Ever since Adobe announced that it will stop developing Flash for mobile browsers, the blogosphere has been buzzing with a broad range of sentiments including “I told you so” by critics, disbelief by Flash developers, Monday morning quarterbacking by analysts, and even a petition for Adobe’s CEO to resign.  Check out also the Occupy Flash and Occupy HTML manifestos from the opposing camps. Flash is one of those topics that attract very emotional responses from both its passionate developer community and its very vocal detractors. Although I am generally an Adobe supporter, I will put emotion aside and summarize, in hindsight, what went wrong. For full disclosure, I am a former Adobe employee, but this post is based only on publicly available information.

HTML5 did not kill Flash. Steve Jobs did not kill Flash. The death of Flash was caused by a time bomb planted inadvertently by Adobe many years ago.

Although Flash for mobile ultimately died because Adobe did not adapt fast enough to post iPhone changes in the ecosystem, the seeds for Adobe’s failure were planted earlier on. To understand what went wrong, let’s first review what happened before the iPhone and how those events set the stage for what happened later.

Before the iPhone – the Flash Lite era

Back in the early to mid 2000’s, there was great demand from handset makers (OEMs) who were willing to pay for Flash Lite (the mobile version of Flash at that time) and Adobe decided to collect a per-device license fee for the software. This decision set in motion the incentives and behavior that would ultimately lead to the demise of Flash in mobile, and as I explain later in this post, will also kill Flash on the desktop. Adobe’s ambition to create a platform for delivering rich internet experiences is now doomed.

A big question in many people’s minds is why Adobe didn’t just replicate the model that had been successful with PDF and the desktop Flash Player: make the runtime freely available and monetize it with increased tools revenue. Presumably this would have motivated Adobe to prioritize platform consistency over broad (but fragmented) reach. But it was not that simple.

Although there was a thriving Flash Lite ecosystem in Japan (developers creating content and distributing it via the operators), Flash Lite was initially NOT used as an apps platform in other countries. Flash Lite was used in many cases by OEMs who were looking to differentiate their devices by building expressive user interfaces for the core applications (home screen, dialer, address book, messaging, call log, and others). The LG Prada is a great example of the kind of user interface handset makers could build using Flash Lite. This device featured an iPhone-like touch interface back in 2006 (demo). The Samsung D900 and the LG Chocolate are good examples also. Although these devices included Flash Lite, they did not offer an opportunity for developers to distribute Flash-based content. The implementation of Flash Lite was closed to third party developers as there was no Flash in the browser nor the ability to execute Flash-based apps. As there was no clear opportunity for developers and therefore no tools revenue to be made, it made sense for Adobe to collect a per-device fee from handset makers rather than monetize the player via the tools.

Conflicting objectives: handset makers versus developers

As it happens, when the opportunity to deploy Flash Lite as an applications platform presented itself later on (especially on Nokia and Sony Ericsson devices), Adobe did not adapt its business model right away. In hindsight, this turned out to be a costly mistake. At that point, there was an inherent conflict between the needs of handset makers looking to differentiate their devices and the needs of developers who needed a consistent platform across devices. As OEMs were paying the bills and the mobile team was measured on revenue, it was natural for Adobe to prioritize OEM requirements over developer requirements and to let OEMs implement Flash to meet their own needs. OEMs licensed the source code from Adobe and created their own binary implementations that were not consistent across devices. Flash Lite was used sometimes for building device user interfaces, other times for browsing Flash content, and other times for running standalone apps. In addition, OEMs did not always implement the same set of APIs creating additional fragmentation for developers. Worse yet, as the runtime was not updateable over the air, device fragmentation would only get worse with time.

Lack of distribution and monetization opportunities for developers

Even when Flash Lite was deployed as a platform to run standalone apps (not in the browser), there was no easy way for developers to distribute their apps. There were no iPhone style app stores at the time. Developers had to distribute their content via middlemen (aggregators) who collected a tax and who had distribution deals with handset OEMs and network operators. Worse, the OEMs and Operators did not have good merchandising channels and discovery of apps by consumers was very poor to say the least. There was no streamlined way for Flash developers to reach consumers. This was a major issue for developers as it was for Adobe. At the same time, revenue from OEMs continued to grow –shipments of Flash enabled devices were more than doubling every year– masking the severity of the problem and allowing the time bomb to continue to tick.

A glimpse of hope: partnering with operators to reach consumers

In an effort to create a thriving ecosystem for developers, Adobe turned its attention to mobile operators who at the time controlled content distribution via their infamous walled gardens. Working with operators was not a popular move especially with Adobe’s Web developers who were new to mobile and did not appreciate the level of control that operators had at the time. Adobe worked with several operators but most prominently with Verizon Wireless (see the April 2006 news release) which on paper was an ideal partner. As one of the world’s largest CDMA operators, Verizon Wireless had great influence over its OEMs and was able to specify the Flash runtime on its devices. Verizon Wireless also had the most successful app store in the US at the time (the BREW-based Get it Now download market).

Adobe and Verizon launched two services: A Flash app download service as part of the BREW Get it Now ecosystem (see the October 2006 news) and Verizon “Dashboard” (announced in March 2007), a much more ambitious service based on Adobe’s on-device portal called Flash Cast. Both services, had issues. The BREW Get it Now offering failed because it was too difficult for developers to onboard new apps, developer revenue shares were too thin, app discovery was difficult for consumers, and Verizon moved too slowly to certify new handsets with Flash (for more on this see: Is Brew Dead? Lessons Learned).

The Dashboard service failed because it took far too long to launch, missing its market window. Verizon announced Dashboard in March 2007 promising availability in the second half of the year, but the service did not see the light of day until September 2008. Even then the service was available on only one handset out of a broad device lineup available on Verizon stores. With the iPhone and Android devices attracting all developer attention by then, Flash Cast and Dashboard were too little too late.

