Views on the new media market

Adobe - the future is magazines, apparently

Adobe is holding it's annual developer conference in LA this week. It's interesting to see what they chose to lead off with at the keynote given by their CTO Kevin Lynch.

The major part of the keynote was taken up by demonstrations of what is being achieved using Adobe's InDesign tool in the area of magazines with great demos by Martha Stewart (of Martha Stewart Living) and Conde Nast's Joe Simon showcasing what Wired has been able to achieve.

So the next billion dollar market for Adobe is magazines.

Sorry, I mean that next billion dollar market for Adobe is Magazines on digital tablet devices.

WHAT?

Truly this was very strange. While it's clear that Adobe's InDesign customers are in pain (they have already had a decade of the web challenging their traditional print business model) does anyone believe that the emergence of tablet devices is set to revolutionise the magazine content type market, and create a significant new, multi-billion dollar opportunity?

Surely anyone with a significant opportunity in content has already had 10 years of experience on the web in building a great, engaged, monetized community around quality content - tablets are emerging as part of that ecosystem, but is this something that Adobe should be focussed on - or is it simply another example of how the shift to connected, digital content is continuing?

The challenge for magazines isn't in getting the right package of technologies to allow consumers to better consume their content - it's in the competition for individual's time, and the associated competition for advertisers's money to pay for the content creation that will capture and keep the audience's attention.

So what do I recommend for a magazine brand and content owner?

First - understand where consumers see the value in your content - is it an impulse purchase of a £3 magazine driven by the desire to see high quality glossy photos of lifestyle/homes/fashion? Is it the curiosity driven by the desire to peep into the lives of celebrities without having to read lots of text, alongside glossy paparazzi shots? Is it the desire to read thoughtful, editorial on major issues?

How do people consume this? How do they share the content? What do they keep of the content?

Now look at the technology that surrounds these audiences - and work out how to improve on the experiences and impulses that are driving them to consume the content in the first place - make it easy, rewarding and fun for them to consume the content. Help them to share the content with their friends. Remember that consumers see the whole experience - so make sure that the values that you are applying to your content also apply to the adverts alongside your content (yes, that means no garish, annoying, animated banner adverts on your web content)

Creating compelling content experiences is hard - but your opportunity to create new, long term revenue streams would be significantly enhanced by experimenting in depth with what engages the community around your content, how to help them connect, and discuss the content that you've provided them. Make sure that people feel that they are getting £3 of value from your content - just like they used to when they bought the glossy magazine from the newsagent.

Mobile phone manufacturers lost customers

We have launched Live Talkback at Confex yesterday, and I had the opportunity to meet many people who organise and run hundreds of meetings and events across europe every year.  Live Talkback lets them get their audiences involved and engaged in their event - and our solution is both better, and approximately one tenth of the price of our competitors - so we had a very successful first day.

At the event I got to see the reality of the mobile industry with the real public - asking people to pull out their mobile phone and use a mobile service at a show.  This is a target audience who is frequently away from their desk at an event, or a meeting, so mobile connectivity is vital to them - while some people had forgotten to bring their business cards to the event nobody had forgotten to bring their mobile phone.
So what were the phones we saw?

Exhibitors overwhelmingly had iPhones - they valued the rich experience, and it was fun to watch our competitors using Live Talkback on their own iPhones, and going "wow, cool" - another converted customer.

There were a significant number of Blackberries in the audience - often held in front of people checking their email while they walk down the aisles of the show (or maybe voting on the show polls with Live Talkback's Blackberry application)
At least half of the audience though were carrying phones that were around 3 years old, and very battered looking.  When we explained how to use Live Talkback - go to m.livetalkback.com in your mobile phone browser - a common reaction was "My phone doesn't have the internet"  The suggestion of "why don't you try?" - resulted in a success every time, often with a "wow, I didn't know my phone could do that"  So it turns out that consumers in the UK market do have phones with browsers, and are data enabled - yet are not aware of the fact they could use this.

