Mobile Times They Are A Changing

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

2007 will go down in history as the turning point where smartphones became mobile phones. With RIM on a roll with it’s business ready blackberry, to Apple charging onto the scene with their user (and app) friendly iPhone, to Google’s Android mobile platform, 2007 was packed the sort of tipping points that make Malcolm Gladwell giddy.

Each of the “new” vendors are predicated on the user experience as the dominant need, not the need of the carrier and their business model. Indeed I have argued before that existing manufacturers (eg Nokia, Motorola) are subjected to the limitations their market and have acted accordingly. The carrier decides what features will be provided to whom and the manufacturer created it. Sure their was some give and take, but the immutable law was that the carrier decided what was on the phone and the manufacturer build it, and the sales person sold it.

So the key limitation was not that phones were not offered by the manufacturers but that phones were delivered consistent to what the manufacturers believed would be accepted by the carriers in their network. However 2007 was characterized by a fundamental change in how the consumers view the mobile phone lead by Apple.

Subsequently two new business models have arrived, the Apple iphone alternate reality and the Google application goodness reality.

Right in this mix you have an extremely clever consumer products organization that knows how to play hard ball. It is no secret that ATT was on the receiving end of negotiations with Apple over the iPhone. Apple received concessions that were unheard of in the industry up to that point. What is lesser known is that Apple’s iPhone pricing strategy is exactly that a strategy. The original $599 price was there to straddle the market. What that means is that you price the product close to the perception price when you launch it (ie $599) to capture the early adopters and to set R&D budgets for competitors because they had to respond to the product. Then 6 months later drop the price back to an aggressive position ($399) and again make the competitors respond. This is a technique used simply to slow down the competition by creating two reaction points. (This also allows consumers to react as well. Consumers react to changes in prices not absolute prices.) Apple brings a degree of marketing and product sophistication that has not been seen in the mobile market.

Much to the chagrin of the traditional model, Google’s Android platform is largely subsidized by search and advertising revenue. It is main premise is to allow developers and customers to come up with a platform that appeals to the widest audience. It is largely based on open source and hence is very extensible.

More importantly it has the support of Google’s core applications including search, docs, maps and others. It dominant motive is to provide a consistent platform for the delivery of Google goodness, and the extensibility to allow new applications (such as say traffic reporting system based on GPS, Google maps and real time traffic data. The Android platform has an anchor tenant so to speak.

2007 provided much in the way of change for the mobile market. It was a world of change from the beginning of the year to the end of the year in how the consumer viewed their role. However this has only opened the flood gates of change. The Block C auction in the USA proved that the open access rule does not destroy the value of the network as the carriers threatened, Apple and Google (and Symbian) are pushing the value of mobile applications, and Intel and ARM are pushing the limit of what’s possible with CPUs and by extension personal mobile devices.