Google shares jumped past $1000 mark, as its results convinced the markets that it had finally crossed the chasm between Desktop advertising to Mobile advertising. The rise of mobile devices had raised fundamental questions for the company: Would users conduct as many searches as on PCs? Would they click on as many ads? Would advertisers pay as much for a fingernail-sized spot on a phone as they do on a PC? The numbers Google disclosed undercut those fears. The number of “paid clicks”—the times a user clicks on an advertiser’s link during a search—surged 26%, the highest growth rate in a year.
As has been the case recently, the amount paid per click declined, this time by 8%. But the total volume of searches, driven by the rise of mobile devices, far outweighed the falling per-click rates. Mark Mahaney, an analyst at RBC Capital Markets, estimates the total number of paid searches will reach nearly 125 billion in 2013, up 24% from the prior year and nearly triple the figure of five years ago. That is the rough equivalent of 36 clicks on Google ads this year from each of the world’s approximately 3.4 billion PCs, smartphones and tablets. Steadily increasing sales of mobile devices could help Google for a long time. “What all this leads up to is that investors just feel this is a longer-term story.
The spurt made Google the third most-valuable U.S. company by market capitalization, with a value of $338 billion, behind only Apple and Exxon Mobil Corp. What also interesting is that the Google results have also given a spurt to the prices of Twitter, Facebook, Pandora, Yahoo! and other online companies which are contingent on ads.
How the high and mighty fall aside to give way to new blood!
Thats the perpetual script of the mobile phone industry… You miss the bus once – there isnt any catch up left to do. Industry marquees such as Nokia, Motorola, Blackberry, Sony, HTC have seen their growth and margins erode – caught unawares amidst scope and landscape changes. There seems to a pattern where each vendor reaches a peak share, though that peak varies greatly in value and then goes into a decline, which again varies from drastic to gradual.
The only ones who have bucked the trend so far is Samsung and Apple – though Apple is beginning to show weakness. However, if the industry trend were to continue Samsung would hit its decline within an year – give it a couple of years at maximum.
As tablets continue to pound on Laptop and Netbook segments – and the Laptop/Netbook segment is at best projected to be stagnant if not decreasing in terms of y-o-y shipments it is difficult to harbor any significant optimism about Intel. Intel has been trying to migrate its business to the Handhelds given the impending fall of the Wintel Franchise. It is clearly trying to move away from the Wintel Monogamy to separate alliances with Android, Samsung (Tizen) apart from the Windows Phone platform. However, creating a platform with meaningful revenue stream to replace its Wintel franchise is a long shot – something it has not been able to do for a very long time.
Highlights of Intel’s Performance
Full-Year 2012 Key Financial Information and Business Unit Trends
Full-year revenue of $53.3 billion for FY2012
PC Client Group had revenue of $34.3 billion, down 3 percent from 2011.
Data Center Group had revenue of $10.7 billion, up 6 percent from 2011.
Other Intel architecture group had revenue of $4.4 billion, down 13 percent from 2011.
Gross margin of 58% not broken down by group.
I am listing out a few thoughts on the Intel prospects going forward-
1. Intel Versus Qualcomm: Qualcomm with its leadership of the mobile space is possibly Intel’s biggest competitor in the mobile space. What works for Qualcomm is its economies of scale – hence allowing it to price itself very suitably. Intel chips in its current state would be 5X costlier than Qualcomm.
2. Intel’s specialty was the Windows platform and its complete monopoly. I don’t think they can repeat the same success with Google’s Android because the spots are already taken.
3. The low end growth in volumes will be typically driven in low price markets such as India, SE Asia. In this segment, there are pretty strong guerillas such as MTK, Allwinner and even Qualcomm has a spot of bother targeting these segments
• The problem with these markets is that none of them seems to offer the kind of margins that Intel has become accustomed to–even *if* Intel is successful in those markets
4. Either in terms of competing with Qualcomm or finding new markets, If Intel was to beat the market by considerably pricing itself lower (assuming very high volumes) – it would impact its profit margins dearly.
5. Intel has been innovating at the high end of the market. Thus, the cleverness that has gone into Intel’s current generation of high-end processors is simply stunning, but the market that benefits from that cleverness, and the margin that goes with it, is disappearing.
6. The only saving grace to this equation could be Microsoft – but the platform had its share of problems with Windows 8 and I am not sure if Windows Blue can reverse the tide.