So in spite of nearly 10 years of marketing mobile internet services (Vodafone Live launched in 2001 for example) - the awareness of the internet on phones other than the iPhone has not reached about half of the UK phone buying public.
As bad is this section of the phone buying public seems to have no desire to get a newer phone - they are happy with their 3 year old model, yet few of them are wearing 3 year old suits, or have 3 year old designer handbags.  It does not seem that we can blame the economy for this, the problem lies in the fact that the mobile industry is not providing them with sufficient perceived value.

What is the missing phone?

These people are smart consumers, but they are unlike the technology savvy folk who drive the mobile phone industry.  They value simplicity, quality, elegance.  What does the industry offer them?  3 year old technology repackaged in a new shell, with a cluttered set of features with the minimum investment in software as that is expensive, and all they want is a low cost phone, right?

Where is the "elegant phone" - the phone that is beautiful, and robust, with a simple set of core features done extremely well - yes it is 3 year old technology, but the watch on my wrist has technology that is about 100 years old, and it's still executed superbly, and continues to run reliably after being in continual use for 16 years.
Nokia and Samsung come closest here, but both suffer from the assumption that just re-using the software from older devices.  As the mobile phone market further splits into the smartphone "haves" and the featurephone "don't want's" will anyone successfully address this market?

Best in the world

It was Mobile World Congress last week - the annual get together for people in the mobile industry, and me, and 48,999 of my dearest friends descended onto Barcelona and took over 130,000 square metres of exhibition space and turned it into a temple of all things mobile.

Much has been written about announcements at the event, unfortunately little has been written about the incredible developments at Powermat - who not content with providing wireless charging for mobile phones and other consumer electronics, are also diversifying into wireless power for martini glasses.  Yes, a martini glass that lights up when you place it on the right spot on your bar. How did we ever live without it?   The next evolution is certain to be the self chilling beer glass - pour a warm beer into the glass, place it on the mat, wait 15 minutes - voila - chilled beer.  A new technology revolution for brewers.

Traditionally phone manufacturers use MWC announce their key new phone lineups for 2010 - with three exceptions (Nokia, Blackberry and Apple) this year was the same.  It is interesting to look at positioning statements from manufacturers, and understand how this helps them dominate categories.

Apple

Apple have set the standard that everyone else is following at Mobile World Congress.  Touch was everywhere - as were applications.  Why?  Apple have, and continue to utterly dominate the mobile world in two categories - Internet, and Applications.  Their web browser is undoubtedly the best in the world on a mobile device, and their Application store has a richer choice of applications, and remarkably few poor quality applications - maybe a result of their approval process?

Blackberry

RIM continue to dominate in email devices.  Mobile World Congress is a fascinating event - I saw more people carrying two phones, iPhone and Blackberry than I did anywhere else.  Clearly Blackberry's offer of reliable messaging and voice, coupled with Apple's excellence in Web and Applications is a killer combination for rich business people.  As anyone who has used an iPhone as an integrated device for music, web, applications and email will know the iPhone balks at going more than 8 hours away from a power socket.  This is a weakness that Blackberry can continue to exploit - and with a pending webkit based browser it will be interesting to see how many people they can wrest away from iPhone adoration.

Nokia

The elephant in the room for any mobile event is Nokia.  They remain the worlds number 1 handset manufacturer by volume of shipments - both in overall volumes, and also in the high margin smartphone category.  Any consumer facing service will see that the majority of their users are on Nokia phones.  In it's core market of building high quality, reliable phones at low cost Nokia remains the master.  The lack of any category defining phone however means that there is little to write about.  It is interesting that Nokia chose not to announce new phone lineups at MWC - preferring to focus their marketing efforts on the Ovi store instead.  I look forward to seeing what Nokia can come up with during the rest of 2010.

Sony Ericsson

Once the people who defined, and won the category of "Camera phone" with the Cybershot series, and "Music phone" with the Walkman series, Sony Ericsson continue to lack focus on a category defining winner in the mobile phone space - their headline announcements were around the X10, a small Android phone.   Tough positioning in the Android phone space - with in total 48 different Android phones on show at Mobile World Congress there is clearly a large number of bets on Android as a way to beat Nokia - none quite answer the question for me "what is an Android phone best in the world at?"

