At long last, small NookColor improvement

Barnes & Noble released their NookColor 1.2 update on Monday, updating the 7" tablet to Froyo (Android 2.2) and providing a limited app store.

After playing with it for 24 hours, I can say there are two major pieces of good news. One is Flash: I tried it with Google Voice, and was able to listen to my voicemail messages. (Obviously I couldn’t make calls from my NookColor because it lacks a microphone).

The other is a decent email client. It auto-configured for my two Gmail accounts, and seems allow for arbitrary POP and IMAP servers. (One quibble: no "Reply-To" field, important in many organizations.)

A third small but useful change — the Quick Settings popup includes the screen brightness, something I asked for last December.

However, the long overdue app store is a bust. The contact application is still useless: as before, it only picks up email addresses from Gmail, not the phone number, street address, or any other contact information.

And there’s still no calendar app. The 7" screen of my NookColor is larger than my last physical organizer in the 1990s — it would be a great way to schedule and view meetings, again synchronized to Gmail, Exchange or whatever.

Android phones have a decent built-in calendar and a choice of dozens of calendar apps, but the NookColor still has no built-in calendar. The only one in the app store is the Fliq Calendar — criipleware for a paid side-loading application that doesn’t synchronize to the net — an odd choice for a device that’s always on Wi-Fi and rarely on USB.

And that’s the rub: there are only 139 (there were 140 Tuesday night) Nook Apps™ for the NookColor vs. an estimated 150,000 for Android overall. There are only 15 free apps, versus 100,000+ for the iPhone and tens of thousands for the iPad. A dollar for a clock app?

Maybe there’s just a lag in qualifying. B&N is soliciting new developers to join their “qualified” developer program, so perhaps in a few months we’ll have a broader range of applications.

For now, what we have is a tablet that is exactly what was released last November — plus the long-promised Flash.

Still, this is amazing: 15 years after Palm Pilot, we have a 7" PDA that has no calendar and no usable address book. What gives?

Nook needs that long overdue app store

Brett Arends wrote a glowing review Wednesday in the WSJ of his nookColor and why it’s a better bargain than the iPad 1 or iPad 2. The main difference between his experience and mine is that he hacked his to be a fully functioning Android tablet:

I downloaded a very simple, perfectly legal software fix from the Internet that turned it into a fully functioning tablet running on Google's Android platform. The fix, known as a "rooting," unlocks Barnes & Noble's proprietary overlay. The instructions came via Ars Technica, a reputable site devoted to technology, and were pretty easy to follow.

I wasn't really expecting it to work. I tried it as an experiment. But the results were remarkable.

The Nook Color, which was designed mainly for reading books and magazines, is about half the size of an iPad or a Xoom. It weighs about 30% less. It runs on WiFi, but not 3G. It has an absolutely superb screen. And, once you've unlocked the software, it runs many Android applications, from email to news readers TweetDeck to, yes, Angry Birds.

He argues that it should stop stalling on its plans to make available its own app store:

A company spokeswoman would only say yesterday that it is still "in the works."

Huh? Time is not this company's friend. It should be seizing the moment while it can. Barnes & Noble stock, which was north of $40 five years ago, closed Tuesday at $11.67, a 14-year low. Not even the travails of arch-rival Borders Group, which has filed for Chapter 11 bankruptcy protection and is closing many of its stores, is helping.

I also have long thought B&N could grab the low-end tablet market if it wanted to. In particular, the Kindle is a locked platform while (in principle) the Android-based nook and nookColor are an open one, available for third party development.

The problem is that B&N, like Amazon, wants to make its money from content. Having people pay $250 or $200 for the tablet and never buying a book or magazine is exactly like hackers buying an Xbox or Xbox 360 and converting it to a Linux box without ever buying a game.

But B&N has a pretty clear choice: either get people to carry around its tablet, or proliferate its reader app and forget about selling tablets. I am much less enthusiastic about the nookColor than when I bought it, because without the basic apps that you would find in a 1995 Palm Pilot — like a synchronized address book, a calendar and a simple note-taking app — I still have to carry a laptop or smartphone to every place that I take my nook. (Or I can just carry the laptop and leave the nook at home).

My guess is that by 2015 both B&N and Amazon will be out of the tablet business, or at best will be private labeling someone else’s high volume tablet (like HTC or Samsung) the way Sears does for washers or refrigerators. So the next 2-3 years could be used to build loyalty to BN.com e-downloads (assuming it fixes its store) and perhaps further leverage the brick & mortar stores for supporting electronic content platforms.

Update Thursday 8:30am:
Arends was interviewed on the WSJ “Digits” video blog, reiterating the points of his column. Two points I’d argue with.

First, while he praised the screen as being better than other low-end tablets, he (or his host) concluded it wasn’t suitable for watching “Digits” on. In fact, that’s how I watched the interview: the nookColor does a great job of showing the video, even without Flash. However, the nookColor (or the WSJ web page) take over the screen and there’s no way to navigate back to the original page or to the next video. (I’m surprised he would say anything about this without trying it first.)

Second, while I long agreed with his general point about commodity tablets, he clearly underestimated the B&N achievement: 

Barnes and Noble is hardly a cutting edge technology firm. They have managed to come out with a pretty good Android tablet — from a standing start, I think within a year they set up the whole nook thing. If they can do it, anybody can.

This is like saying that because Google has created a mobile phone OS that competes with Apple, anyone can. That’s certainly not true: so far Nokia, RIM and the Koreans have failed, and it remains to be seen whether Microsoft will either.

B&N put together a crack team of Silicon Valley veterans in Palo Alto to make an easy-to-use mobile device. I don’t see the Asian commodity producers doing this, which means that (as with many other products over the last 40 years) most will have solid inexpensive hardware and incomprehensibly bad software. I think people will be much more tolerant of incoherent software in their TV or DVD player than in a handheld computer.

Google vs. Apple distribution price war

The first year of the tablet wars went entirely to Apple. Apple has the market share, installed base, the mindshare and the superior product. Most projections have Apple crushing the competition again this year, albeit by a lesser margin.