It is worth mentioning that the innovation around Flash Cast and Verizon Dashboard was quite promising. In hindsight, the service resembled many of the key attributes of the iPhone: like the iPhone, it had an App Store concept where consumers could discover and purchase widgets with a revenue share back to developers. Like the iPhone, it was designed as a walled garden with a gate keeper (the operator in this case). Like the iPhone it featured an expressive user experience as the widgets and the user interface were based on Adobe Flash. However, unlike Apple, Adobe did not have end to end control of the ecosystem and the service was late to market as a result. The service was designed for 2006, not 2008, a big difference considering the iPhone showed up in 2007 changing all the rules. Although Adobe was innovating fast, its innovation did not reach consumers in time because it relied on slow moving partners.

Enter Steve Jobs and the iPhone — CONTROL-ALT-DELETE on the ecosystem

The launch of the iPhone changed the mobile ecosystem so dramatically that it disrupted all incumbents in ways that were not readily apparent right away. The disruption was so great, that it favored new entrants that were starting from scratch under the new rules (Apple and Google) over incumbents who had existing market positions and established business models (Nokia, RIM, Motorola, Palm, Microsoft, Qualcomm/BREW, Symbian, Sony Ericsson, and of course, Adobe). Like many other players, Adobe did not adapt fast enough and paid the price as a result. Consider three major changes in the ecosystem and how they negatively impacted Adobe Flash:

• Apple caused the existing operator walled gardens to crumble while Adobe was focused on building ecosystems with operators.
• Consumers started dumping feature phones in favor of buying smart phones, but Adobe had focused on feature phones which represented a much larger share of device shipments (and revenue to the mobile business unit).
• Mobile browsing finally took off as a mainstream service, but Adobe’s mobile player did not support 100% of the desktop Flash content as demanded by Steve Jobs.

As you may recall, the first generation iPhone did not have an App Store or SDK. It was all about browsing the internet (see the “internet in your pocket” ad campaign). The iPhone was the first handset with a decent browsing experience and quickly took the bulk share of mobile browsing (even though it represented only a very small share of device shipments). The lack of Flash was a glaring gap at the time.

If there was ever a time that Steve Jobs needed Flash, it was in 2007 with the first generation iPhone 

Unfortunately Flash was not ready at the time. Because Adobe generated revenue from device shipments, it had been focused on the feature phone category which represented a much larger share of the market in terms of shipments (but nearly zero percent in terms of web browsing page views!). Neither version of the Flash Player met Steve Job’s requirements. Flash Lite did not support all the Flash content on the Internet because it had been optimized for more constrained devices and the full Flash Player did not run well on smart phones because it required the power of a desktop computer. Steve Jobs famously once said, “there is this missing product in the middle,” referring to this issue.

Incredibly, Adobe did not ship the mobile version of the full Flash Player until June of 2010(version 10.1), three long years after the launch of the iPhone! By then, the iPhone was the most popular device on the planet and Apple had shifted focus from browsing the internet to apps where Flash did not matter (recall the “there is an app for that” ad campaign). Adobe had missed the window of opportunity to be part of the iPhone.

Sure, Apple could have still adopted the Flash Platform in 2010, but it was not in the company’s best interest at that time. In the end, Apple decided not to adopt the Flash Platform because Flash would limit its ability to differentiate its devices. Apple marketing was focused on the broad availability of apps that worked best on iOS. To support such positioning, Apple needed developers to target the latest set of proprietary APIs (accelerometer, compass, gyroscope, etc.) rather than write to a higher level cross-device platform that would deliver undifferentiated experiences across Apple and non-Apple devices.  This is why Apple decided to block Flash from iOS (for more on this see: Why Steve Jobs will never put Adobe Flash on iOS devices).

Adobe did react to the disruption the iPhone had created and adjusted its business model, but it was too late by then. In March of 2008, Adobe announced the Open Screen Project essentially making the player free for OEMs as long as they implemented it in a consistent way for developers. To ensure consistency for developers, Adobe also began to create its own binary implementation of the player for the leading mobile platforms in the same way it had always done for Windows and Mac OS on the desktop. However, with “Flashless” iOS devices leading the charts and HTML5 adoption increasing on mobile devices and web properties, the writing was already on the wall and there was no turning back. Adobe had been unable to disarm the time bomb in time and it eventually exploded.

Flash for mobile is dead, but Flash for the desktop lives on, right? Wrong!

It’s pretty simple: Flash for the desktop cannot survive without mobile support. With PCs becoming a smaller and smaller share of Internet connected devices (see chart below), it’s only a matter of time before most web sites will be updated to not require Flash. It is hard to imagine many examples of web properties that would want to exclude the majority of the eyeballs on the internet by requiring Flash.

Of course, web sites don’t have to remove Flash content outright. They can add logic to serve Flash content for desktops and HTML5 content for other devices. This will in fact be the case during a multi-year transition to a “Flashless” internet. As new content is created that excludes Flash, as HTML5 adoption and capabilities catch up to Flash, and as the share of PCs continues to decline, the percent of web sites that serve Flash content on the internet will approach zero, causing Flash on the desktop to die a slow death.

Note that this transition began several years ago as web properties adapted to support iOS devices — which account for a whopping 62% of mobile browsing page views! YouTube, one of Adobe’s flagship references already added support for HTML5, dealing Flash a major blow. jQuery, a popular JavaScript library that competes with Flash for building interactive sites has already overtaken Flash. The tide on HTML5 is turning and it’s only a matter of time before Flash on the desktop suffers the same fate as its mobile sibling.

To recap, the seeds for Adobe’s failure with Flash were planted many years ago with a revenue model that made sense at that time, but remained as a ticking time bomb for far too long. The model caused Adobe to move in a direction that was opposite to where the market ultimately moved to, especially after the launch of the iPhone (feature phones versus smartphones, OEM requirements versus developer requirements, operators as channel versus Apple and Google as channel). In addition, when the iPhone was launched, Adobe moved too slowly to adapt to the new market reality (3 years to launch Flash Player 10.1), ultimately killing Flash.

What do you think? What do you believe went wrong with Flash in mobile? Do you think Flash will survive on the desktop?