Samsung

Samsung are the world number 1 in many of the markets where they choose to operate - from flash memory, televisions and other consumer electronics they have the ambition to get to number 1.  In the mobile phone market they number 2, and still quite a long way behind Nokia.  The key announcement at MWC was the Samsung Wave - the first Bada phone.  This is a phone that is aimed at Samsung's core market - feature phones, those devices that people who are unwilling to pay for smartphones carry around. There are a lot of these - even the most aggressive forecasts for smartphone use in western europe show growth to only 50% of the market by 2012.  Samsung's investment in Bada, and the release of the Wave shift the capabilities of traditional smartphones to the feature phone category.  While their success in this area will be seen as bad by developers as they continue to fragment the mobile platform market, for Samsung I predict great success.  By focussing on a core market, and bringing all their efforts to bear on a single proprietary platform the are able to differentiate from others and excel - creating category defining products.  I believe the focus the Koreans are showing gives them the best chance of toppling Nokia from it's number 1 position by 2012 - but as the Finns are playing their cards close to their chest right now, it's far from certain.

LG

The most surprising announcement I saw at MWC was the announcement by LG that they would be working with Intel and Nokia on the MeeGo platform (the platform that Nokia use in the N900 device)  I will be interested to see how this develops - but for any partner competing with Nokia on the same platform as Nokia life has proven difficult in the past - experiences from Symbian prove this as Nokia has been able to use it's scale to produce more devices, with more features at lower price points and faster than any competitor.

HTC

HTC continue to show innovation in their lineup - and their early bets on Microsoft and Android are paying off - as Microsoft begin a renewed push behind Windows Phone 7 and HTC apply their engineering skils to the devices for this platform I expect to see more growth in smartphone sales from HTC.

Motorola

Motorola continue to be almost invisible in Europe - and having made a big bet on Android are likely to continue to be a minor player unless they can come up with a category defining device.

Coming out of the event I'm most impressed by Samsung, and with HTC, and with Google - who are agressively going after developer mind share with the Nexus One (they gave away Nexus One devices to developers at MWC - reportedly giving away $750,000 worth of devices) - this implies they are positioning the Nexus One as the "Developer's phone" - whether this translates into compelling applications that will drive consumer demand we'll wait and see - in the past on the desktop it has (Microsoft created their leading position in the desktop OS space by partnering effectively with developers).  Unfortunately I didn't get a chance to get my free Nexus One - you know where I am Google if you've got some spare.

AIRpad beat Apple at their own game?

Adobe have been doing an excellent job in co-ordinating media to focus demand for Flash on the iPad. There have been many arguments put forward - one of the most thoughtful pieces is by Jeremy Allaire on TechCrunch one call that I haven't seen is for Adobe to step forward and put their money where their mouth is. Why don't Adobe produce a competing tablet device?

Adobe has all the right partnerships in place - they have been working with ARM for over a year to accelerate flash on ARM cores. They are working with HTC to put Flash onto HTC devices, and have a relationship with Qualcomm accelerating Flash on Snapdragon devices. So building a device wouldn't be that hard. What about selling it? Adobe has great channel to the creative market - who are used to paying around $599 every 18 months for upgrades to Adobe's Creative Suite products. Their consumer products have an existing channel to market through PC and accessory stores - so what would an AIRpad consist of:

• Simple flat, multi-touch display - the power here is in the software platform
• OS - small, simple and light - there are multiple linux based offerings here, an obvious one to pick would be Chromium OS
• Browser - webkit based - Chrome is the obvious pick here
• Application runtime - AIR - which includes Webkit, and already has it's own application store with a rich set of applications
• eBooks - Adobe Digital Editions which already has deals in place with multiple book publishers

Such a product would provide a great showcase for creative agencies to demonstrate their talents to clients - and also provide a great reference design for other hardware manufacturers who want to beat Apple to license from Adobe and drive distribution of.

With Adobe's success in building products that lead to rich, digital content, taking the step into a digital content consumption platform, complete with hardware would be a great way for Adobe to demonstrate it's vision and commitment to it's creative customers - and enable them to have a rich, broad platform that lets them express their creativity in any way they want.

