This situational analysis aims to give an insight in what the current situation of apps usage is and what the future impact will be of apps. First an overview is given of the growth that is expected for the Smartphone market, since this is the largest app platform. In addition to Smartphones there are other devices that make use of these apps. The most upcoming platform for these is Tablets, but there are more devices that are becoming app based. The second part of the situational analysis will take a closer look at the apps itself and a definition will be given on what consumers expect from apps and in particular branded apps. Please note that this market is changing at a very high pace which makes it hard to quantify. Therefore information obtained today could be out of date the next week. This being said remind that is was written in the beginning of 2011 for my graduation assignment, which was published on June 2011. The information however should give a good insight in the possibilities of the mobile environment of these apps.
The Smartphone Landscape
As mentioned before this report focuses primarily on Smartphones. There are more terms to describe a Smartphone, but in this report Smartphones are seen as devices that give the user the possibility to install and run advanced applications based on that specific platform. This has turned the once single purpose cell phone into a Smartphone (PCmag, 2011). The Smartphone is and will become more of your personal computer in your pocket. The device will be used more intensively since the possibilities are getting wider and the range of devices is increasing.
The Smartphone market is just a few years old and still assumed to still be in the early-adoption phase. For Smartphones the biggest change happened with the introduction of the iPhone by Apple in 2007. Before the iPhone there where already Smartphones, but the approach of these devices was more like we have seen on the PC. Apple created the concept of app based Smartphones. In later years alternatives where launched by other producers, these all show lot of similarity to the app-based structure introduced by Apple. Therefore the launch of the first iPhone will be taken as the starting point of this new trend in apps.
Please note that all information obtained is from speculative research done companies such as Morgan Stanley, International Data Corporation [IDC] and Gartner. These companies are specialized in analyzing technology trend development and estimate growth. Furthermore they check the current sales development in the market. Due to the rapid change and development in this market data will never be completely accurate. It does however give a good overview of what is about to happen in this industry.
Size of the Smartphone market
As written by Morgan Stanley (2009) in their report concerning mobile internet adoption, the market of mobile internet access is likely to become bigger than the normal desktop based internet within the next 3 years. The overall market impact of this latest generation of computing is expected to be over 10 billion units, which is 10 times bigger than the impact of the previous generation desktop internet market as can be seen from the figure below. The reason for this huge increases is due to the high inflow of new consumers from less developed countries, who before did not have access to internet via PC. In Africa for example it is expected that by 2013 98% of all internet access will be on mobile. Mobile does not only mean Smartphones, but also includes other devices like Tablets and others. Smartphones will however account for the largest proportion of this.
To give an indication of the present situation, IDC reported that in the fourth quarter of 2010 Smartphones overtook PCs in number of units sold worldwide. The growth of the Smartphone market has been faster than expected. This is related to the lower prices, more differentiation and overall availability (Virki & Kim, 2010). IDC predicted that the total Smartphone market will keep growing with 24.5 percent in 2011, although it will not be that high in the following years, due to the becoming of maturity of the market. It is however still expected that by 2014 the growth will still be above 13 percent, which will be more or less sustainable after that (Nagel, 2010). In 2010 Mobile phones already outperformed all other computing platform with estimated sales of 268 million phones sold. This will only intensify with an estimated of 875 million phones sold in 2014 (Hamblen, 2010) of which the majority, if not all, will be Smartphone able devices.
There are four main Operating Systems [OS] on the Smartphone market; Apple’s IOS, Google’s Android, Windows’ Mobile/Phone [WP7] and Research in Motion’s [RIM] Blackberry OS (As can be seen in this wiki image). Each of these OSes has their strengths and weaknesses. This part is meant to give a better understanding in which platforms have the most potential and why. Besides these four major platforms there are more, mainly Lunix based platforms e.g. PalmOS, Bada or Meego, these platforms are only limited in size compared to the others and therefore will not be taken into consideration for this research. Nokia’s Symbian platform is also not taken into further consideration due to the fact that Nokia announced an alliance with Microsoft [MS] on February 2011. In this alliance Nokia agreed on using WP7 as their main platform for all their newly developed phones.
In the forecast made by Gartner (2011) and IDC (2011), about the expected sales of Smartphones, for the following 4 years a clear trend can seen towards the Android platform. Android has the advantage to be able available to all Smartphone manufactures e.g. Sony Ericson, Samsung or Motorola. These manufactures can create their own look and feel on top of the Android OS due to the openness of the platform. This creates a more differentiated product market and leads to a wider range of price points. This being said it will also give more issues keeping apps running on all the current distributions of android OS, screen sizes and processors. At the moment the android OS market is fragmented into the 2 main different versions of android account for 90% of the market. The latest segmentation of the android platforms can be found at the Android developer Platform). In the future there will be a large part of devices that will still be using the current 2.2 and 2.3 versions of Android while new Smartphones will move on to newer versions. This is only a small concern, but backward capability will be a bigger issue on this type of environment. Windows has a same sort of strategy, with more manufactures creating hardware, only there are more fixed requirements set by MS. The main problem with MS is that they entered the market quite late with their latest installment of windows mobile. This has them playing a catch-up game with Android and iOS and will be very difficult to counter.