The Kindle Fire relies on Google’s Android operating system and the prevailing argument in the blogosphere is that Amazon needs webOS to differentiate:

“By purchasing the remnants of Palm, Amazon would have free rein to redesign webOS to its own liking, and it would be able to further differentiate its Kindle devices from the slew of Android tablets in the market” (from the story referenced above).

A cursory analysis of both companies (see table below) seems to support this argument.  Amazon has all the pieces in place to pose a credible threat to Apple, except for the ability to differentiate at the OS level.

What makes the Amazon rumor most credible is the fact that  Palm’s former CEO, Jon Rubinstein, is now on the board of Amazon and he would love to get his baby back.  In fact, Rubinstein had gone on record to say that “Amazon would certainly make a great partner” for webOS.

It all makes sense, right? Amazon should buy webOS…       NOT.

The problem with this argument is that it fails to recognize that Amazon is in the business content distribution, not devices.  Amazon wants to optimize around maximizing the availability of content it can distribute across as many platforms as possible.   This is Amazon’s business.   Amazon’s strategy is not about profiting from selling devices.   In fact, at $199 for the Kindle Fire, Amazon is subsidizing its devices so it can maximize its market potential for content distribution.  It’s a very different strategy from that of Apple which differentiates its devices with iOS and enjoys a nice margin as a result.

If Amazon were to buy webOS to replace Android on its devices, it would have to invest dearly to 1) maintain the competitiveness of the operating system, and worse 2) build an ecosystem to create webOS content so it can be distributed to consumers.   Amazon would have to virtually start from scratch rather than leverage the existing (and abundant) base of Android developers and apps.

Amazon’s strategy is just the opposite: distribute as much content as possible across as many platforms as possible.  Note that Amazon has already deployed its Kindle reading app across competing Android and iOS devices.   It has also deployed its Android app store on competing devices, and I’m sure it would love to deploy its app store on iOS devices as well, should Apple ever allow it.

Borrowing Geoffrey Moore’s terminology, for Amazon the OS is “context” not “core.”   The OS is something that Amazon needs, but it does not need to differentiate.   Fortunately for Amazon, Google has made Android available as open source.    This enables Amazon to license Android at no cost and invest minimally to have its own branded user experience.   Amazon is not even required to use the Android or Google brands with consumers.   This is the best deal in town and I’m sure Google is not too happy about it.  But if you are Amazon, why mess with a good deal?  It’s like having your cake and eating it too.

What about the Palm Patent Porfolio?

The only reason I see Amazon making a play for webOS is to acquire Palm’s patent portfolio.  If HP cannot find a buyer who needs webOS for its devices, it will have to settle for a much lower valuation and find a buyer that needs the portfolio as arsenal for the patent warfare that is currently plaguing the mobile industry.  Amazon could make a play if it thought it was vulnerable to a patent attack.  According to the latest set of rumors, HP may be reaching the stage of considering lower offers for Palm’s patent portfolio with Oracle listed as the potential buyer.   In this scenario, the buyer would buy webOS, shut it down, and keep the patents to play either offense or defense with the likes of Apple, Microsoft, and Google, all of which have recently beefed up their own patent portfolios for this purpose.

What do you think?  Who do you think will buy webOS and why?  Should Amazon make a play?

Last month we had a good mixture of analysis and round up type blog posts.  I selected the ones that I thought were more insightful and/or contained practical advice for developers or marketers.  Be sure to check out my pick of the month at the bottom of this article.

If you are a developer, Sean Thompson, VP of Production at GOSUB 60, wrote a nice piece on the WIP blog to help you decide if your app should be free.  The top grossing apps are free to download and are monetized through in-app purchases, but should you also monetize your app this way?  Sean helps you decide by considering five key questions.

If you are considering building your retirement nest egg with mobile affiliate marketing, you should think twice before you take the plunge.   James Coops from MobyAffiliates explains that while many conditions for making money from mobile affiliate marketing are coming into place, a number of barriers still remain. Take a look as his post Is it Possible to Make Money from Mobile Affiliate Marketing?  If you decide to not take the plunge with mobile affiliate marketing, you may want to consider mobile coupons.  Russel Buckley, Chief Marketing Officer of Eagle Eye Solutions, believes that mobile coupons will be the the next billion dollar market.  Despite the company promotion in the article, it is worth a read.  Russel explains why the largest physical good advertisers such as Procter & Gamble have stayed on the sidelines when it comes to digital advertising and predicts that mobile coupons will cause these advertisers to make a serious move into digital.

Ajit Jaokar, founder of the London based publishing and research company futuretext posted a thought provoking piece arguing that the two sided model does not apply to telecom operators.  With all the buzz around Telco 2.0 and with many operators investing in developer ecosystems, this is certainly a contrarian view by a leading thinker.  Take a look to see which side of the argument you take.

Are you a Digital Native? or an Immigrant?  Do you know how to market to the Digital Natives? If you are a marketer in the 21st century, Peggy Anne Salz, Chief Analyst and Founder of MSearchGroove (and also founder of Carnival of the Mobilists), wrote a must-read piece with practical advice on marketing to the Digital Natives.  It relates to her contribution to a recent book on the topic and a follow-up to the book author’s own post on the topic.  Peggy’s contribution is based on extensive primary research she conducted on the topic and is full of insights.  Take a look.

James Rosewell, Technical Wizzard at The Fonecast makes the case that Microsoft should buy Nokia outright.  Microsoft should use the pocket change it saved from the failed attempt to buy Yahoo! and put it to better use by acquiring Nokia.  James backs up his case with two key reasons Microsoft should act.  Very timely post.  Given Nokia’s recent stock price tumble, Microsoft might even end up with some spare change after the transaction.  Also related to Microsoft, in case you missed the news about Mango, Aurélien Fonteneau, mobile media & marketing enthusiast, wrote a round up of the new capabilities in Windows Phone 7.

Dennis Bournique of the WAP Review attended the Meego conference recently and was disappointed to find no Meego handsets.  However, he wrote a nice round up of the conference, including what’s new in Meego 1.2 and other announcements.

