in a timely manner.

Google announced yesterday a 7% uptick in revenue growth for the quarter ending September 30, 2009, compared with the quarter a year ago. Google also used the earnings announcement to signal that the downward pressures from the recession appears to be subsiding. While the earnings call primarily focused on revenue and search trends, Google executives also discussed mobile marketing in detail (sources: Q3 2009 earnings call transcript and Extended Q&A Call Transcript). Here are some points that I wanted to highlight about the trends in mobile marketing:

Mobile search is experiencing a quarter-over-quarter growth rate of 30% in Q3 2009. The current momentum in mobile adoption is resulting in a simple pile-on effect. Demand for mobile is surging on the data side: according to a recent report by CTIA (source), wireless data service revenue is up nearly 40% in the past 6 months of 2009 (ending in September). Consumers adoption of smart phones is finally expanding; they are seeing how these devices simplify their life and enable them to be more productivity while away from the internet connected laptop or desktop. With these devices, they can easily communicate with their friends via text and research locations and/or products while in transit.

Mobile advertising offers Marketers a novel touchpoint to engage consumers. While Google executives admit that search volume is still light in comparison to other mediums, marketers are extending their campaigns to these devices because they can expose the consumer to one additional message. This is important because today’s advertisers need to smack consumers with multiple touchpoints to effectively wrangle a behavior out of them, like a purchase. Since advertising is still fairly new on these devices, Google executives claim that mobile advertisements are more effective at driving clicks. While it is understandable that consumers may find these ads more engaging, I’m hoping to find data on the effectiveness of the ad beyond the click. [NOTE: If you have some, please share!].

Marketers need to match the message to the mode when they interact with a consumer on a mobile device. A few big brands are toying with mobile commerce. For example, Starbucks recently released a mobile application that allows consumers to buy a coffee via an iPhone. While Starbucks seems to have found a gem of an idea, Google executives confirm that there are currently a limited number of applications that can engage a consumer on a mobile device.  This is partly attributed to the consumer being in a different mindset or mode when they are on their smart phone. They are basically “snacking” on information. Additionally, Marketers need to recognize that their mobile message needs to be different than their email message because of the wide range of technology support on these devices.

Mobile is not going away. The final point that Google made is that they’re going to continue their investment in their mobile platform Android. Google has plenty of cash on hand so Marketers that are thinking that mobile marketing has no future should reconsider. While mobile advertising is still in its infancy state, it seems to be maturing at a rapid clip so marketers should not ignore the power of mobile.