However, Apple needs to take seriously Google’s latest salvo in the tablet content distribution fight. If Apple hopes to keep the iPad the dominant tablet — in a way the iPhone and Macintosh never were and never could be — it needs to take this attack seriously.

Apple won many fans among software developers for its convenient app store in exchange for a 30% commission. But its proposal to extend commission to newspaper, magazine and all other subscriptions has been highly unpopular, and some have questioned whether this is really tenable in the long haul.

Then on Wednesday, Google said it would only take a 10% cut for its One Pass content store, a direct attack on Apple’s pricing model. (Isn’t competition great?) Although online distribution is a low value-added commodity — with oliogopolistic competition — I think Google can hold a 10% margin, because both Apple nor Amazon tend to prefer margins better than that.

If most of the online tablet media goes through such services, then Apple can make plenty of money on a 10% margin. The problem is protecting its margin for other App Store products. Already, publishers and developers have been trying to bypass paying Apple — using Apple to distribute free apps and trying to charge outside the app. Apple closing the loophole is fair — it deserves some compensation for its distribution — but its plan to keep 30% is not.

So will apps be 30% and content be 10%? Will everything be something in between? Will Apple be in denial about the price war until its share drops below 50%?

Apple already seems to have lost the book distribution fight. iBooks was stillborn, and I can’t see how it will ever catch Barnes & Noble, let alone Amazon or Google. Are magazines and newspapers the same distribution channel as books? I don’t think anyone can say for sure.

Apple was reasonably aggressive in responding to Amazon’s efforts to abolish DRM on music downloads, so I expect we’ll see their answer on or before the rollout of the iPhone 5 this summer. Will they protect their margins on the assumption they can hold the market another year, or will they respond aggressively to protect every bit of market share? That I can’t predict.

When closed is better than open

The iPhone and Android are fighting for smartphone leadership with many similar strategies: touch screens, a good browser, an app store with thousands of apps.

Overall, however, Android is seen as more open. This is normally assumed to be a good thing, but two recent incidents suggest such openness has some disadvantages.

One of the long-remarked differences is that that Apple is selective (some say arbitrary) about which apps it allows in the Apps Store, whereas Google is pretty laissez-faire about what it allows in Android Market. But — as in many things involved complex technical or business systems — it’s not that simple.

Finally Google realized that some people were abusing its app store and decided to throw some out. AppBrain reported Monday that one app developer alone had 4,000 apps deleted from Android Market. On Wednesday, AndroidGuys reported that one of impacted developers vowed to be back, using multiple fake logon accounts. (H/T: Phandroid).

Why would one firm publish 4,000 apps? Reportedly the developer said:

We didn't want to have to do that. But the Android Market doesn't have many people who like to pay for apps. So how is a developer to live? Just off of ad revenue?

This is interesting on so many levels. Ad-supported free software works great for Google and is the norm on the Internet, but (if this claim can be believed) isn’t working so well for app developers.

As in desktop and server Linux, apparently Android users expect free beer. Excessive openness by Android — like free access to open SMTP relays — makes it possible for “spammers” to both gain access and work around limitations in a way that a physical market would not allow.

In telling the smartphone app story, we think about positive externalities: more apps brings more users brings more apps. We don’t think about negative externalities (like traffic jams or overcrowding): more users brings more abusive app vendors brings lower average app quality.

Finally, this problem raises the question of what the count of Google apps means if so many of them are bogus. If a real live human being is screening each app, then both the count and the quality are meaningful.

I figure Google will solve this eventually, probably with an algorithm. The algorithm will count the number of apps, the rate of app submission, the similarity of apps, perhaps their complexity. Just like the credit card companies, this will trigger an exception report that has to be monitored by a real live human being.

The one that seems more troubling — and harder to fix — is the openness to customization by manufacturers that preload craplets on the phone. Wired lists examples of Samsung (with a T-Mobile phone) and HTC (with the Sprint Evo). The HTC rep was blunt:

“It’s different from phone to phone and operator to operator,” says Keith Nowak, spokesman for HTC. “But in general, the apps are put there to meet the operator’s business and revenue needs.”

What’s particularly annoying to users is that this bloatware cannot be removed by users. To me, this is inconceivable: I can delete apps from my Mac and every Palm OS phone I’ve ever owned.

Alas, this is inherent in the Android business model. The iPhone put Apple in the driver’s seat with carriers, but it was a temporary aberration. The whole point of Android was to commoditize smartphone software, and with it reduce barriers to entry (and thus prices) for smartphones. Commodity phones are the dream of Vodafone and the rest of the world’s carriers, restoring (in their minds) them back to their rightful dominance in dictating to vendors and users alike.

Big bad Apple controls what apps are allowed in its app store. Big bad Apple tells operators what apps it will provide pre-installed. So the iPhone is less open, but (at least as long as Steve Jobs is there) that proprietary control is used to provide a better user experience.

iPhone beats Android 250:1

Matt Hall on his Larva Labs blog laments lousy sales on Android Market, both for his apps and those by other companies. For one application, the iPhone App Store is outselling Android Market 250:1, while (as a commenter notes) the iPhone installed base advantage is only 15:1.

The conclusions are based on AdMob data, which notes that iPhone/iPodTouch owners are 2x as likely to buy paid apps as Android users. (That would only suggest a 30x discrepancy between the two platforms).

Hall laments several aspects of the Android Market shopping experience. It’s not clear whether these decisions are just implementation errors that are easily fixed, or systematic choices, perhaps (as Hall suggests) reflecting a bias towards free apps.

The latter point I don‘t quite follow: Google is making money off of Android (through increased use of its ad-supported online services), so what’s wrong with the software developers making money? Google has already so commoditized mobile phone software — and Apple has established a standard $1 price point for most paid apps — that smartphone app developers already face a considerable challenge in monetizing their creative efforts. Why force a zero price rather than a near-zero price?