Volker Hirsh, Chief Strategy Office at Scoreloop and co-founder of Blue-Beck takes a close look at the evolving role of the game publisher – from the traditional console game days to today’s mobile distribution.  At a time when many have already proclaimed the death of the publisher, Volker breaks down the role of the publisher and explains how each is evolving, including providing his advice for game developers.  If you participate in the gaming ecosystem, be sure to take a look.

Mobile is the mega disrupter argues Richard Monson-Haefel, VP of Mobility at Ambient Consulting.  Mobile devices are now ubiquitous and more powerful than ever, yet mobility is not yet a fundamental component of every IT department’s strategy.  Check out Richard’s post where he coins the term “Omni-Mobility.”

My pick of the month:  Sean Thompson for his insights, helpful advice and original content.   Honorable mention goes to Ajit Jaokar for his controversial post on telco business models.

PS: If you are in the Manchester area, be sure to check out the inaugural Mobile Monday event coming up on June 6.

In the era before the iPhone (aka “Bi“), this question did not matter as there were no viable alternatives.  In fact, with hindsight, the notion of a smartphone to run many apps did not exist for most consumers.    You bought a BlackBerry primarily for messaging and phone calls (maybe a couple extra apps, at best).   However, in this new “Ai” era (after the iPhone), the situation is dramatically different.  RIM has been incapable of defending its position as a smartphone platform against new entrants Apple and Google.   And the situation can only get more difficult for RIM with the resurgence of Web OS under HP and of Windows Phone thanks to the recent Nokia deal.  If RIM can’t compete in a 3 horse race, can it survive a 5 platform war?

By contrast, RIM has been very successful with its messaging and collaboration applications.  RIM is the clear leader in Enterprise email, with others playing catch up.  And in case you have not been paying attention, RIM has been able to build a very large base of consumer messaging users with its flagship BBM application especially in international markets.   In fact, RIM’s troubles in North America are only being masked by its unprecedented growth of consumer messaging users internationally (for more on this, check out Mike Mace’s Tale of Two BlackBerries).

Should RIM continue to try to compete as a platform play? Or would RIM shareholders be better off if RIM focused on building its messaging franchise across more platforms?

The answer to this question will have dramatic implications on RIM’s future actions.  For exampe:

• Should RIM invest to not only catch up, but differentiate its operating system and app store?
• Should RIM scrap its plans to launch the Playbook and instead launch its apps on the iPad and other tablets?
• Should RIM port its enterprise collaboration suite to competing platforms?
• Should RIM port its successful BlackBerry Messenger (BBM) to iOS and Android?

What business is RIM in?

Let’s run some quick “back of the envelope” numbers to shed some light on this question (source):

• RIM’s Device Average Selling Price = $300
• Device Margin = $105     (35%)
• Messaging Subscription Revenue = $15 per quarter per user (or $60 per year, $120 for two years)

If we look at the numbers over the typical 2-year contract in North America, RIM generates subscription revenues per user of approximately $120, but a margin of only $105 for the device.

At a very gross level (say nothing else changes for a rough “order of magnitude” approximation), if RIM could double the number of user subscriptions by porting its apps to all other platforms, it would more than make up the lost margin from device sales.  Doubling messaging users would be no slam dunk, but it’s definitely attainable with the much larger addressable market that would result from this move.

On the other hand, if RIM does not port its apps to competing platforms and its device market share continues to drop, both subscription and device revenues could plateau and then head south over time.

Is RIM a player in consumer messaging?

It is common knowledge to those of us in Silicon Valley that enterprise email is what keeps many users loyal (or should I say “hostage”) to RIM devices, especially given corporate IT guidelines.  However, the same is true in the consumer segment in international markets such as Latin America and the Middle East with RIM’s BBM app.    In those markets, many consumers pick up BlackBerries so they can message their friends at no additional cost using BBM.  In addition to lower costs, BBM offers enhanced functionality such as presence and read receipts that SMS can’t offer.   For example, how quickly a message status of “D” (delivered) changes to “R” (read) indicates to the sender whether the recipient is engaged in the conversation or perhaps busy with something else.  For more on BBM’s popularity, check out this post.

The BBM community of users has kept many consumers in these markets loyal to RIM devices.  If most of your friends are on BBM, you will think twice before you switch to an iPhone or Android device (which doesn’t offer the BBM service).

Anecdotally,   I personally have many friends and relatives in Latin America on my BBM and this is one reason I carry multiple devices rather than outright switch to one of my newer devices.  Even when I travel to Europe where roaming SMS rates skyrocket to 50 USD cents, I can still stay in touch with my LATAM contacts at no additional cost.

How long can RIM keep its messaging users hostage to its platform?

RIM needs to either 1) offer a competitive platform with a thriving developer community and regain device market share or 2) port its apps to new platforms and grow its base of messaging users across a larger addressable market.

Time is running out

• RIM has just lost its long held No. 1 position in the US to Android and with 300,000 activations per day, Android shows no signs of slowing down
• RIM’s developer acquisition efforts are far behind competing platforms, as illustrated by this wake up call to RIM by a prospective developer that went viral
• After 2 years since its launch, RIM’s App World contains a meager 20K apps, compared to several hundred thousand for iOS and Android
• RIM has yet to ship its first tablet while Apple has already raised the bar with its second generation design and aggressive pricing and Android tablets are beginning to crowd the space
• HP, the world’s largest PC maker, is playing to win: planning to ship over 100M Web OS devices per year, including PCs
• iOS is quickly catching up in the enterprise, RIM’s traditional stronghold, with many IT departments already welcoming Apple devices
• Windows Phone now has a much better chance to be a contender given Nokia’s recent endorsement (though this won’t be a slam dunk either)
• Facebook is about to launch its Chat service on the BlackBerry platform, attacking RIM’s own BBM.  If Facebook Chat will have all your friends,  and BBM will have only the portion of your friends who own a RIM device, who do you think would win this battle?