How about it Adobe? When can I get an AIRpad?

And one more thing

So Apple launched a new category yesterday. It's the web pad. Sorry, I mean the Tablet PC, no, no, I mean the MID, err, the eBook. Well something like that anyway.

What consumer want has the iPad converted into a need?

Apple have a track record in bringing products to market in an existing area, and executing better than the incumbents in creating high end, premium, high margin products. They have achieved this with desktops, laptops, portable music players and phones. As Steve Jobs presented the iPad is targetted at the space currently occupied by netbooks, and previously occupied by an array of products, none of which have demonstrated huge success.

What has made netbooks a success in this category? Price. Netbooks offer the promise of laptop functionality at a much lower price point - making them an acceptable additional device. The iPad is close here - the entry level device at $499 is close enough to netbook prices at around $300 to cause people to look - though the gap is still significant enough to dissuade many people.

The same is true for eReaders - Amazon's Kindle is $269 - so it's possible to get a netbook and a kindle for the same price as an iPad. Will consumers view the style and functionality of the iPad as worth the premium?

iPad has some very elegant software in it - it seems to do what it's aiming at very well - what is the likely impact?

Winners

• iPhone software developers. With the marketing hype and hope around iPad skilled iPhone software developers will find themselves even more in demand
• Digital media companies - particularly those with a clear content monetization strategy built off a solid web presence
• HTML5 + CSS developers - Safari in the iPhone OS is significantly ahead of most browsers in what it can do
• RIM - business people with money, and wanting a portable "iPhone like" experience can now keep their Blackberry (with all the advantages of power consumption and corporate email) and buy themselves a personal iPad - less pressure to get iPhones in corporates.
• Amazon - the rush to get eBooks will help Amazon's retailing - you can after all read your Kindle books on the iPad, using the Amazon Kindle iPhone application, I'm willing to bet Amazon can be a better book retailer than Apple - if they no longer have to produce and sell hardware even better - they make money on the content.

Losers

• Adobe. No Flash on the iPhone makes Adobe's core proposition to web developers weaker. Anyone who want's to reliably deliver video to the iPhone + iPod Touch + iPad economy needs an HTML5 solution as well as Flash.
• Intel - Apple's delivery of a superb ARM based browsing solution hurts Intel in the growing low power market. Expect to see more smartbook type notebooks based upon an ARM core with much better battery life than intel based devices
• Microsoft - the emergence of a new "application economy" around iPhone OS hurts Microsoft's long term position in being able to leverage Windows as the platform of trust for application developers

Let's see 1 year from now where these players end up.

Mobile advertising - where is the money?

Mobile advertising is a hot space right now. Google are in the process of buying AdMob with a valuation of $750m - for AdMob revenue are in the $50m-$100m range - so at the mid point that's around 10x earnings. A great exit for the founders of AdMob. At the same time Apple is buying Quattro Wireless for around $275m, for a company with between $20m and $30m revenue.

These numbers make for very impressive VC returns, and are a credit to all those involved in AdMob and Quattro Wireless, and clearly indicate a belief within Apple and Google that mobile advertising is going to be a big revenue source in the future.

So we should be able to easily find examples of mobile advertising that work well for companies and brands - after all there must be many.

Sat in London, where there is a major media market, many advertising agencies, and we have great mobile networks and great consumer adoption of high end mobile phones you'd expect that I'd be able to point to many examples of success. Luckily I can think of one example - Flirtomatic a mobile flirting site. Now Flirtomatic may not be a major brand that you have heard of - but they are successful in driving traffic to their mobile site, and converting customers into paying users of the service.

What about other major brands? ITV, Sky, Tesco, Nescafe, Vodafone, Nokia? Remarkable by the absence of success stories there. Yet this is in a market where we are growing to over 50% of consumers will be buying smartphone devices this year.

So what's wrong? Simple experiments demonstrate the problem. Even within a contained ecosystem (the iPhone) advertising does not prove a very cost effective way of driving traffic. Estimates based on my experience are that the cost per download of a free application is around £6 ($9) per download, and the cost per download for a paid application is around £11 ($16). Business models in mobile that have consumers paying upward of £10 per application are hard to come by - and compare poorly with the web where cost per click is sub $1.