Apple's encouraging semi-openness

I find really encouraging the big iPhone App Store news this week, i.e. Apple’s decision to allow the rival Spotify music service. I think it marks a crucial turning point in the degree of proprietary control that Apple will exert over the iPhone/iPod/iTunes ecosystem.

Apple has been playing an odd game for 30 years. Its quandary over proprietary control vs. the need for third party complements sends mixed messages to third party suppliers. Sometimes it wants 3rd parties, sometimes it begrudgingly allows them to compete, and sometimes it tries to stomp out third party competition for its end-to-end control of a complete system. (IBM in the 1970s, DEC in the 1980s and Microsoft in the 1990s were even more hostile to certain third party competition).

Of course, I have a very biased perspective, since I spent 17 years making money by allowing third party printers to connect to Apple’s Mac OS computers. For the first decade, our clients competed with Apple’s hardware (until they discontinued their printers in 1998). At times, Apple worked against its interests as a platform owner to hinder competition and protect its printer product line.

Maybe Apple’s latest App Store move is under the gun of an FCC threat (including an empty threat of litigation). Still, I find it encouraging.

Both as a product strategy, and as a nod to government competition policy, this points to a much better Apple strategy, defined in two parts:

1. Make a great end-to-end solution; but
2. Allow point replacement at any point within the modular design.

This sort of modularity and consumer choice is consistent with many technologies of the past decades. My first stereo was a Kenwood receiver, Advent speakers and a Teac tape recorder. Later on I used a Harmon-Kardon tape recorder with the Sansui amplifier — and did not have to use a Sansui tape recorder or a HK amp. Although I own some Yamaha speakers, in general the makers of the best speakers didn’t make electronics.

Of course, such open modularity is the DNA of the Internet: What would a Mac be if it only allowed use of Mac.com email, or a Windows machine if it only supported hotmail and MSN? Shouldn’t Android phones allow use of SaaS sites not owned by the Monster of Mountain View? Or if Outlook could only send email to other Outlook clients?

Apple’s point products are pretty darn good, so it shouldn’t be afraid of competing with its ISVs and IHVs. If it is afraid — and uses technical means to block third party competition — it’s no better than 1990s Microsoft, back in the Bill Gates days when it was crushing 1-2-3, WordPerfect, and DR-DOS.†

I don’t think Apple is done opening up, and I have no illusions that it’s going to end up as open as Mozilla or Eclipse. Still, it’s a great start.

† Charles Ferguson makes a convincing argument that Netscape was at least partly culpable for its own fate.

App stores: mega-cathedral and small bazaar

Since I'm not a market moving-pundit, I won’t attempt to provide the definitive analysis of Friday’s filings by Apple, AT&T and Google in the Google Voice/iPhone App Store controversy. Business Week and the NYT have less impassioned reports than most of the blogosphere.

But stepping back a few feet (say to the 10,000' perspective), it seems as though — to use the Eric Raymond over-stylized typology† — the Android Market is a nascent bazaar and iPhone App Store is a much bigger, more popular and more carefully controlled cathedral. This difference could end up being as (or more) radical than the open source differences claimed by ESR more than a decade ago.

While Google (like Sun 15 years ago) often claims to be “open,” the company that wants the entire universe available as a freely-searchable text file has not released their reply directly (e.g. on the Google public policy blog). A purported version of the redacted Aug. 21 Google filing includes this answer to an FCC series of questions:

Please provide a description of the standards for considering and approving applications with respect to Google’s Android platform. …

The Android market is an open distribution channel for developers seeking to get their Android applications into the hands of users. As such, there is no pre-approval process conducted by Google or any third-party before applications submitted by a registered developer … are available for download by users.
…
Once an application has been uploaded by the developer … the Android Market community is relied upon to flag applications that do not abide by our policies.
…
An application could be removed from the Android Market if it is found to violate Google’s Developer Distribution Agreement … or Google’s Content Policies. … Approximately 1 percent of all applications that have been uploaded to Android Market and made available to customers subsequently have been taken down by Google. The majority of these applications have been removed after being flagged by users for containing impermissible adult content, or in response to valid Digital Millennium Copyright Act (“DMCA”) notices from rights-holders.

In other words, as with everything else it wants to scale, Google doesn’t want to pay an incremental penny of labor, but instead relies on free user labor to do almost all of the app evaluations.

Meanwhile, this is the Apple description of the comparable process.

What other applications have been rejected for use on the iPhone and for what reasons? …

In a little more than a year, the App Store has grown to become the world’s largest wireless applications store, with over 65,000 applications. We’ve rejected applications for a variety of reasons. Most rejections are based on the application containing quality issues or software bugs, while other rejections involve protecting consumer privacy, safeguarding children from inappropriate content, and avoiding applications that degrade the core experience of the iPhone. Given the volume and variety of technical issues, most of the review process is consumed with quality issues and software bugs, and providing feedback to developers so they can fix applications. Applications that are fixed and resubmitted are approved.

The following is a list of representative applications that have been rejected as originally submitted and their current status:

• Twittelator, by Stone Design Corp., was initially rejected because it crashed during loading, but the developer subsequently fixed the application and it has been approved;
• iLoveWiFi!, by iCloseBy LLC, was rejected because it used undocumented application protocols (it has not been resubmitted as of the date of this letter);
• SlingPlayer Mobile, by Sling Media, was initially rejected because redirecting a TV signal to an iPhone using AT&T’s cellular network is prohibited by AT&T’s customer Terms of Service, but the developer subsequently fixed the application to use WiFi only and it has been approved; and
• Lingerie Fantasy Video (Lite), by On The Go Girls, LLC, was initially rejected because it displayed nudity and explicit sexual content, but the developer subsequently fixed the application and it has been approved with the use of a 17+ age rating.

I found the candor here to be refreshing for Apple, particularly in explaining the notorious SlingPlayer case.

I find troubling the precedent about “undocumented” APIs, since this seems to be a business decision rather than a technical or security one. There was lots of Mac software that could not have shipped without using undocumented backdoors — we certainly depended on it, as did many other system software companies. Yes, the iPhone architecture is newer and better, but inherently there will be system APIs that are useful to certain utilities while not published to the average application. Microsoft faced potential antitrust trouble for allowing its own apps but not competing apps to use undocumented APIs, although the iPhone is unlikely to be subject to antitrust action because it lacks the Windows market share.