Is RIM internally conflicted about its own positioning?

There is some evidence in the blogosphere that RIM may already be struggling with this decision.   The most recent rumor indicates that RIM is planning to bring BBM to Android and iOS.  Whatever RIM decides, it is critically important that it communicates the decision well and sticks with it.   This is in contrast to the recent Playbook positioning fiasco where RIM initially positioned it as the “First Professional Tablet” and “the Enterprise Standard” only to later reposition it in Barcelona squarely as a consumer device (games, music, videos) that is simply “enterprise ready.”   Perhaps the choice of a seemingly consumer brand “Playbook” for an enterprise device should have given us a clue that RIM was internally conflicted on the proper Playbook positioning (I wonder if this internal conflict contributed to the recent departure of RIM’s CMO Keith Pardy).  RIM can’t afford this kind of indecision in such a competitive market.  RIM needs to figure out how to play to its strength, position itself accordingly, and rally the company in that direction.

What do you think?  Should RIM be in the platform business or the messaging business?  Participate in the poll below and leave a comment with your view.

• Apple launched 4 successful phones plus the iPad
• Google launched Android and quickly secured a market leading position
• RIM has lost some ground with two under achieving devices (Storm and Torch)
• Palm launched the failed Pre and ran out of cash
• Once almighty Symbian faded
• Nokia and Intel joined forces with Meego
• Samsung launched Bada….

all this… and Microsoft has yet to make its first move.

In a platform battle that is surely to consolidate, in the limit, to likely one big winner plus niche players, it’s not a pretty situation for Microsoft.  But if you are in Redmond you can’t afford to lose in mobile.  PC shipments are an increasingly small share of device shipments, with mobile devices enjoying all the growth.  Losing in mobile would relegate the Windows platform from a virtual monopoly to a minority player in only a few years when looking at all connected devices.

The question is what cards does Redmond have to play (besides a ton of cash)?

The February preview of Windows Phone 7 in Barcelona and the recent news from Gamescom (see articles here and here) provide us with a strong clue:  Microsoft is going to play the Xbox card in a big way. Microsoft is going after gamers (users and developers) in a desperate move to gain relevance in mobile.   It makes sense for them.  When compared to market leaders Apple, Google and RIM, Microsoft’s advantage in gaming sticks out like a sore thumb.  Microsoft’s leading Xbox console and Live service will serve as Microsoft’s beachhead for its mobile attack.   In the same way that Apple leveraged iTunes to enter a new market and RIM is leveraging its enterprise base of email addicts to buy time, Microsoft will leverage its Xbox assets to establish a position in mobile.  This is obviously a big departure from Windows Mobile’s original base of business users (in case you haven’t been watching, Microsoft lost the battle among business users long ago).

As is apparent from the Gamescom articles referenced above, gaming will be the major differentiator for Windows Phone 7.   50 titles were announced as just the “first wave.”  In addition, Microsoft is planning to integrate the Xbox Live experience into Windows Phone 7 to make Xbox Live users feel at home on Windows Phone.   For example the Xbox gamer profile that contains your avatar, reputation, online status, and achievements will follow you seamlessly from console to mobile and back.   Many of the same titles you are already familiar with on the console will be in mobile as well and you’ll be able to easily play multi-player games on the Live service.  It has also been reported that Microsoft is paying iPhone developers to port their games to Windows 7, a tactic commonly used in the industry, but it is another clue that gaming is the key planned differentiator for Microsoft.  Another important clue is the emphasis on XNA as a way to create applications for Windows Phone 7.  XNA is Microsoft’s toolset and runtime environment for game development that supports the Xbox, Windows and is now a very prominent part of Windows Phone.  XNA was also a very prominent part of Microsoft’s recent training for developers.

The following recent quotes from Microsoft spokespeople provide clues to Redmond’s strategy:

• “Windows Phone 7 is the launch of a major gaming platform for Microsoft,” Matt Booty, General Manager of Mobile Gaming at Microsoft Game Studios.
• “We’re really approaching this as we would a console, so we have to deliver the breadth of games and the quality people expect from Xbox,” said Kevin Unangst, senior director of PC and mobile gaming. “To have this quantity and quality of games committed this far ahead of launch, with even more to come, is a statement of support that says Windows Phone 7 will be a big success.”
• Kevin Unangst: “Starting with the announcement today, we’re going to bring a set of high -quality games and experiences, all using Xbox LIVE, to bear at the launch of the Windows Phone 7.”

Clearly Apple will fight hard in this segment of the market.  Despite original criticism that a device with a single button could not deliver a great gaming experience, Apple has proven critics wrong.  And with innovations such as the new gyroscope in the iPhone 4, Apple will raise the gaming experience another notch.  Still, there is a base of hard core gamers (see this post) that don’t buy into the iPhone as a gaming platform that can provide a seam for Microsoft to exploit.

I personally think it is going to be really tough for Microsoft to get in the game.   The market window is closing fast.  Traditional Microsoft OEM partners like HTC (Microsoft’s largest OEM partner) and Motorola are having great success with Android already.   However, I do think Redmond is playing a sensible card.  To have a shot Microsoft needs to pick a target segment and put all the wood behind that arrow.  Going after its own base of Xb0x users and developers a logical move for them.

This does not mean that Windows Phone devices won’t support other functions.  To be successful devices will need to attract other genres as well (social networking, music, etc.), but Microsoft devices don’t need to differentiate with them.   To borrow Geoffrey Moore’s terminology, gaming will be “core” to Windows Phone 7 and everything else will be “context.”  The strategy is to focus the innovation in gaming and copy others everywhere else.

What do you think?   Can Microsoft still get in the game and be a contender?   What other cards can Microsoft play?

Given the launch of the Flash-less iPad and the leaks from Apple’s post launch employee meeting most industry insiders have finally concluded that Adobe Flash is not coming to iPhone OS devices.    Over the last two-and-a-half years the conversation has shifted from

• When will the iPhone support Flash? to…
• Will the iPhone ever support Flash? to most recently…
• Why won’t Apple devices ever support Flash?

