I was a (relatively) early adopter to FourSquare.  Today FourSquare has over 10M users and I was one of the first two percent (#197,372). I’ve also written about FourSquare here. FourSquare does several things well. The discounts and offerings associated with checking-in have always worked for me and with recent updates they’ve improved the experience.  Recently announced partnerships with Groupon and others highlight the importance discounts and deals (and especially location-sensitive
discounts and deals) represent for the burgeoning service.  FourSquare has escalated quickly past other location-aware check-in services like Gowalla and Loopt.  While these services were once close competitors in terms of users, FourSquare has taken a substantial lead.

The game dynamics of FourSquare surely helped it initially grow and gain acceptance among users and I’m sure there are a myriad of users who still focus in on points, badges, and mayorships, but I’ve personally become more interested in using FourSquare to add context to tweets or other postings to social sites.  I’m also interested in capturing check-ins over-time to create mash-ups in the futures.

One area FourSquare hasn’t been successful is expanding the number of connections a user has.  Of course users can proactively seek additional connections, but services like LinkedIn have done a better job of pushing potential connections to users thereby expanding the network and increasing the value of the service. As a result I don’t necessarily have many connections in FourSquare nor do I have much motivation to seek out additional connections.

Technology tends to reward first movers.  Preferences can change over time and that results in the popularity of some technology services waning, but if tech services are able to remain current it is difficult for up-starts to significantly disrupt incumbents.  There are tremendous network effects in technology and as long companies remain relevant, they retain a strong foothold. Despite gaining some ground, MSFT still has a strong hold of productivity software like document editing, spreadsheets, and presentation software in the enterprise and consumer markets as well as strong market share in the Internet browser market. Despite some recent success (with the emphasis on some), Google and others have been unsuccessful in creating a viable competitor for Facebook. LivingSocial and Groupon are winning the emerging daily deals business despite multiple new entries. Google still holds the majority share of search.  Certainly tech service leadership does change, but if a given tech service can stay relevant it will be difficult to best.  The same is true in location-based check-in services.  Facebook recently entered this space with Facebook Places and despite the tremendous popularity of Facebook and the vast user base, my early take was that Facebook would have difficulty finding success in the arena given the foothold of services like FourSquare.  This supposition changed for me the other night.

This past week I was in Utah visiting some extended family and showing the kids some of my old college haunts. I took them to CaféRio – a favorite restaurant from college.  I checked-in on FourSquare and Andrea checked-in on Facebook Places.  After getting our food and finding a table, an old college roommate walked in.  He was a few blocks away when his wife saw that we had checked-in so he dropped by to say hello.  Here-in is the beauty of a location-based check-in service.  Sure the discounts will be an important aspect of the service, but the serendipitous crossings add tremendous value to geo-based social services.  I thought Facebook would have difficulty getting into the geo-game.  Until now.

 

The big news in tech today was of course Google’s acquisition of Motorola Mobility.  Google dipped into it’s roughly $39 billion in cash and agreed to pay $12.5 billion (or $40/share) – a 60+ percent premium over Friday’s close. You can read some of the coverage here: Google’s blog post on the acquisition, TechCrunch, TechCocktail, Forbes and TheVerge.

It is an interesting acquisition given Moto was already all-in on Android.  The implicit assumption is that Google can more effectively run what was already the equivalent of their mobile hardware business internally.   Initially I didn’t really see this as patent acquisition despite acquiring 17,000+ patents (and other 7K+ pending), but here is what Google wrote on their official blog:

We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android. The U.S. Department of Justice had to intervene in the results of one recent patent auction to “protect competition and innovation in the open source software community” and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats
from Microsoft, Apple and other companies.

TechCrunch quotes Citi analyst Mark Mahaney in calling the acquisition “defensive and here is what Android partners have to say about the acquisition.  TheVerge also wrote about Google’s newly acquired patent pool so clearly besting the competition through a large patent pool is an important dynamic to this acquisition.

Here are a few things that haven’t yet received much attention:

The acquisition gives Google tremendous distribution which is something Google has lacked.  As TechCrunch points out, once the acquisition clears, Google will instantaneously become the #2 Android hardware vendor. Distribution is one of the key elements
to hardware partnerships.  The new found distribution will help Google push out new devices without having to rely
solely on partners.  With this, I suspect Google will use this new hardware division (and accompanying distribution) to
make a big push into tablets – a market which Android hasn’t yet been extremely successful in penetrating.

Despite this new distribution, it sounds like Google will remain committed to their Nexus strategy for the foreseeable future . Given the acquisition and the need to placate their other hardware partners, I suspect the next Nexus device will not be a Moto device.

A final area where little has been said is the set-top box business of Motorola Mobility.  Last month Logitech (a key Google TV hardware partner) announced sales had been dismal. Logitech even announcing more boxes were being returned than sold (see here and here).  Logitech also subsequently dropped the price to $99 – more in-line with the “other” TV box out there.  The Moto
acquisition might allow Google to breathe new life into their TV ambitions.