Is Apple the most onerous gatekeeper for app developers? Hardly. US carriers are the worst, which approve less than 50% and often take 6 months or more. The Apple filing implies its app store accepts 80% (or 95%) of applications on first try, and the vast majority in two weeks.

Will other app stores go for Android’s wide-open, anything-goes approach — equivalent to Guy Kawasaki’s “ask forgiveness, not permission”? Or will they still go for a a manual, discretionary approval process? Right now the BlackBerry App World and Nokia Ovi Store seem to differ from the iPhone (if at all) only in degree rather than a core idea of control.

If anyone were going to go for the open source, self-policing community, it should be the open source stewards at the Symbian Foundation. However, right now they seem to be planning an even more controlled model than Apple or RIM (perhaps only temporarily). Also, if the Symbian Horizon is only available to users through other portals (such as Ovi or carriers), then developers may enjoy two shots at rejection rather than the one that Apple or RIM offer.

Even if discretionary policing is the norm for almost any distribution channel, one zinger in the Google response hints at the potential monopsony abuse by Apple:

…it is important to note that the Android Market is not the exclusive method for distribution of Android applications. Developers are free to make their applications available through alternative channels instead of, or in addition to, the Android Market, and users are free to install Android applications from any source they choose.

Will it be OK for any ecosystem member to claim a monopoly on distribution channels for their platform or customers? (This has been the norm, for example, with Japanese keitai operators.) If the monopoly is examined, is it justified by security or quality concerns, or merely a desire to capture all the distribution margin for third party applications?

As an open source project, Android is open in only one dimension (IP) of the three dimensions of openness. However, as a platform, their model for distributing third party applications is potentially more radical in its conception (and impact) than anything Apple has done thus far with either the iPod or iPhone.


† The Linux “bazaar” is much more hierarchical than the ESR typology claims, and the BSD “cathedral” is not as hierarchical as claimed.

The next iPod Touch

When it is announced next month, the iPod Touch 3.0 may very well be lost in the tidal wave of interest in the new Apple tablet. If rumors are correct, the iTablet (iPad) is a 10" touch-screen tablet that (as I expected) is based on the iPhone OS — and (more questionably) is being released this fall.

With or without an iPad, next month’s introduction of the new iPod Touch will be an important incremental product for Apple in spreading its platform more broadly. By my estimate, Apple’s iPhone OS has been shipping 60/40 between iPhone models and iPT models.

I’m expecting to buy the iPT 3.0. Why? The main reason is to get a Wi-Fi/Skype (and eventually Google Voice) communications device without the monthly AT&T contract. However, it will also allow access to the wide range of iPhone apps, allow a chance to do iPhone development, provide a handy-dandy PDA and (as a side benefit) replace my long-dead iPod.

What will be in it? I have no inside information, but many of the details are easy to predict.

From the previous iPhone/iPT pairings, the software story is obvious. (Or as we like to say in social science: inductively proved — “1, 2, … n”). The new iPod Touch will include the iPhone 3.1 software, which provides better copy/paste, better email and other tweaks. Most important for iPhone Lite users, the 3.x OS offers better Wi-Fi that will make the iPT a more practical substitute for a smartphone, when carried between home, work and other sources of handy (or free) Wi-Fi hotspots.

What about hardware features? This is educated guesswork:

• Faster CPU? Yes
• Stereo Bluetooth? Probably
• Voice control? Maybe
• Compass? Probably not
• GPS? No
• Camera? A month ago I would have said no way but rumors are that it will.

When will the iPT 3.0 be announced? That part is much clearer: September 9, the day after the old iPT is discontinued. As the Apple ad says:

Buy a Mac for college, and get a free iPod touch.
If you’re a student or a faculty or staff member, purchase an Apple computer and a qualifying iPod from May 27, 2009, through September 8, 2009 and receive a rebate up to $229.

However, like all iPhone (and iPT) users, the big downside will be that my app choices are at the mercy of Apple and its seemingly arbitrary application rejection process.

For example, if the iPT is my main holder of my music library, I’d like to play the music directly from the PDA rather than having to use my laptop or desktop. As it turns out, I own an AirPort Express, Apple’s low-end base station that supports AirTunes, streaming audio to external speakers. Apple allows streaming to AirTunes from a Mac or Windows running iTunes, but nothing else.

However, Rogue Amoeba (as have others) has done a good job of reverse-engineering how to stream arbitrary audio to AirTunes, and sell their Airfoil product is available for Max OS X and Windows. But since the only way to distribute this to iPT users is through the iPhone App Store — where Apple has made controversial decisions to ban key third party apps — I can’t see Apple ever allowing such an app. (Perhaps Apple will sometimes add this feature, but why do we have to wait for Apple?)

The other interesting thing is that the main thing holding back adoption of the iPhone OS jailbreak is the ATT threat of shutting down or otherwise retaliating against these phones. None of this applies to iPT owners, so the incentives for trying jailbreak is much higher for these owners. Would this be enough to create a market for jailbreak-only apps for iPT users?

Symbian App Warehouse is now Symbian Horizon

In May, Symbian talked about plans to put together a wholesale app store for all its phones and operators. At the time, I suggested that the most descriptive name would be to call it “Symbian App Warehouse” but today it was announced as Symbian Horizon.

Perhaps for Brits the confusion with retailer Carphone Warehouse® (division of Best Buy) is too great, or perhaps it’s part of the forced silliness of Symbian Foundation as part of its efforts to act anti-corporate. Or perhaps they want a unique name (Horizon) and App Store (iPhone), App World (BlackBerry), Market (Android) and Marketplace (Windows Mobile) were already taken.

They’re still promising to do it free (rather than charge a nominal fee), which raises serious questions about how well a non-profit foundation can afford to scale up the evaluation and publishing process.