The question in most people’s mind now is why not?  That is the question I want to address with this post.

While most of the debate in the blogosphere  centers around technical reasons, the real reason is not technical at all.  It is a calculated business decision made by Steve Jobs.

There is a lot of discussion about the technical issues that are keeping Flash away from Apple devices.   Here are only a few:

• Flash drains the battery
• Flash is buggy
• Flash performance is too poor
• Flash Lite does not support web based Flash content (Flash 9+)
• Steve Jobs: Flash Lite is too constrained, Flash Player does not perform in mobile, we need a “product in the middle”
• Steve Jobs: Adobe is lazy (well, this one is not really a technical reason)
• Steve Jobs:  Flash is obsolete.  HTML5 will replace it.

The latest technical argument to garner a lot of attention in the bloggosphere is:

• Flash does not support touch and requires a visible mouse with hover effect.

While many of these technical arguments are accurate, they don’t explain Steve Job’s stubbornness toward Flash.  These technical arguments are only excuses used by the Apple camp.  The lack of touch support is indeed a big problem, but if this were the real reason, Apple would have already stated this and would be working with Adobe and its community to address the issue.  After all, updating a Flash application to support touch is easier for a Flash developer than having to create a brand new application using Objective C and Apple’s native SDK.

So what’s the real reason?

Adobe Flash will not come to iPhone OS devices because Flash would limit Apple’s ability to differentiate its devices.

Adobe’s vision is to turn its Flash Platform (including both Flash and AIR) into THE consistent runtime across devices.  For more on this vision see the Open Screen Project, launched by my team while I was at Adobe.  It’s a great idea.  Developers target the Flash Platform (instead of the native SDKs) and their applications run consistently across devices, eliminating device fragmentation.  Sounds great, right??  Yes… unless you are a device manufacturer looking to differentiate with applications (can you say Apple?).

It’s clearly evident in Apple’s marketing that its catalog of native iPhone applications is a significant differentiator.  We’ve all seen the “There is an App for That” campaign.  It is in Apple’s interest to encourage developers to create native applications that take advantage of Apple proprietary APIs.  As an example, multi-touch and the accelerometer were important differentiators of the iPhone early on and it was important for Apple to have developers target those APIs.   The same applies to the proximity sensor.  As Apple continues to innovate it will want developers to target native device capabilities that run best on Apple devices.  Supporting Adobe’s Flash Platform would compromise this objective.  Apps developed on Adobe Flash or Adobe AIR would offer a similar experience across Apple and non-Apple devices.  Note the tagline on Adobe’s Open Screen Project web site:  ”singular experience, multiple devices.”   This is not what Apple wants.

The strategy to differentiate with applications is not limited to Apple.  RIM and Samsung have made recent moves that point to their aspiration to differentiate their devices with applications (although neither can afford to pick the Flash battle at this time; their positions are under attack by Apple and Google and are too busy playing defense).  Unlike Motorola who chose to forgo differentiation with applications by adopting Android as its platform going forward, Samsung launched its own mobile platform called BADA.  With BADA, Samsung hopes to build its own developer ecosystem and differentiate in this way.

RIM’s strategy to differentiate with apps is clearly evident with the launch of its recent “Super App” campaign.   Super Apps are apps that take advantage of RIM’s proprietary APIs and enable tight integration with RIM’s own applications like the inbox, contacts and calendar.  I was at the latest RIM developer conference in Barcelona where the top message for developers was:  ”develop your applications to integrate deeply with the RIM platform.”   I suspect that RIM will be running contests to promote Super App development and maybe even reward developers who create them with better placement on its App World store.  In this way RIM (like Apple) can ensure the availability of many applications that run better on its platform.

Although most in the industry cite device fragmentation as a top issue in mobile, device OEM’s  need to differentiate results in increased fragmentation instead.  Apple has chosen to differentiate its devices with applications and this is why Steve will not support the Adobe Flash Platform on Apple devices.

Please share your thoughts on this topic.  What do you believe is the main reason Apple devices will not support Adobe Flash?

11 May 2010 Update:

I posted this article at a time when most were pointing at technology issues as the key reasons Apple would not adopt Flash.  Since then Apple has made two moves that confirm the premise of this article (that this was a calculated business decision by Steve Jobs):

• Apple updated its SDK agreement forbidding developers from using other programming languages
• In a very unusual move, Steve Jobs himself published his rationale for banning Adobe Flash

It is very interesting to note that Steve Jobs contradicted himself in his own letter.  He initially argued that the decision was “based on technology issues,” but later cites “the most important reason” as purely a business reason.   I suspect Steve got caught between the outdated “party line” to blame Adobe technology and the reality of the situation.   I’m not trying to minimize the technical issues with Flash.  They are real.  But as I stated in this article, they are used as convenient excuses by the Apple camp.  Given “the most important reason” that Steve cited, you can be sure that even if the technology issues did not exist, Steve would not have allowed Flash on his devices.  The business reason he cited trumps all the technical arguments.

In case you have not read Steve’s letter, he cited the most important reason pretty much as predicted in this article.  In Steve’s own words:  ”Flash is a cross platform development tool. It is not Adobe’s goal to help developers write the best iPhone, iPod and iPad apps. It is their goal to help developers write cross platform apps.” Steve also writes:  “We cannot be at the mercy of a third party deciding if and when they will make our enhancements available to our developers.”

In other words, supporting Flash would limit Apple’s ability to differentiate its devices.  As Apple continues to innovate with its devices, it will publish new proprietary APIs and encourage developers to adopt them, ensuring that the resulting applications run best on Apple devices.

How did Google build this database of operator base stations?

In case you have not already heard, it’s a simple crowd sourcing method:  many handsets have both GPS and access to Cell ID.  Each time one of these devices reports its GPS coordinates to Google (using Google applications like Maps) it also reports its Cell ID even if it is not required for that particular application.  With so many devices reporting their location around all the base stations, Google can use a clustering algorithm to pinpoint the location of each base station and build a very accurate database.   When devices that don’t have GPS (or are indoors) require a location fix, they simply report their Cell ID and Google can easily locate them with a database look up.  As new base stations are added (tons are added all the time), Google quickly discovers them using the same method.  Very clever indeed.

