The Market Sides of the Mobile Ecosystem

I’ve been using a taxonomy to describe the market-sides of the mobile ecosystem that looks like this:

 

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Up until now, my writing on the mobile ecosystem has been focused on smartphones, because their adoption and sales dominated. Given the season of the tablet has started, I need to make some points about how tablets relate.

Even though we use the term “mobile” to describe scenarios involving both phones and tablets, before I go further, get this through your head:

Phones are not tablets and tablets are not phones.

The market and business dynamics of phones are fundamentally and significantly different than those of tablets. Why?  Because phones require a voice service, either pre-paid, or as subscription to be useful. Thus the primary channel for phones is carriers. This is more true in the US than the rest of the world, but it still generally holds. Phones are generally subsidized by the carrier and that subsidy is made up over the life of a (typically 2 year) contract.

Tablets are useful without a voice connection. Some tablets are sold with embedded cellular data connectivity, and a subsidy, but the vast majority do not include anything but WiFi connectivity. Thus the primary channels for tablets are retail and online, not carriers.

If you follow me to this point, you’ll agree the taxonomy picture above is phone specific. It includes Carriers but not other channels where devices are purchased by end users.

When I first wrote my piece explaining how fragmentation of Android was good for Android but bad for Google I almost included Services as a specific market-side. However, at that time, service fragmentation was mostly just theory and I felt it would add complexity not required to make my point. Since that time Amazon has demonstrated how serious it is about building a competitor to Google’s app store and Apple kicked Google Maps out of bed. 

These examples and more mean we are going to see a significant amount of platform fragmentation along the services axis in the next year. I plan on writing my thoughts on why and how, thus I need to add Services as a key side of the taxonomy.

Here’s the updated taxonomy that changes “Carriers” to “Channels” and adds “Services”:

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The Six Primary Sides of the Mobile Ecosystem

The mobile ecosystem is a multi-sided market where each side gives and receives value from other sides. The six primary sides of the mobile ecosystem include:

End Users: Own the disposable income. Idealistically they drive the ecosystem; realistically they are slaves to marketing and advertising.  Examples: Me and you.

Channels: Own the sale of the device and/or service to the End User. Own billing. Own Sales. In the case of carriers, own the physical pipe. Because the money flows through them, they, effectively, are the primary owners of the customer relationship. They also are often directly responsible for the majority of the marketing. Examples: Verizon, Amazon.com, Best Buy, Apple Stores, iTunes, Windows Store.

Device Manufacturers: Own the hardware. Own the industrial design. They hate not owning the customer relationship. But their HW bias (and manufacturing capex structure) prevent them from breaking out of this (there are no proof points of large hardware manufacturers becoming successful software companies).  Examples: Samsung, Apple, Nokia, Microsoft (for Surface).

OS providers: Own the core of the customer experience. Think they own most real innovation. They hate not owning the customer. In some cases, their core business models (search, desktop/server OS, office, …), means they are at the mercy of some middleman between them and the customer. Examples: Apple (iOS), Google (Android), Microsoft (Windows).

Services: Own key components of the customer experience. Tend to be sticky. Examples: Apple Maps, Google Search, Xbox LIVE, Kindle Fire App Store.

3rd Party Developers: Deliver the most of the end-user benefit.  Actually own most of the real innovation. They target platforms which have the greatest promise of ‘eyeballs’. Some care deeply about monetization features of the platform; others care more about distribution. They despise the inter- and intra-platform fragmentation that exists.

This fall starts the season of the tablet. Between Apple’s rumored iPad mini, Microsoft’s Surface, the new Kindle Fires, new offerings from Samsung and other Android device manufacturers, and the coming onslaught of $100 tablets we are on the cusp of an explosion in the tablet space. 

It’s important that we have a common framework for understanding the dynamics of this ecosystem. I can’t control what taxonomy and lexicon YOU use, but I can try to be clear and consistent with mine. Hence this post.

Would love to know your thoughts…

© Charlie Kindel. All Rights Reserved.