Friday, September 26, 2008

How I See It

The future is bright for smartphones and the mobile web

I made one completely off-the-mark prediction for 2007 in my blog : “The iPhone would have disappointing sales.” I made up for it in a 2008 prediction: “Apple’s greatest innovation in the iPhone is its browsing capability, and as a result the mobile Internet will finally take off.” The mobile internet was predicted to take off in the late ’90s, with over $1 billion invested in startup companies back then.

Ten years later, the iPhone, with its bigger screen and fabulous browser, has finally made this prediction come true.

M-metrics reported in March that smartphone users browsed the Internet for an average of four and a half hours per month in the U.S. and 80 percent of iPhone users were browsing the Internet compared to 30 percent of other smartphone users.

So the mobile Internet is finally here, right? In my opinion, browsing the Internet will be a minor usage of smartphones. Just like the PC, I think we will see a mixture of client-only and client-server applications on the smartphone. Apple Inc.’s brilliant iPhone application store is a testament to this view. Over 1,500 applications have become available from third-party developers since the iPhone store was unveiled in February. These are either stand-alone applications such as games or true client-server applications. In fact I believe that client and client-server applications will be the dominant use of the smartphones for many years. Here is why:

• Smartphones, unlike the desktop PC, operate in an asynchronous environment. In other words, wireless coverage is not ubiquitous and bandwidth will always lag wireline by a decade.
• All PCs have the same keyboard and screens at least 14 inches in size. Cell phones, even smartphones, have a multitude of screen sizes, orientation and keyboards.
• You generally use cell phones while engaged in another activity, such as driving or walking.
• Cell phones have integrated sensors that only client applications can access: location, camera, voice, accelerometer, ambient light detection, etc.

RIM Ltd., Microsoft Corp., as well as Nokia Corp. and the other incumbent smartphone vendors, are scrambling to create their own application stores. Google Inc. is a new entrant, with its much-discussed Android smartphone operating system. I will go out on a limb and predict that Android will take a while to catch on, just as Microsft’s Windows Mobile (finally taking off on version 7) has, since they are dependent on how well third-party device manufacturers deploy their software.

There are 3.5 billion cell phone users around the world — compared with 1 billion PC users. Close to 1 billion phone users are in China and India, combined. While the majority of those users are not smartphone users, the iPhone has been a huge hit in both countries, in spite of the lack of 3G networks. Emerging markets have seen dramatic cell phone adoption but not PC adoption, resulting in many innovative uses such as mobile banking, using limited capabilities of entry level feature phones, such as SMS text messaging. Most emerging markets are hyper competitive with multiple wireless carriers in each country (China is an exception but the regulator there has pushed China Mobile to be innovative). As a result these carriers are quick to adopt new applications that give them an edge. Contrast this with the United States where we have an oligopoly of essentially three dominant carriers — Verizon, AT&T and Sprint — who between them have about 75 percent of the market, with Verizon and AT&T increasing their market share by the month. Innovation is being forced upon them by the computer industry, Apple and Google in particular.

If you are thinking of starting a mobile application company I encourage you to think client-server and think globally.

 

Vinit Nijhawan, an entrepreneur and venture capitalist, is an executive-in-residence at Boston University. He was named a Mass High Tech All-Star in 2005.