Can operators block Google from “stealing” their location information?  Enter Dynamic Cell-ID

Dynamic Cell-ID is a way of dynamically assigning the Cell-ID that is reported to wireless devices by base stations.  Rather than always reporting the same Cell ID, base stations report a different, dynamically generated Cell-ID.   Only the operator can map the dynamic Cell-ID to the fixed Cell-ID that is required to infer location.   Very clever too.  You can find a patent application for dynamic Cell ID here and note the mention of shielding “illegal” service effectively.  I know of at least one major European operator considering implementing this approach.

Should operators block Google? would this backfire?

As tempting as this dynamic Cell-ID approach sounds, blocking Google is not be in the best interest of operators.  Imagine if Google Maps did not work for operator A customers, but it worked well for customers of operators B, C, and D?   Would operator A be better off?  Probably not.   Customers could vote with their feet and switch to another operator.   Although Google would have the option to pay the operator for access to its location API, this does not seem likely.

Water under the bridge

Rather than trying to regain control of location, operators should learn from this experience and move fast to monetize other assets before they too become commoditized.   Examples of these include payments and subscriber profile.   See also my post “Will Operators miss the Boat with Payments Too?“

What do you think about Dynamic Cell-ID?  Should operators block Google in an effort to monetize location?

2009 was the year of the app store wannabes.  Following the remarkable success of the Apple App Store, OEMs, mobile platform vendors, mobile operators, and traditional aggregators either created new app stores or repositioned their existing offerings as app stores.  There are now between 24 to 32 app stores depending on who is counting (see Distimo’s app store report and the WIP App Store Wiki for reference), and more stores are surely to follow.  However, key questions remain about how the app store landscape will emerge after the current period of hysteria subsides and the dust settles.

- Are we going to see many app stores on each handset?
- Will app malls emerge to host multiple app stores within?
- Will operator stores gain critical mass?

[Or will we see a "no app store" future as proposed by Matt Millar via the comment thread?]

Andreas Constantinou wrote an excellent article that defines the app store building blocks and predicts a “dime-a-dozen” app store future.  I will build on this post, but will offer an alternative view of how the landscape will evolve.

It’s a Winner-Take-All Contest

If we were to extrapolate the current trend, we could expect a future where each handset will host many app stores.   An LG Android device on the Orange network would have the LG App Store, the Android Market, and the Orange App Shop.  The Verizon version would have the V CAST store in place of the Orange App Shop.  On top of this, you could add the Getjar multiplatform store and several specialty stores for say, games, health, and productivity apps to name just a few.  Can you imagine the mess this would create for the user experience?  Which app store do I launch? Which apps do I find on which store? Are apps duplicated on multiple stores?  Are the prices the same across stores or do I need to shop around?  Are the versions of the apps consistent across stores?

Fortunately when the dust settles consolidation will occur and one app store will command nearly all the market share on each device.  Sure there may be a couple “also rans” with a small share, but as history has shown us, these two-sided platform battles tend to result in winner-take-all contests (see definition of two-sided markets here).   We’ve seen similar battles already play out on the web with Amazon winning e-commerce, eBay winning auctions, and Google winning search.

Why winner-take-all markets happen has already been well documented.  Economists Frank and Cook documented this phenomenon with their Winner Take All Society book and Rich Skrenta wrote a nice post on the battle for search supremacy that led to Google’s reign. In two-sided markets there are two sets of users (consumers and developers in the case of app stores) and once both sets of users pick a winner, it is very hard for competitors to gain much share. To cut to the chase, the app store battle in mobile will also result in a winner-take-all contest for the following reasons:

Please see the rest of the article at Vision Mobile’s blog and join the discussion via its comment thread.

Although Verizon desperately needs to counter the iPhone, I believe this latest attempt will hurt RIM much more than Apple.   In other words, it will backfire cannibalizing more Verizon RIM devices than AT&T iphone devices.   Here are two reasons why:

1. Droid Takes Advertising Dollars from RIM

RIM was until now Verizon’s flagship smartphone partner.  If we ignore the ailing Windows Mobile platform, RIM has virtually the only competitive smartphones in Verizon stores.   In the past Verizon poured most of its advertising dollars in the smartphone category to promote RIM Devices.  But that is about to change.   Not only does RIM have to share Verizon’s ad budget with Droid, Droid will get the better part of it.   Verizon has said publicly that it will promote Droid with its “biggest marketing campaign ever.”   This is going to hurt RIM.  Although other carriers in the US carry RIM devices, Verizon is the only operator where RIM enjoys flagship status.  AT&T’s flagship device is the iPhone of course.  Sprint’s flagship devices are now Palm and Android devices.  And T-Mobile is pushing Android of course.

2. Droid’s Target Market Overlaps more with RIM’s than the iPhone’s

The second reason is a bit more subtle, but perhaps more significant.   Droid’s feature set will appeal more to the traditional RIM user than to iPhone’s target market.  This means that Droid will naturally attract more would be RIM users than would be iPhone users.  Let me elaborate.

Roughly speaking, there are two main clusters of smartphone users:  those users who optimize for communications features and those who optimize for entertainment features.   Users optimizing for communications features need good quality voice service, great email and Exchange support, and a preferably physical keyboard for typing lots of emails.    Users optimizing for entertainment want a great gaming experience and great music and video services, including media synchronization (i.e.  iTunes).  Although these two segments are increasingly overlapping,  they are still distinct.  It’s no mystery that the iPhone dominates the entertainment segment with its great music player and iTunes integration.  When it comes down to it, the iPhone is a great entertainment device and not that great voice phone (which users who optimize for communications demand).   Unlike a voice phone, the iPhone has no physical keyboard.  And running on the AT&T network, iPhone users often complain about dropped calls but put up with the problem because they favor the entertainment features.