One way they can keep costs down is to not publish everything submitted. Rather than try to match Apple’s record of 65,000 apps in one year, Symbian sounds like it will be more selective.

Horizon is a publisher program similar to a book publisher or record label. Developers can submit their app or even an idea for an app that they will build. Symbian will select the best apps and help take them to market. We will sign the app, publish it to the App Stores and manage the transactions, all at no cost to the developers. It is a ‘code once, publish to many’ syndication service.

This approach will require more screening and will be subject to complaints about fairness, but (unlike the current Apple organization) the best apps won’t be lost in the clutter.

The devil is in the details, I think it’s a clever idea. Symbian Horizon will provide a common platform for developers (as Apple and Google and others do) while not trying to compete with or bypass the operator and handset maker stores. (Control is a big deal to Nokia, Vodafone, Orange and several other firms).

Quote without comment

Financial Times, June 7:

In the long run, the most important thing to come out of the Worldwide Developers Conference will probably not be the latest phones. It will be the revisions to iPhone software and the App Store, which aim to widen Apple’s lead.

A big innovation is that the store will start allowing developers to collect money not just when a user buys and downloads an application, but through follow-on transactions or subscriptions.

OpenIT Strategies, June 9:

Apple has average hardware, superior ease of use on software, and a distribution and monetization system unmatched in North America or Europe.

Forbes, 9am PDT June 18:

The real breakthrough is what the phone's software will unlock for the developers creating third-party applications for the device. ...

Start with the App Store, which is now packed with more than 50,000 applications. Now add the ability for software developers to sell subscriptions that deliver premium content or additional levels for a game. "Basically when we look at the iPhone we don't see a mobile phone, we see a computing platform," says Shervin Pishevar, chief executive of Social Gaming Network (SGN).

iPhone 2.5, App Store 2.0

Monday brought the announcement (sans Steve Jobs) of the curiously named “iPhone 3G S.” I guess the name is intended to suggest this is merely an incremental improvement on the iPhone 3G (which remains in the product family); if not, it’s an example of the foolishness of Apple’s rabidly minimalist naming strategy as when “iPod” could mean “iPod 5th Generation late 2006” or “iPod (dock connector)” or “iPod (scroll wheel)”.

The phone adds a number of features available in some (if not all) competing phones: video recording, a compass, and (eventually) MMS support. The camera goes from 2.0mp to 3.0mp, Faster performance and supposedly better battery life. Even with voice command and supposedly 2x better performance, it still seems like a slightly enhanced iPhone 3G, not the radical leap ahead of rivals that the 1.0 iPhone brought back in 2007.

Of course, one of the problems that Apple has that it has two models — this year’s and last year’s, both mid-market smartphones — rather than a range of products like RIM or Nokia. Take, for example, the camera. The iPhone camera goes from 2.0mp to 3.0mp — roughly equivalent to a Blackberry Curve (but without the zoom). but camera on the high-end Nokia N97 is 5.0mp, as is the more affordable Nokia 6220. (Samsung is pushing the envelope even further).

The big news is the enhancement to the business model. The FT captured what is likely to be Apple’s main push this year, with the next iteration of the App Store:

A big innovation is that the store will start allowing developers to collect money not just when a user buys and downloads an application, but through follow-on transactions or subscriptions. Apple is likely to show off some of the most compelling repeat-purchase offerings at the conference.

The change dramatically increases the potential pay day for developers, provides Apple with an additional revenue stream from the percentage it takes on app sales, and gives users more choice – and more reasons to stick with the iPhone instead of switching to the me-too hardware reaching the marketplace.

Some of the biggest beneficiaries among developers, at least at first, will be game publishers. Six-year-old Gameloft already has dozens of titles for the iPhone and iPod touch, including Asphalt 4, a racing game that allows players to use the device as a steering wheel.

In Asphalt 5, players would be able to pay more for extra cars and different tracks, and suggest their friends do the same, said Michel Guillemot, Gameloft chief executive.

In other words, Apple has average hardware, superior ease of use on software, and a distribution and monetization system unmatched in North America or Europe. (Of course, NTT DoCoMo had a comparable monetization system with i-mode almost a decade ago). The question is whether these advantages will be enough to hold off the proliferation of models by Android and other competitors.

Pre is better -- so what?

Palm’s last chance for survival is going on sale Saturday. Operator Sprint has almost as as much at stake. It claims an exclusive on the Palm Pre through the end of the year, despite Verizon’s hope to offer it real soon now.

A number of sites (ZDNet, PC World, Barron’s) are summarizing the Pre reviews, which range between glowing and fawning. Take for example this AP review

Move over, iPhone. You've had two years on top of the smart phone world. Now there's a touch-screen phone with better software: the Palm Pre.

In a remarkable achievement, Palm Inc., a company that was something of a has-been, has come up with a phone operating system that is more powerful, elegant and user-friendly. …

So webOS makes the iPhone look clunky, which is stunning in itself. It also thoroughly shows up Microsoft Corp.'s Windows Mobile. That operating system has had multitasking for years, but few users have appreciated that. Rather, Windows Mobile has been blamed for making phones clumsy and slow. Now, webOS comes along and does multitasking right.

I am more that a little skeptical. Reporters like the underdog, both for personal biases and also because it makes for a more interesting “horse race.” So just because they say the Pre is better doesn’t mean that it is. (In fact, the only claim is that the software is better, not that the hardware is better.)

However, suppose the Pre is better: so what? We figured out decades ago that the aphorism “build a better mousetrap and the world will beat a path to your door” is an engineer’s self-dillusion.

The reality is that better is not the only reason people buy phones. There’s also carrier switching costs, status, price, form factor/convenience, and now the availability of third-party complements.

Palm is trying to leverage its hacked iTunes download capabilities
to equalize one difference — the iTunes store. (Apparently Apple is trying to break that effort via the iTunes 8.2 update).

Even with iTunes songs, Palm still needs an app store. Or rather, even with an app store, it needs applications — which means it needs to seed developers with tools. And then developers need to be convinced they should develop (unless they decide there’s an inherent advantage in coming early to a tiny but hopefully growing market).