Much of the chatter today went back and forth on whether this was a hardware transaction or a patent pool transaction.  What this discussion subtly misses is that platforms require a hardware core. This is something I’ve talked a lot about over the last year. The current platform discussion has focused on software (Android v. iOS v. Other), but this fails to see the role hardware plays in developing the ecosystem of a platform.  As you look through the history of platforms, hardware is at the core.  Through this acquisition, Google ensures the hardware core of Android is secure.

 

IHS iSuppli recently projected sluggish growth for single-purpose consumer tech devices like MP3 players, PNDs, and digital cameras.  At the same
time they expect multi-function devices like smartphones and tablets to enjoy strong double-digit growth over the same horizon The IHS iSuppli statement quotes, Jordan Selburn as saying,

The success of multipurpose electronic equipment, often coming at the expense of devices dedicated to a single task, is reshaping the landscape of the consumer electronics industry… In many cases, users can replace a slew of dedicated systems with just one multipurpose device, gaining functionality and portability while simultaneously saving money… The story of consumer electronics is an ongoing survival of the fittest, and multi-tasking systems such as media tablets will have a hand in turning yesterday’s hot consumer electronics gear into tomorrow’s fossils,

While their trends and predictions are all directionally accurate and something we’ve been pointing to and discussing with clients since early last year as we’ve tracked the monthly OEM data, I think IHS iSuppli and Selburn are overly strong on the causality of these declines.

What is primarily driving the decline in these categories are the individual structural issues these categories face directly.  For example, according to CEA Research, digital cameras are owned by 79 percent of households and these households own on average 1.8 digital cameras.  Eight-nine percent of self-identified early adopters own a digital camera and even 73 percent of self-identified late adopters own one.  Fifty percent of the households who do not own a digital camera say they’ll never buy one – suggesting we are extremely close to full market saturation for this category.  Digital cameras will never be owned by all households and this has nothing to do with the introduction of other devices.  Very few products ever enjoy 90+ percent ownership rates. The primary decline in digital camera sales isn’t necessarily what is happening in other categories – it is a function of what is happening in the camera category itself.

PND growth slowed and then outright declined largely because the technology is increasingly integrated into vehicles.  I suppose the argument could be made that this is the ultimate multi-function device.  MP3 players are owned by half of US households. We know MP3 players aren’t  for everyone.  In fact, 56 percent of non-owners still say they’ll never own one. Despite the fact the technology has been in the market for over a decade, only 37 percent of self-identified late adopters own one. Here again, the category declines as a result of hitting market saturation and not necessarily because there are alternatives.

Certainly, single purpose devices are impacted by Swiss Army Knife-like devices. Calculators likely have lower replacement rates (and subsequently growth rates) because of the ubiquity of computers. Multi-function printers represent a large share of the computer printer market.  And I’m sure paper calendar
sales have slowed since the introduction of digital alternatives. Some of these changes might be more a result of living in an increasingly digital world than as a
result of multi-function device substitutes. Still, the impact is noted. About a quarter of the households who own a digital camera say they’ll never buy another digital camera. This rate is consistent with many other products (18 percent of households owning a smartphone say they’ll never buy another one). Still this result does suggest some households will not replace/upgrade their digital cameras because of alternatives.

Single-purpose devices have through the history of technology existed – even with the entry of multi-function devices. Single purpose devices have (and always will have) an important place in the market. The article/report cites Cisco’s decision to shutter Flip.  By all accounts, Flip was highly successful. It was profitable and owned 40 percent of that market.  Cisco closed the business unit to send an important message to the market generally and shareholders specifically that they were committed to moving away from experiments in adjacent consumer businesses and return a full focus within their core enterprise business.  Despite high ownership rates of digital cameras (most if not all of which shoot video), Flip was able to do well.  It did one thing and it did it well.

e-Readers are another great example of a single-purpose device that can thrive despite the introduction and existence of multi-function alternatives.  e-Readers continue to grow rapidly despite the success of products like the tablet and the smartphone – both of which enable mobile/portable reading.  Recent research shows consumers have a very low interest in considering other devices when they shop for an e-Reader – suggesting consumers largely find no alternatives to an e-Reader.

These are just a few examples of devices that have (and continue to) do well despite the introduction of new multi-function devices.

Earlier this week, the New York Times reported on a study by Forrester.  The key finding: “Even though just 9 percent of shoppers own tablets, sales from tablets already account for 20 percent of mobile e-commerce sales and 60 percent of tablet owners have used them to shop.”  Certainly tablets are set to have a disruptive impact on a variety of services and devices, but it is important to frame “mobile” in the correct light.

The term “mobile” is being thrown around too loosely.  Mobility is a relative term, but it is frequently being used in the absolute sense.  There are several device attributes that influence the degree to which a device/experience is mobile. These include device size, power or battery life, and availability of content. Size and batter life are self explanatory. The smaller a device the higher degree of mobility it affords users.  This of course assumes some constant level of usability.  One could easily imagine a device so small it isn’t useful to the end user. In this way, size could have asymptotic characteristics.  Size influence on the device’s degree of mobility can also be general (applied to the entire size of the device) or it can be specific to an attribute of the device like screen size, antenna, etc. For power and battery life, the great the longevity of power the greater the degree of mobility provided by the device.  Power longevity also doesn’t necessarily mean battery life. The in-vehicle experience readily provides 12V power to devices used in and around vehicles, but these are still mobile devices in the general sense for which we are using it here.