So how are AdMob and Quattro Wireless going to turn their initial customers who are generating today's revenues into repeat customers who scale to $billions in revenues for them? The evidence so far is that what they won't achieve that.

It's instructive to look at the internet advertising market - $5.4bn for the first half of 2009. The IAB produce a report on internet advertising let's look at the split of the different types of advertising

Then we should consider, from the same report that the top 50 companies account for 89% of all internet advertising spend. So without those big brands seeing the return on investment from mobile advertising it is going to remain a small fraction of the overall advertising market - hardly enough to justify the investment that Google and Apple are making.

So - how can mobile advertising improve? The clue is in the above pie chart. Context is king. Mobile phones are all about convenience - that's why you use your mobile to call someone when you have a landline on your desk. It's why you check your email on your mobile phone when your laptop is a few steps away from you. So anyone seeking to have a successful advertisment on mobile needs to understand the context of how the device is being used.

Most business plans that include context and mobile tend to include the phrase "Location based services" in their plan - and sure, for a minority of cases mobile phones are uniquely used in places where location is important - mobile applications like FourSquare and Flook take advantage of this feature. More poorly served is the majority case where the mobile phone is in one of two locations - home and work. Yet people still pick it up and use it there. Smart solutions like Live Talkback can be used both when outside (for on location events) or at home (for broadcast events)

The really smart solutions for advertising will start to understand much more of the context around individuals - and will pick the right time to engage users with advertising - maybe mobile has something to learn from TV advertising here - will your mobile phone have an ad break?

Google and Nokia competing with free

There has been lots of chatter about Google's gift of the Nexus One to it's staff. This is normal practice for smart companies in the mobile space - what better way to get feedback on early, experimental products and services than have your own staff use the early releases.

There has been much chatter about whether Google will go the next step and make the Nexus One available directly to the public. There is already an established mobile brand that has taken this step - Nokia. Unfortunately for Nokia it seems like consumers don't have that much demand for directly purchasing phones - Nokia's flagship stores are being closed.

The challenge for both Google and Nokia here is that they are both in the business of selling a product that consumers consider to be free - in Google's case search and applications are offered free to the consumer and subsidised by advertising revenues, in Nokia's case phones are offered free to the consumer and subsidised by network operator subscriptions.

As the music and media industries have seen there is often a big change in the demand for products when the move from free to paid. Evidence from some music services suggest that the fall in demand once you ask consumers to pay for something may be as much as 80%.

So Nokia and Google face the same challenge - how do they offer something that consumers currently get for free in a way that makes consumers prepared to pay for it?

One distraction in mobile is the word mobile - while most actual use of phones is in two locations - home and work. So creating compelling services that consumers will pay for has to offer some benefits in those two locations.

The mobile phone has succeeded at this in the past - some examples

Voice calls - consumers are used to having access to alternative forms of voice calling at both home and work - yet the convenience of integrated address books in mobile phones have succeeded in capturing more and more voice call revenue from landlines.

Text messaging - the ubiquity of SMS based text messaging captured huge new markets even when large numbers of people also had email and PC's with far better keyboards for text entry.

For me there is a new example National Rail Enquiries even though there are multiple ways I can get hold of this information - either phone, or websites, I choose to use the iPhone application, even when at my desk. The simplicity and focus of the application helps me get what I want done straight away.

The challenge for Google and Nokia engineers is thus to answer this question What services would you choose to use from your mobile phone while you are sat in front of your PC? The winners will be able to show examples of more phone usage - not just mobile, but every minute of the day.

Nokia the General Motors of mobile phones

In 2007 Nokia would have been proud to be referred to as the General Motors of mobile Phones. GM had long been a stalwart of the motor manufacturing industry, with a rich portfolio of consumer brands and a a highly respected brand in themselves.

Look forward to 2009 - GM went bankrupt, and are currently in the midst of radical restructuring, and the elimination of some of those respected brands.