So the odds are long. The Treo, once dominant in the US, has been a stagnant niche product over the past 3-4 years.

The most optimistic thought would be that no one thought Apple could enter the market late and challenge Nokia and Research in Motion. Clearly Apple succeeded and continues to have momentum. It’s possible that Palm could succeed too, but my hunch is that Apple, RIM and Palm are splitting the same market — which means that Palm will be competing against two very entrenched competitors.

Sprint is the low cost provider among the US Big Four operators. Perhaps Sprint and Palm can bring smartphone and 3G services to the masses. One can only hope.

Ovi store fizzles

Catching up on blogging.

On Tuesday, Nokia launched its Ovi Store to sell applications for S60 handsets. The store has direct operator billing in Europe, Russia, Singapore and Australia. Support for Ovi in the US (via AT&T) is due later this year.

Apparently the website was sluggish and hard to navigate (according to Symbian Watch and TechCrunch). The Register in the UK has been particularly merciless in pillorying the European cellphone giant. Writing on Wednesday:

Ovi is Nokia's answer to Apple's iTunes, offering a broader range of content to a broader range of handsets - or at least it would if it could stay up for more than five minutes and operated at a sensible speed when it was available

On Friday, longtime Psion and Symbian fan Andrew Orlowski wrote:

It must be frustrating to sketch out a long-term technology roadmap in great depth, and see it come to fruition... only to goof on your own execution. But to do so repeatedly - as Nokia has - points to something seriously wrong.
…
The launch was "an utter disaster" according to one blogger, or in a more measured assessment (from Ewan at All About Symbian), "rushed, early and not fit for public consumption". Nokia accepts second-best from Ovi, which apart from Maps is second-best in every category, the company all but admitted recently. But the Ovi application store deserves a Z-grade.

It's now clear that it was simply too ambitious to roll out a store to so many territories and in particular, to so many device categories, in one Big Bang. The number of devices supported goes back six years - encompassing eight versions of Series 40 and three versions of S60.

Nokia is a company that sells more phones than anyone, manages high volume logistics, works with nearly every carrier in the world, designs complex infrastructure and fancies itself a services company rather than a mere maker of handsets. It is a complex operation, with 125,000 employees and revenues of $71 billion.

You would think that it would be a top priority to roll out its main consumer portal against rivals like RIM, Apple, Microsoft and Google. Shouldn’t a company with this sort of scale know whether or not its portal is going to work before it launches?

These sort of systems are hard to build. Perhaps Nokia should take a hint from Google and release everything as “beta” for a few years so that it can disclaim any responsibility for reliability or responsiveness.

App stores: early or not at all?

In the past 10 months, the Apple app store has been a tremendous success, helping to fuel the success of the iPhone. Now all the other platforms owners (Google, Microsoft, RIM) and operators are planning their own app stores.

There are some dubious assumptions that both app store owners and app developers are making about app stores.

• Early apps were successful so we can be too.
• Early apps were successful but it’s too late for us.
• App stores made Apple a success and will make our platform a success too
• All we need is the “killer app” to make our platform a smash hit.

The answer is: Your mileage will vary.

All this is a preface to a discussion Wednesday in San Mateo by two Symbian Foundation executives — “catalyst” David Wood and interim marketing VP Ted Shelton — on their own planned app store.

The app store plan for Apple is pretty simple: Apple makes the phone, Apple makes the platform, and Apple strong-armed the carriers into providing (on-deck) access to App Store apps on any iPhone. For firms that license their OS (Google, Microsoft, Symbian) the story is quite a bit messier, since both the phone maker and the operator may want to get involved.

At the Nokia Developer Conference last month, Symbian Foundation head Lee Williams announced Symbian will be developing its own app store. It appears most analysts in the US missed the story, to the point that some (like my friend Matt Asay) are growing impatient.

Shelton and Wood talked about the app store Wednesday night to a small grouping of developers and analysts. The name is not settled, but the name I thought fit best was “Symbian App Warehouse.” Rather than sell to end users, they will certify applications and distribute them to all manner of application stores (e.g. Nokia Ovi) run by handset vendors, operators. The claim was that it would be without a fee, but I (like others) suspect in the long run they will need a minimal fee to cover operating costs; Mike Mace suggested 5-6%.

Symbian is shopping for lead ISVs: 5 developers in July, 100 in October for the 2009 Symbian Exchange and Exposition (“Come and SEE the future of mobile.”) The idea is to scale slowly to work out some of the kinks — not to impose some sort of limit as to the number of applications.

So the offer from Symbian was simple: do you want to be app # 45,678 at the Apple store or one of the first five at the Symbian store? As Shelton said, “the first movers have a greater opportunity to make money because there is a lower signal to noise ratio.” Palm has been making similar claims to prospective Pre developers (but with 0% share for its new platform vs. nearly 50% for Symbian).

Shelton had a point: ceteris paribus, later is worse. When I launched my Mac software company in July 1987 I had a far harder time getting carried by the channel and getting noticed than had Silicon Beach Software 3 years earlier. (I also had less money and less compelling applications). Of course, big companies with big budgets are better equipped to enter late than small self-funded (perhaps garage-dwelling) startups.

The iPhone App Store with its high visibility (and high download rate) would be very attractive if I had a narrow niche program, such as a virtual bass guitar. Unfortunately, PocketGuitar (99¢) already does that, and there are also other electronic guitars, several pianos, drum sets and even simulated sax, flute and bugle (blow on the mike). This is among more than 1300 applications listed under the “music” category.

So the Apple app market is heavily fragmented, and with a free online course being viewed by 100,000 developers, it will only get worse. Expectations for the Android Market mean that it is likely to head in the same direction. What should a developer do?

In the long run, developers will enter with one platform and then (if their app is hot) port to everything in sight; as with videogames, a platform will have only a temporary exclusive. The web-based apps (Facebook, MySpace, Google maps etc.) are already heading in this direction. A handful of companies (like Pangea Software on the iPhone) will figure out a way to come up with a string of hits.