The degree of mobility a device provides is also a function of the content it provides the end user.  This content can take many forms and can be delivered in many ways.  Content includes video (ie Portable DVD players) and audio (ie portable tape players to MP3 players).  It could include maps (ie GPS) or other information (ie data available on the Internet).  It can be delivered to the device physically (ie tapes, CDs, DVDs) or digitally.  Content delivery influence on mobility is also a function of time.  It can be delivered before the device moves into a “mobile” state – this is generally the case with devices requiring physical media.  But content is of course increasingly being delivered while the device is in a mobile setting using spectrum.  This use to be only really applicable to radio and some TV, but is increasingly applicable to all forms of content. The greater the access to content, the greater degree of mobility the device can provide.

I’ve written in the past about Amazon’s (eventual) entry into the tablet world.  Some interesting research from Retrevo consistent with points I’ve made in the past. First, consumers have grown quickly comfortable with Amazon as an OEM. You’ll recall that the original Kindle was panned heavily by critics, but consumers have warmed quickly to Amazon devices. As you can see from the chart, 55 percent of respondents interested in a tablet say they would seriously consider buying a tablet from Amazon.

The results of the study are also consistent with a point I’ve made repeatedly on differentiation.  In order to compete in a quickly crowded segment one must differentiate.  It isn’t just that OEMs are competing with Apple in this space  – in order to succeed in the tablet segment, OEMs must bring to market something different.  They can differentiate by screen size, form factor, feature set, or price.  Until now there has been minimal differentiation and I’m not sure there is enough flexibility to compete by differentiating form factor or feature set.  There might be large enough segments of the population interested in screen sizes less than (or more than) 10 inches that there is still room to compete by screen size. Ultimately, I think the most likely place to compete will be price (assuming the user experience is comparable). The results of the study suggest half of those interested in a tablet would consider an Android tablet over an iOS tablet if it was priced below $300.

At the end of the month, Toys“R”Us will begin selling Amazon’s Kindle (see Retailing Today, Mashable, Reuters, LA Times). This is a natural extention of its existing non-Amazon retail strategy (which already includes Target, Best Buy, RadioShack and AT&T stores). More importantly, I think it targets an important segment of the population primed for an e-reader experience but who haven’t had the chance to express that interest.

Some facinating findings in some recently released data from Furry:

Games drive 75% of revenue among the top 100 grossing iOS apps and 65% of this revenue were generated from freemium games.

The average purchase from within free-to-play mobile game is $14

As the chart shows, 71% of all in-app transactions happing within freemium games are for amounts under $10, 16% are for spends between $10 to $20 and 13% are for amounts greater than $20.

Over half of the revenue from in-app purchases happening within freemium games are coming from purchases in excess of $20.

By the end of 2011, Flurry estimates that total U.S. iOS and Android game revenue will surpass $1 billion

 

One can’t help but be bullish – at least a tinge – on both Apple and China.  From a recent NYT article:

Last week, Apple reported blockbuster sales and profits in its third quarter, including $3.8 billion in revenue in greater China, which includes Taiwan and Hong Kong.

For the first three quarters of Apple’s fiscal year, revenue in greater China was $8.8 billion — six times that of a year earlier.

 

Much has been written about the relationship between iPad supply and demand.  I’ve added to that discussion here. What I haven’t seen discussed much is how iPad sales might change now that supply and demand are finding equilibrium. As I wrote, I don’t believe supply constraints have defined aggregate unit volume.  But I do think it might have influenced allocation across models within that aggregate volume.  Nielsen recently suggested about half of iPads are of the 3G variety.  This seems consistent with the fact that Apple has to-date sold most of what they’ve made available for sale and I’ve heard that they are spreading supply roughly equally across their models.

In fiscal Q2 (calendar Q1) Apple sold roughly 4.69 million iPads.  If roughly half were 3G models – then Apple sold about 2.35 million 3G models during the quarter.  But examining the financial releases from ATT and Verizon suggest they collectively activated only about 700k tablets during the same period. If these stats are close, then many who are buying 3G-enabled tablets are not actually using the 3G service.  Sure, some are buying it “just in case” and some will perhaps activate it at some point.  But there appears to be a large pool of owners who aren’t and likely won’t be using the 3G service unless usage patterns/scenarios change significantly.

As GigaOm reports, in their recent quarterly conference call “Cook went as far as to say that in some markets they (Apple) had actually caught up and were able to be in some sort of an equilibrium with demand and supply they had actually caught up and were able to be in some sort of an equilibrium
with demand and supply.”  If supply and demand are finding an equilibrium then buyers will presumably be able to buy the exact model they are interested in.  Taken together with the relatively low activation figures suggests the tablets to sell in the future will be predominately Wi-Fi models.  This suggests a lower average price point.