7. Intel’s share of the server markets is also under threat with the ARM architecture and Atom like low margin chips being purported to be lopping off a big chunk of the server markets in near future. The driver is the cost of electricity and of cooling data centers. (Low power rules)
8. The third of Intel’s strengths – high-reliability enterprise computing and high-end analytics for business or national security applications is also moving the IBM way. IBM doesnot make any profits on its processors – its makes it dough from the services.
Finally, from cumulative experience of high end technology industry – any incumbent Goliath who missed one technology cycle – cannot by any means play catch up unless it re-invents the whole industry yet again. Intel doesnot have to look too far – beyond Microsoft – to learn missing out a technology cycle and losing the plot.
India is taking to the Internet and how!
A recently released TRAI states 164.81 million users in India who have internet access. Out of that 143.20 million subscribers access internet through wireless phones, i.e. mobile phones and tablets. This puts 87% data users in India access internet through mobiles.
TRAI data also reports negative growth in the Indian telecom sector. According to data released by TRAI today, the number of telephone subscribers in India increased from 895.51 million at the end of December 2012 to 898.02 million at the end of March this year, registering a growth of 0.28 per cent over the previous quarter Dec-12. This reflects year-on-year (Y-O-Y) negative growth of 5.61 per cent over the same quarter of last year. Interestingly, urban teledensity declined from 149.90 to 146.96 whereas rural subscription increased from 338.54 million to 349.22 million, and rural teledensity increased from 39.85 to 41.02. Monthly Average Revenue Per User (ARPU) for GSM service has been increased by 6.99 per cent, from 98 in December 2012 to 105 in March this year, with YoY increase of 7.84 per cent.
For many of the marketers out there – there is not a great case for Tablets and Smartphones together. Most of them view tablets as a passing fad. This equation is perhaps complicated by the announcement of Phablets as a hybrid form and use factor! However, is Tablet really a fad?
A recent report published by the Adobe Digital Index is an eye opener. For February 2013, Tablets are attributed to be driving more traffic to websites than smartphones. The report is based on 100 billion visits to more than 1,000 websites worldwide over the last year – hence this isnt a fluke that you had blow over. Adobe attributes this shift in web browsing patterns primarily to the device’s form factor, which lends itself to leisurely (and more comfortable) browsing than smaller touch devices.
Listing down a key points on how and why Tablets are not a fad. They are here for good-
1. Frankly, with both WiFi Tablets and Entry-level Smartphones penetrating the $50 price point – the screen size is a big enabler for tablets.
2. As WiFi hotspot roll outs gather momentum – Tablets will push more and more of data.
3. So while Smartphone gathers numbers in the low end – it is the larger screen size devices (3.5″ – 4.0″ – 5″ – 7″- 9.7″) which will posssibly drive higher data consumption.
4. The customer at the economy end of connected devices ($50-$100) tends to use his device as a media machine – again for the $50-70 price – a tablet provides greater value than a 2.8″-3.5″ smartphone given the profusion of pirated content.
5. Tablets are also driving penetration across segments such as education, insurance for the large screen internet access advantage
6. For the Phablet space – this is a sub-category branching out into becoming a category by itself – but its numbers will take some building up – and the pricing still is $200 & above.
7. With tablet growth rates still well above smartphone growth rates, expect this gap to widen
8. Traditionally because of the higher screen size the engagement time on tablets has been higher than the smartphones as well.
Interestingly enough, in mature economies, Tablets have found yet another niche. Tablets are increasingly being used shopping activities.Adobe found that 13.5% of all online sales were transacted via tablets during the recent holiday season. Furthermore, as of January 2012, researchers found that consumers using tablets spent 54 percent more time per online order than their counterparts on smartphones, and 19 percent more than desktop/laptop users.
Thus the key take away from the Adobe report is this – tablets and smartphones are two different animals. Based on consumer use cases, one does not replace the other because mobile device owners are using tablets and smartphones to accomplish different tasks. This has implications on the way e-commerce companies as well as media companies and online content distributors would play up to serve the user. So this really gets into single device – multi use cases scenarios – all of is still building.
Thus i come back to my initial point – Marketers who are apprehensive of the scale and scope of tablets and are unable to fix “proper” answers to tablets, need to understand, there is no single answer… and the answers too are evolving at a fast clip! The risk that they run in trying to perfect the business cases and create understanding is that they could be left out of the markets. Proposition here is possibly not a case of inspiration but of evolution!