While there are some critical differences between the financial status of GM and Nokia - GM had $179bn in debt, while Nokia is predominantly equity financed with $9bn in the bank, the product portfolios have similarities.

Nokia products today are great workhorse mobile phones. They are reliable, have the all the features you might want, although you might not be able to work out how to use those features, at least they are there. They are keenly priced, and available everywhere.

In short they are a reliable, workhorse of a product, not exciting, but good value. In a market where everybody needs a mobile phone (just as everyone needs a car) this is a great position to have.

The risk comes when people realise that they don't need a new mobile phone (just as people realised that if their new car had no significant advantages over their last car they didn't need to replace it).

With the feature set of current mobile phones this is increasingly likely - the features that have driven new device sales over the past few years

• a camera on your phone (Nokia 7650) (2002)
• megapixels on your phone camera (Nokia 7610) (2003)
• an MP3 player in your phone (Sony Ericsson Walkman) (2004)
• get a thin phone (Motorola Razr) (2005)
  
• get a thin, slide phone (Samsung D900) (2006)
• internet on your phone (Apple iPhone) (2007)

Innovation in the mobile phone space has changed - it's no longer focussed on innovation in hardware as it was up until 2007 - and now has shifted toward software on the phones.

Want to play music on your phone? Get a music application. Want to use location? Get a navigation application? Want to meet up with friends? Use a social networking application.

Nokia saw the trend here, and shifted their efforts to Ovi but that effort has not yet shown significant adoption by consumers. Comparing the popularity of Ovi, with twitter and facebook (both services that could adopt Nokia's tagline of "Connecting people")

We see that while Ovi is growing slowly, it's still an order of magnitude behind the leading internet services. With the distribution, marketing budgets and reach that Nokia has I expect better from them.

So Nokia seems to have stalled on innovation whether in devices, or in services. They still have the advantage of scale, and cost - and are driving growth in India and China but to avoid a slow decline they need to re-invigorate their core markets.

So what could they do?

Nokia have two great core platforms - Symbian, and S40 - both of these are proven volume platforms that ship on millions of existing devices.

Nokia have advantages of scale that everyone else in the industry would die to get. They have great marketing, and fantastic consumer awareness. Their production, distribution and supply chain are unmatched in the mobile industry - even at the scale that Nokia operate product shortages or surpluses are unheard of. Operationally they are a fantastically run business.

The secret ingredient they may be missing, is someone to beat - Nokia have spent so long at the top of the mobile phone market, that it's easy for people to convince themselves of their own invincibility. They miss the clear focus that enables discussions to happen promptly, and people to make hard, quick decisions driven by the need to win against a clear, external competitor.

Segmenting the market however and the competitors become clear. I see three directions where Nokia could focus, and innovate.

1. Text messaging devices

The competition here is RIM. Nokia have huge advantages in scale, and software platforms against RIM, particularly in the consumer segment. A focussed messaging communication device that does consumer communications better than RIM + Blackberry Internet Services has an opportunity to connect the internet savvy consumer mass market globally.

2. Web devices

The competition here is Apple. Apple have a formiddable pair of devices in the iPhone (for the post paid internet market) and iPod Touch (for the pre-paid phone market). The opportunity is for Nokia to create device that offers a superb web browsing experience - and can sell through the pre-paid market for under £150. The chief competition is the iPod Touch - but this is an iPod Touch device with a phone integrated already.

3. Mass market web services

The emerging markets of China, India and the emerging economies in the rest of the Asia Pacific basin are still connected to the web - though not often through personal PCs, but through internet cafes. The opportunity for really low cost internet service enabled devices that enable internet services to reach into new markets is just the growth opportunity that change the scope of Nokia's business into internet services.

With small teams, focussed, and with the freedom to drop more features than they add to platforms Nokia could bring new devices to market in volumes that other manufacturers could only aspire to in 2011. I'll watch with interest to see what they achieve.

The product or platform challenge

There is a huge attraction today in building a platform - whether it's a software platform competing for space on devices (Android, Symbian, LiMo, Java, Flash, WebKit, Opera), or an "in the cloud" platform on the internet (Amazon, Facebook, Twitter, Myspace) - what all the new media and technology upstarts want to be is to be a platform that has multiple great products from innovators both within the platform company and outside the platform company.