Apple has a very different strategy compared to the other mobile platforms out there. Apple currently only has one Smartphone “the iPhone” and it is by far the most expensive on the market ($600). This being said it still tends to sells remarkably well in the upper part of the market (Ahonen, 2011). The only problem is that this part of the market is slowing down in growth while the lower ends of the market keep developing. This will mean Iphone sales growth will stall in the near future (Ahonen, 2011). It is assumed that, like with the Ipod era, Apple will announce a cheaper model in the near future. Due to the high competition in the Smartphone market it probably will not be enough for Apple to keep their leading role in the industry. It does however stay one of the most interesting platforms out there due to its aim at the highest market and there great all round integration of their OS platform via iTunes.
A final remark has to be made about RIM and their Blackberry platform. RIM, just as Apple, is a single party with their own OS. The difference is that RIM offers multiple devices. The Blackberry platform has a more “Enterprise” market orientated and has been quite slow to the whole consumer app revolution. Rim (2011) recognized this problem and announced on 24th of March 2011 their first step to join the android app market with their Playbook Tablet. Due to the open character of the Android platform it is possible for companies, like RIM, to build such a tool that imitates the android platform. For now this is Tablet exclusive, but it can be assumed that the Smartphone integration will be done sooner or later as well by RIM. This is not yet announced, but it can be assumed to happen due to the fact that RIM’s main consumer base, besides enterprise users, are text addicted youth (Ahonen, 2010) who would like to see app integration in the near future. Besides RIM also HP with their Palm Web OS are concerning to such a tactic (Topolsky & Rubinstein, 2011). This will mean that with the development of android apps you will be able to address at least 60% of the whole Smartphone market in 2015.
In conclusion the most promising market in the following years will be the Android OS. Due to high fragmentation there might be some pitfalls to overcome, but the gathered strength of that many producers in one OS and also the presumably upcoming Blackberry OS port makes Android the platform that will have the most users and therefore the most interesting to target. In addition iOS has an already impressive one type phone user base and has a great integrated app market. Together with the loyal consumers who is mainly focused in the high-end market creates an interesting platform which should also be included when targeting an audience.
Apps do not only concern the Smartphone market, but can be used on other new media platforms as well. Devices that work in the same way as these new breeds of Smartphones are for instance Tablets. A Tablet enriches the user’s media experience and the key benefit of Tablets is that it has a lean backward approach to media consumption while with Smartphones and PC’s have a lean forward approach (Saunders & Mons, 2010). In 2010 Apple reinvented the Tablet market with the Ipad the same way as they have done with the Smartphone market in 2007. Gartner (2011) estimated that Tablets alone will grow from being a new device in the market selling around 19 million units in 2010 to more than 150 million units in four years time. This is still minimal compared to the Smartphone market, but is something to already keep in mind.
Even though equivalents have been released by others manufactures like Motorola, Samsung, RIM the Ipad is expected to be dominant in the tablet market (Patel, 2010). Gartner (2011) estimates that Apple’s iOS will account for 69 percent in 2011 and still will have a dominant positioning 2015 where Apple’s market share will account for about 47 percent of the market. By then the rise of Android is inevitable, since consumers tend towards adapting the same platform they already have for their Smartphone (Milanesi, 2011). The Ipad will, just like Apple in the beginning of the Smartphone market be dominant, but be overtaken later due to the high number of products available.
Some of the most innovative projects are happening on these Tablet platforms. The only problem is that the market penetration is very limited at this time and will stay low until after 2015. Most apps could quite easily adapt to Tablets, therefore adaption to the Ipad should be considered at first. If this is highly successful it could be considered to be made available on Android Tablets. Branded apps aimed at the Tablet format alone seem to have such a limited amount of user it can reach that this is, for now, not a preferred strategy.
Other app-enabled devices
So, there are Smartphones, Tablets but there are more devices yet to come. All of these platforms will see interesting and will become interconnected by their application-based structure. All these markets have significant upcoming opportunities with growth estimated to skyrocket. By now apps have become that popular that apple is offering them for their Mac computers (Apple, 2011). Also for the Windows PC experiments have been started by Google in their Chrome browser and by the Mozilla foundation as an extension of their Firefox browser. These projects are likely to become available on other browser available devices.
Another upcoming app environment is for television. This technique is called smart Internet-connected televisions [iTV]. Google has made their Android platform available to television and media players, and Apple has already launched a basic iTV. The first true iTV products where launched by Sony in October 2010 when their first Google TV product line of televisions and Blu-ray players became available. The functions on iTVs now are still limited, but this technology promises to evolve in the future to offer an experience similar to current Smartphones and Tablets. On the iTV platform it is still difficult to say how it will develop in these very early stages but, Google TV has already gained support from production most studios (Harnick, 2010) and TV manufacturers (King, Douglas, & Cliff, 2010).
Besides television there are other more futuristic possibilities of integration that we will see in the near future. Think of products like refrigerators, cars that are becoming more computerized and will gain the ability to run apps as well. The key factor that is making these developments interesting is that these app-enabled devices are being built on the same OS as the existing Smartphones e.g. In my orientation of this report I’ve called this the portal that is used to be present in all parts of our lives. Apple is using their privately developed iOS and Sony for instance is using the universal and open source code of Google’s android. This creates the opportunity for apps to grow over all these new devices. This being said, keep in mind that these platforms might require different app strategies due to the fact that they are used under different circumstances and have different processing power capabilities.
If you want to read my full report on “how to enhance brand via mobile apps” please go here. While editing this part of my report I’ve allready come across some parts that have changed the “digitalplatform-gam” completely. An example of this is Google’s takeover of Motorola or HP forfeiting their whole tablet division. Other analysis will be posted here on the site. Hope this article was useful to somebody and any comments are welcome :).