I know many of you are thinking that the iPhone is a good email device too.  Although the iPhone is making clear inroads into the communications space with Exchange support for example, this is not the iPhone’s sweat spot.   RIM of course optimizes around communications capabilities.  With the best support of corporate email systems, a great physical keyboard for typing lots of emails, and a good voice phone.

Droid is a better communications device than it is a good entertainment device.  For this reason, Droid will hurt RIM more than Apple.  Droid comes with the Verizon network which offers better voice service and fewer dropped calls.   Droid is made by Motorola, who makes better phones and radios than Apple.  Droid featurs a physical keyboard that many RIM users will demand before switching to a new platform.  At the same time, Droid is missing key entertainment capabilities such as VCAST music,  iTunes support, or any other good media synchronization service.

It will be interesting to watch what happens, but for these reasons, my bet is that Droid will hurt RIM more so than the iPhone.  This is despite such aggressive Droid marketing campaign attacking the iPhone directly.

What do you think?   If you are an iPhone user, would you switch to Droid?   If you are a RIM user, would you?

I want to write about merchandising apps in the mobile ecosystem, but first let me say that we need a new way to measure time in mobile.  The launch of the iPhone changed the ecosystem so dramatically that any discussion of how the mobile ecosystem works must specify Ai or Bi (After or Before the iPhone), in a similar way that historians use BC and AD to date historical events.

As an example, how you merchandise a mobile application today is very different than at any time Bi.   And this is what I want to post about.

At CTIA in San Diego I attended and spoke at the #wipjam event and I found the discussion on merchandising apps most interesting.   It was led by Mitch Oliver from Qualcomm with many developers sharing their experiences, and I thought it would be good to share some of the learnings with developers looking to go mobile.  Some of you not interested in the details may want to skip to the recommendations below.

Before the iPhone (Bi): it was all about getting on deck:

Operators had a virtual monopoly on application distribution.    If your application could get on deck with an operator, this was half the battle. Investing in additional marketing helped, but was not required if your app got decent deck placement.  Because the operators had very limited shelf space, they did not take chances with “hit or miss” long tail developers.   So they pretty much stuck with proven, larger developers with a recognizable brand.    If your app did not perform (often because it was hard to discover), out you went.  Your livelihood depended not on consumer choice, but on the operator team responsible for programming its deck.  The programming team allocated valuable deck placement based on their own view of how an app would perform or in many cases based on behind the scenes deals.   Worse yet, developers had to make a significant investment without any assurances of ever getting on deck.  This model left the small developers – often the more creative ones – out of mobile.   Small developers did have an opportunity to work with publishers  (or aggregators) who had reserved shelf pace with the operators – but this model required the developer to share a significant portion of the revenue with the publisher, making it financially unattractive.

As a result, before the iPhone, the most creative developers focused their energies on the desktop and the Web. The operators had squandered their monopoly position to distribute mobile apps and had stifled innovation.   There was pent up demand, however, by brands, content owners and developers to extend their reach to mobile.  Enter the iPhone.

After the iPhone (Ai): leveling the playing field for the small developer:

One year Ai, Apple launched the the App Store.  85,000 apps and 2 billion downloads later, the app store has redefined the model and is now being copied by many other app stores:

• The App Store made the playing field even so small developers can get on deck as easily as the big guys.
• The App Store eliminated the need for middle men (publishers or aggregators).  Small developers have a direct path to market.
• The programming team is gone, other than for programming the carousel (very important if you can get on it) and for blocking competing apps that Steve does not like.
• Developers get to price their own applications. Amazingly, before the iPhone operators insisted in setting the price for apps as if they knew more about the developers’ customers than the developers themselves.   More importantly, developers are now able to tweak pricing based on real time feedback from the market.
• The app store eliminated certification fees lowering the entry barriers and enabling trial and error application posting.
• Introduced a model for free apps.  This is a model that Lithuania based Getjar pioneered with its traditionally geeky audience, but the App Store made it mainstream.

OK, so the iPhone made it much easier to merchandize applications, right??   Think again.   The iPhone simply created unlimited shelf space.   If your app is one of 85000, how do you stand from the crowd?   Obviously if you can get on the carousel of promoted apps, you’re golden.  But this requires magic as there are no written rules.  Now that the operators are not picking the winners with deck placement, you need to compete on your own merits and merchandise the old fashion way.

Here are the recommendations for developers:

1. You have to do your own marketing.   You can’t rely on the app store provider to market your app or on consumers discovering your app.
2. Know your audience and figure out where they hang out so you can reach them.  For example if you are trying to reach the social generation, use social media.  Developers at #wipjam reported great results from these efforts.  And it’s incredibly cheap.  Use Facebook, Twitter, and the bloggosphere as your CRM system.
3. If you deploy a free app with the objective of later upgrading your customers to a premium app (the “freemium” model), ensure the free app stands on its own.  Don’t just put out a demo or significantly crippled version of the application.  Your objective is not to upgrade every free user.  Free users give you free marketing.  Many will never upgrade and this is OK.   But many will tell their friends, post on Facebook or tweet about your app.
4. Invest in an in-app analytics tool such as Motally to understand your users and tweak your application.
5. Trial and error pays, especially with today’s lower barriers to entry.  It is very hard to predict what consumers will want.  Don’t spend your life savings on a single app.  Instead develop quickly and try it out on the app store.  If consumers adopt it, update the application quickly and often.   If it does not fly, move on to the next one.
6. Port your app to the Palm Pre.   Unlike the iPhone, the Palm Pre is hurting for apps.  You have a much better chance of getting noticed.  If you can get discovered on the Pre, you’ll get a ripple effect on the iPhone and other stores.
7. Cross promote your application with other developers.  Large developers have a significant advantage because they can cross promote their applications.  If one of their applications is a hit, they can use that application to promote other apps in their lineup.   Find other small developers and work out a deal to cross promote your apps.  As an example, look into App Treasures a group of small game developers doing just this.

Do you have other recommendations?   Please share them with a comment.