In the short run, young developers need an open field market entry strategy: go where the competitors ain’t. Videogame developers have done this for more than a decade, just as companies choose geographic markets that are most promising. Once all the app stores have their initial launch ISVs, it will be up to developers to figure out a way to stand out of the clutter.

iPhone success: browsers, then apps

Last month, I visited the Quello Center for Telecommunication Management & Law at Michigan State University. I was invited to speak by center co-director Steven Wildman, who I met last summer while presenting at a USC-sponsored telecommunications conference.

We debated what I should present. In the end, I chose to present iPhone paper I’ve been working on with Mike Mace, because it’s almost done and the visit would act as a forcing function.

It was a great choice: we had 35 people in the room — a few faculty, but mostly students. I was told was the most ever for a Friday lunchtime talk (but perhaps because some students were behind writing up seminar reports.)

I’ve posted my slides at SlideShare.net — my first posting there ever. (I joined the site after I saw speakers use it at the O’Reilly Web 2.0 conference in March.)

Since readers can see the slides, let me just summarize the argument in short form. Most people think of the iPhone as a success because of the app store. However, the app store was part of iPhone 2.0, and the success of iPhone 1.0 was based on a simple core idea: deliver the “real Internet.”

There are plenty of anecdotes to show that the iPhone succeeded in changing how people think about mobile browsing. Clearly iPhone users browse more than owners of other smartphones (at least in North America), as Google discovered in December 2007, and as AT&T is finding as it seeks to keep “all you can eat” from destroying its 3G network capacity. We are trying to come up with more systematic data.

I gave the talk the day after Apple reported that it had achieved 1 billion downloads at the app store. For my talk, I tried to briefly classify the most popular applications, but I was tentative because it not clear whether Apple’s “top paid apps” and “top free apps” were worldwide or US. (Tech Crunch has Mobclix data that is a little more useful here).

Clearly the top 20 paid apps are all games or other forms of entertainment. The iPhone/iPod Touch is a hot gaming platform with has many satisfied developers. The iPhone scores points both for an easy-to-use SDK and also for its convenient distribution channel. This is mostly the “kill a few minutes” casual gaming audience — such using mom’s iPhone as a video pacifier. But the units are rapidly gaining on the Sony PSP if not the Nintendo DS.

Some are concentrating on the direct revenues to Apple, i.e. from paid apps. A lot of estimating the number of paid downloads depends on the assumptions of the ratio of paid to free downloads, as the Apple 2.0 blog at Fortune noted last week.

(I thought I saw an article around April 23 that noted actual unit sales for some of the top 20 apps, but I have been unable to find the article. Does anyone have such an article.)

However, what I found interesting was the free apps. Sure, there are some freemium offerings in game and entertainment. But there were also iPhone versions of some of the most popular wired Internet apps — Facebook, MySpace, Google Earth, the Weather Channel.

If the iPhone is heavily used for the same thing as the wired Internet, that means it will make progress on substituting for the wired Internet. I’m not ignoring all those motion-sensitive games (or location based services) designed just for the iPhone — only concentrating on evidence where the iPhone is compelling enough to get people to drop (or ignore) their PC.

Carrier app stores still alive and growing

The assumption was that the iPhone App Store harkened a tidal shift to phone (or operating system) centric app stores. Many assumed that this also rendered obsolete attempts by mobile network operators to create their own walled gardens.

Apparently two of the four major European operators, Orange and Vodafone, didn’t get the message. The Orange Application Shop (announced last month) and the unnamed Vodafone application store (announced Tuesday) are two examples. (Apparently the Vodafone store will also apply to Verizon Wireless in the US.) Both T-Mobile and Telefonica also have app store experiments.

Each of the app stores has its own APIs, own billing systems, own markets. Of course, this is in addition to the app stores from Apple, Google, Microsoft, Nokia, RIM, Samsung and others — each with its own APIs, devices, billing and so on.

The proliferation of app stores reminds me a lot of music stores: Apple created the iTunes Music Store and everyone wanted to have their own store. Now many of them are gone.

However, there’s actually a better argument for multiple music stores than multiple app stores. Once upon a time, we had thousands of LP (later CD) stores. If the online music stores were all distributing DRM-free MP3 files, then consumers could buy songs from different stores and different days and have them all work together.

However, a fragmentation of MP3 distribution would increase buyer power and thus increase competition (and price competition) between suppliers. This competition could commoditize MP3 distribution — putting the less efficient dealers out of business — or put pressure on music publishers to increase promotions or cut prices.

Symbian's planned app store

The Symbian Foundation has advertised for a new manager to run their app store:

The Symbian Foundation is looking for an Application Deployment Manager with a keen passion to drive a team in the creation of a superior Mobile Application Store. This will be a senior role within both the US office and Developer Services at The Symbian Foundation.

In this role, the Application Deployment Manager will work with the entire Symbian community (including device manufacturers and operators) to define, create and drive the deployment channels for Symbian Foundation’s Application Store.

It is interesting that the Symbian Foundation — substantially funded by Nokia — is creating a new app store while Nokia already is developing their own app store — due as the Ovi Store next month. The new store will support both S40 and Symbian S60, while presumably the Symbian store would only support S60.

More apps is not better

As a standards researcher (and pundit and consultant), one of the myths I’ve been trying to fight is that more applications are necessarily better, i.e. a source of competitive advantage. It’s quite clear — as I observed almost a decade ago — that this one of several over-generalizations from the VHS vs. Beta format war of the 1980s. This morning I found another industry — smartphones — where the evidence is compelling.

The influence of the VHS vs. Beta war was powerful, because it happened at a time when contested consumer electronics format battles were rare. Atari and a handful of firms were producing consoles. All of the 8-bit home computers had pretty much died, supplanted by the 16-bit IBM PC. Due to fortunate timing (and a dramatic outcome), it became the exemplar of what a standards contest is about. However, it was not a typical standards contest. In particular, we have different types of 3rd party “software” use patterns. A movie (other than a kid’s video pacifier) you consume once or twice, and thus novelty and variety are key. It doesn’t generalize to other entertainment, because even music is something that you buy once and may use dozens or hundreds of times.