We've seen this evolution before - both in technology (the evolution of the mainframe platform companies like IBM, the desktop platform companies such as Microsoft and Intel) where the platform consisted of hardware+OS software and the products were software applications that ran on the combination and also in media with the creation of the TV broadcasting companies - where the platform was the (licensed) TV broadcast infrastructure, and the products were the TV shows.

In both cases the platform owners were able to leverage huge returns over a long period of time, and create large barriers to entry to competitors.

No wonder everyone wants to be a platform.

So how do you go about building a platform?

Platforms succeed because they have multiple, great, products that use them - so to create a successful platform you need to first create multiple great products. Sometimes in the rush to win the platform wars this essential fact can get lost - and people hope that merely by building a great platform automatically great products will get built.

Unfortunately it turns out that there is more to building a great product than merely starting with a great platform. While a great platform can help you build a great product - it doesn't stop you from building a mediocre product.

This is a challenge for anyone who wants to take advantage of a platform to create a product - how do you pick the right platform to build your product on?

My recommendation? Look for the platform where the people responsible for that product are focussed on creating multiple great products of their own using the platform.

Looking at the platform landscape today I see the following as clear winners

• Apple (Mac, iPhone/iPod Touch, iTunes Store are all great products, and can be used as great platform)
• Amazon (Amazon's store, Amazon Marketplace are great products, so I'll continue to use AWS as a great platform)
• Open Web and WebKit - WebKit's quality and performance across multiple devices shows potential, and where WebKit isn't there the web standards are a great platform to develop against
• Linux (server side) - for web services Linux has such a rich, flexible heritage, and such a broad range of technology available it's an great platform to build with

I'm also keeping an eye on the following - as they have great products and the potential to be great platforms

• BBC - iPlayer is a great product, if this becomes a platform it could be a global success
• Google - search is a great products - and they have the potential to be a great platform company, but it's still early for their other products and platform plans
• Cisco - great network products, but not yet clear how they are leveraging this to be a platform
• Adobe - some good products, some that are OK, but increasingly challenged by the Open Web

iPhone demonstrates that consumers prefer quality and simplicity

Who buys phones? In most markets it's not actually consumers - it's network operators. How come? In markets where there are phone subsidies (which can be as much as €250 per phone) the effect of network operator subsidies distorts the market.

So what form does the market distortion take?

Firstly consumers find it impossible to differentiate between different devices - if all the devices are the same price (somewhere between €50 and free) then how do you make a choice between different devices? There isn't a way for manufacturers to signal different advantages, or to differentiate between devices as there is in any normal purchase, where price conveys part of the information to the consumer. (higher price indicates a combination of more exclusive/higher quality/more features)

So how are phones sold?

They are sold in massive quantities to purchasing departments at major mobile operator groups. These groups make decisions to compare devices on bulk discount pricing (sustaining Nokia's market share advantage - as they can bulk source components better than anyone else) - and on features that fit into different parts of their product portfolios.

This behaviour tends to lead to feature creep as manufacturers try to win sales against other manufacturers by offering "more features at the same price" - and tends to discourage novel new devices that may sell in small volumes - as sales wins are based on bulk discounts and volumes, it's safer to buy the phone that is an evolution of the phone that sold big last year.

In europe there are some markets where this dynamic doesn't happen though - Italy is an interesting case study here. In Italy phone contracts are traditionally pre-paid, so the opportunity for the significant subsidies that exist in post paid markets don't exist. Thus phone carry the full "sticker price".

How does this look in reality? Let's look at an example - the Samsung Tocco Ultra on Vodafone

UK offer - free

Italian offer - €399

Quite a difference.

What is the result? In Italy consumers buy more expensive, high end smartphone devices than in the UK.

Yes, that's right Italian consumers buy more expensive phones.

When I see discussions on the battle for operator subsidies by phone manufacturers - I think manufacturers miss the point - if they were to focus on creating the products that consumers want, they would end up with longer term successes, though with some short term challenges in convincing buyers at operators to take their handsets.