Google and the principle of more wood behind fewer arrows! ( Service Prioritization and End of Life)
Google prioritizes its products and services and while it is constantly innovating in different levels and layers of services – it is equally ruthless in chopping of products and services which donot support its strategic imperatives and directions.
From an outsider’s perspectice, the following principles are evident as a part of Google’s service End of Life (EOL) strategy.
1. Products and Services are shelved as and when a better substitute (in terms of delivery mechanism or service/customer experience) is in place
Examples include HTML over UiApp, 3D imagery (Street View) over Google Building maker, Android/Chrome over iGoogle, Youtube over Google Videos, Google Drive on desktop over Cloud Connect, Google Shopping over Search API and many more.
2. Axing stand alone services in favour of a platform approach
For Instance HTML5 over Voice App for Blackberry, Google Apps/Vault over Postini (and many more)
3. Inadequate or middle of nowhere solution!
Lack of success of Google Wave was attributed among other things to its complicated user interface resulting in a product that was a bit like email, a bit like an instant messenger and a bit like a wiki but ultimately couldn’t do any of the things really better than the existing solutions
4. Services that are simply non-core i.e it doesnot extend Google’s strategic imperatives
Google Classic Plus was a customization service that let people upload or select images to use as a background on Google.com. However, it really was noncore in terms of customer experience or service delivery. It was hence dropped.
5. And then there is Performance…
Google Health (inspite of all its promise) was axed as it was seen not having the broad impact that Google had planned. Same goes with Google Apps for teams as well.
Listed below are a list of services that have been chopped over the last few years – for not having made the Google cut – its a case of Google forever prioritizing and trying to put more wood behind fewer arrows
With 25 million tablets selling of in Q2, 2012 globally, tablets could very well have arrived as the third device in the mobile stack – PC and smartphone being the first two devices. But do we find productivity yet on the tablets? Or would they always remain as consumption devices?
Tablets aren’t really new. They’re big PDAs. We do calendaring, note taking, alarms, and notifications on tablets — but so could a PDA, all the way back to the Newton. We’ve been using this kind of touch-based organizer for over a decade at the executive level (remember the clumsy tablets from Microsoft?). They’re coming into their own stride, but we still struggle with leveraging them for productivity.
Many IT professionals are wondering how tablets are going to affect the enterprise. We’re all trying to work out if, when, and how these devices are going to impact our work. However, I’m not sure we’re asking the right questions about these devices. Given that customized, purpose-driven appliances and tablets are the best answer to the ever increasing productization requirements, the case is still largely inconclusive. We (Marketers in general) are all over the place trying to figuring out how to leverage mobile platforms. We’re looking desperately for a use model. This lack of a definite conclusion reflects the entire industry.
The classic innovation and monetization syndrome is that if we don’t innovate and implement this exciting new technology, our competitors will — but don’t worry, they’re as uncertain about how to proceed as we are.
Coming back to the use cases of Tablets for the enterprises, I see two major tablet applications:
- Better mobile connectivity than PDAs. In particular, tablets are able to give a more feature-rich browsing experience and reasonable email communication. They also tend to work better with web apps like OWA than previous mobile devices.
- Ability to design and deploy custom native apps.
The trouble seems to be one of convergence and transition. We’re transitioning from a desktop OS, application-based, business productivity environment — Office, Outlook, PowerPoint, and local applications running on a traditional PC. We use server-based back office, HR, and business processes platforms. Those are behind on developing meaningful mobile options, and they don’t yet rival traditional desktop PC methods in features and convenience. The value add of having a mobile device is offset by the limitations, where it’s an option.
Another driver is the convergence of cloud technologies and mobile devices. Public clouds make enterprises nervous, private clouds lose a lot of the supposed benefits of public clouds, and IT seems reluctant about adopting any cloud. But mobile devices are cloud pods. They’re lightweight devices designed to buzz around the cloud — gathering, creating, sharing, or moving information. Storing my private music and movies on the cloud is one thing, and storing my critical corporate IP there is another. The personal digital assistant part of the PDA is becoming a reality with Now and Siri, but we’re asked to place a lot of trust in allowing a cloud to collect meaningful information about us. Without that, we can’t reap the benefits of these solutions.
The enterprise challenge is that these mobile consumer devices take away the granular control of a PC. Ultimately, things are still sorting themselves out for tablets in the enterprise. It’s still very difficult to see where these technologies might take us.
Maybe Microsoft may have a few answers!