At the other extreme, PC software is something you get one of and tend to use over and over again. Yes , you want a program to serve your particular (perhaps niche) need, but you don't need five or a dozen. One spreadsheet, presentation and e-mail program are quite enough, even if I have 3 browsers installed on my laptop. (Videogames are somewhere in between, but that’s a whole ’nother post).

In my dissertation and subsequent paper, I documented a dramatic example in Apple’s recovery in the first few years of the Jobs II era (1997-present). The Macintosh market share was essentially the same as at the bottom, but if it had good implementations of the key applications — office, a browser, an e-mail client, a music player — a large number of users would say that‘s “good enough”.

In economics, the Betamax model became accepted dogma through the argument of “positive network effects.” I argued that Apple’s recovery demonstrated that PC users didn’t seek the maximum number of applications but “satisficed” if there was enough variety to cover their needs.

For a talk I wrote in the past 12 hours (and gave this morning at the Symbian Partner Event in San Francisco) I did some research on the relationship between app quantity and Q3 global smartphone platform market share.

Vendor	Platform	Est. Share	Apps
Nokia etc.	Symbian S60	≈ 40%	> 12,000
Apple	iPhone	17%	10,000
RIM	BlackBerry	15%	n.r.
HTC, Palm, Motorola …	Windows	≈ 12%	18,000
Palm	Palm	≈ 2%	29,000

Even if the data is crude, the results are dramatic. (Disclaimers: Q3 data is estimated from the Canalys press release, which doesn’t provide an accurate measure of Windows or Palm OS market share or non-Nokia S60 devices. Q3 data for Apple is distorted by iPhone 3G launch. Measures of the number of applications are from 2008, but reported by various sources that may not be strictly comparable).

Looking at the data, the biggest driver of the number of apps (stock) is the age of a platform, even if the recent trend (flow) reflects the demand perceived by ISVs, i.e. current market share and momentum. The dramatic example of the latter is the iPhone, where the app store went from 100 applications in July to 10,000 earlier this week. Still, the iPhone — with rapidly rising share — has far fewer apps than the less popular, older and stagnant (or declining) Windows and Palm platforms.

Thus it’s clear that a huge supply of apps don’t cause success. A certain number might be a prerequisite, but beyond a certain number, more is not better. In fact, too many applications can create fragmentation and confusion among users until demand coalesces around 1-3 apps in a given category that gain enough scale to keep going.

Why didn’t we see this before? Distribution and disintermediation. When you had to get store shelf space, that limits the carrying capacity of the ecosystem, with the entry barrier being firms needing enough scale to win shelf space at dealers (or even catalog stores). In a virtual, post-Amazon electronic goods world, no such natural limit exists, so the hobbyist-programmer in PJs can post an app to the Apple or Google or Nokia app store.

Still, the fragmentation should now discourage (but not eliminate) further entry. New entrants will need to provide a compelling implementation or a find a significant unserved niche, or they will fade into the clutter.

Additionally, differences in the rate of application library growth will not significantly impact the market share of the top 2 or 3 platforms. As with videogames, some apps will come out on a particular platform first, but if they succeed on one, they will be quickly ported to the other major platforms. APIs and tools may slow the availability of apps for some platforms, but if there’s enough demand, eventually they’ll be ported.

G1 Limitations

The Nokia Blog is posting an article by a tech writer who tried the Android G1 and gave up.

Obviously the site is biased, but still it is instructive to see what blogger Chris Walters hated: the camera build quality, camera quality its looks, and the carrier lock-in. He did find the G1 user interface much more elegant than S60, particularly for how messaging is handled.

He also liked the nascent App Market more than either the commercial (Download!) or free (MOSH) Nokia download services. However, he doesn’t analyze the app store capabilities to the same degree as (say) Michael Mace.

His conclusion:

After a week with the G1, my conclusion was that Android is loaded with promise, but the G1 represents a squandered opportunity for T-Mobile and HTC. I’m certain upcoming firmware updates will iron out kinds in the Android OS, and may even make the camera usable for basic snapshots, but you can’t fix ugly design or poor build quality over-the-air. The G1 is definitely not a smart phone, and with the lack of a headphone jack, decent speakers, or the ability to record video or take decent photos, it’s not even really a feature phone.

From the things he likes, I suspect he will like the 2.0 or 3.0 much better.

iPhone installed base up 17% in 72 hours

To the installed base of 6 million iPhone 2G phones, in the past three days Apple sold 1 million of its new iPhone 3G. An unknown number of 2G owners have also upgraded to the iPhone 2.0 software, including at least two of my loyal blog readers.

Of course, the big news is that AT&T and Apple created a new activation process that failed miserably under the flood of new users and brought a flurry of bad publicity. (Of course, this utterly predictable problem happened because they changed the activation process to make sure all the iPhones got activated). It’s TBD whether this bad experience will have any lasting impact, although those who waited in line over the weekend were clearly the hard-core true believers.

Between the new and existing iPhone owners, Apple this morning also claimed 10 million downloads of native iPhone applications from the App Store since it was launched Thursday. Since the SDK was released in March, Apple’s iPhone ISVs have created many compelling applications (although not much for business). They don’t specify, but most of the publicity is on the free applications which I suspect account for 90+% of the 10 million downloads.

What I’m finding interesting is what’s not there. Some 17 months ago, I proposed the iChat test. iChat is still not on the iPhone but a (text only) AIM is. (AOL also announced AOL Radio for the iPhone). I’m guessing AOL has noticed that AIM is no longer cool, and thus having the first native IM client on the iPhone might help it with the younger demographic.

But where is the VoIP service via iChat or Skype? Will these applications be funded (authorized) by Apple? It’s not as though there’s a lack of demand or interest. (Some would attribute it to Steve Jobs’ opposition).

No one knows if the gPhone will support VOIP, and it’s safe to assume that the carrier-led LiMo will not. So perhaps Apple has months to worry about this because competing platforms are in no hurry either.