Smartphones as Appliances

The growth of the mobile data marketplace is one of the bright spots for business in the current recession. Mobile carriers report increasing demand for data services, and Apple and Research in Motion both reported strong earnings aided by sales of their smartphone products.

To understand better how the mobile data market is developing, my company, Rubicon, conducted a quick study of smartphone users in the US.

Key findings:

• Smartphones are carried by about 10-11% of US adults.
• RIM Blackberry is the leading smartphone in the US, with almost half of smartphone users.
• Apple’s iPhone is second; it’s carried by about a quarter of smartphone users.
• Users of different smartphones have different feature priorities. iPhone users rank browsing as the most important feature when choosing a phone. Blackberry users favor e-mail, many Palm users favor calendar, and Google G1 users put heavier emphasis on maps.
• The best-selling smartphones are the ones that most strongly associate with one or two particular features. Blackberry and iPhone each have one or two standout features that more than half their users rank as extremely important. It appears that these strong identities attract more users.
• Although the iPhone application store has been getting huge press coverage, the ability to add applications is only the #4 priority for iPhone users, below browsing, e-mail, and 3G capability.

What it means: Smartphones are more like appliances than computers
Although reviewers and analysts often try to determine which smartphone is “best” overall, people apparently choose them according to which functions they care about the most. In the minds of many users, smartphones are apparently more like appliances than like general-purpose computers — users buy them for a specific task, and choose the one that is best optimized for that task.

Understanding how the mobile data market works is much more than an academic exercise. Creating a strong franchise in mobile data can have a huge impact on a company’s valuation. For example, RIM has a market capitalization of about $39 billion, far ahead of Motorola at about $13 billion and surprisingly close to Nokia at $52 billion.

The best-selling smartphones today are those that are most strongly identified with a particular usage, rather than those that are seen as moderately good several things. In our survey, this appears to be a particular challenge for Windows Mobile (which did not have a distinctive user profile), Palm, and the Google G1 (whose association with mapping was fairly weak).

It will be interesting to see if the mobile industry’s heavy promotion of application stores will make users start to view smartphones more like general-purpose computers. That would not necessarily be a good thing for most smartphone manufacturers, as it could lead to the sort of consolidation and commoditization seen in the PC market.

Installed base share: RIM leads the US smartphone market
Although many industry analysts produce market share figures for smartphones, most of them are based on self-reported shipment numbers provided by the manufacturers themselves. That means they show current sales rather than installed base, and are not verified independently. In contrast, this survey looked at the installed base, as reported by users themselves.

The chart below shows which models of mobile phone are used by respondents to the survey. About 80% of PC users in the survey use conventional mobile phones (called feature phones by the industry). About 15% are smartphone users, and the remaining 5% do not carry any mobile phones.

About 70% of US adults use personal computers, and few non-computer users are likely to carry smartphones. So we think it’s fair to say that about 10-11% of the US adult population carries a smartphone.

RIM is the US smartphone installed base leader, with just under half the installed base. Apple iPhone is next, with about a quarter of the installed base. The remaining share is taken up by Windows Mobile, Palm, and the G1 “GPhone.”

Notes:
–The installed base of Windows Mobile phones was a little bit lower than we expected, compared to reported Windows Mobile sales over the years. This could be due to several factors:

• Some users may not realize that they are running Windows Mobile, since it is available through a number of different handset brands.
• Some Windows Mobile users may have migrated to iPhone and/or RIM.
• Some Windows Mobile users probably identified themselves as Palm users, and were captured in that slice of the market.

–We did not distinguish between Palm users running Windows Mobile and those running Palm OS. In our experience, it’s hard for many users to make that distinction in a quick survey.

–We did not measure Nokia smartphone users. Nokia share in the US is quite low, and in our experience it’s almost impossible for Nokia users in a quick study to distinguish whether they are running a smartphone or a feature phone, as the identity of the OS is not prominent.

Different phones attract different types of users
Most reporters and analysts cover the mobile phone market as if it’s a single unified marketplace, with all mobile phones competing directly against one-another. In reality, the market appears to be is heavily segmented. Different people favor different features, and so they buy different phones. This is especially true of smartphones, because they have more variable features.

The average mobile phone user is focused on practical aspects of the device — price, choice of carrier, and the size of the phone. The chart below shows the percent of all mobile phone users (including smartphone and feature phone users) who listed a particular feature among their top four features. So about 70% of mobile phone users said price is one of their four most important features, but only about 15% listed mobile e-mail as one of their top four.

Top features of the average mobile phone user
Percent of users listing a particular feature in their top four.
Blackberry = e-mail
The priority profile for RIM Blackberry users is very different. By far their top feature is e-mail (not surprising), and they are also much more interested than average phone users in web browsing and calendar. Blackberry users are substantially less interested in price, size of the phone, and address book management.

iPhone = browsing
Since Blackberry is the leading smartphone platform, we’ll keep it in the chart, and show how other smartphones differ from it. First is the iPhone. The priorities of iPhone users are dramatically different from either typical mobile phone users or RIM users. Browsing was the iPhone users’ #1 feature, followed closely by e-mail. iPhone users were much more interested than RIM users in music, maps, 3G, and the ability to add new software. Of all the smartphones, iPhone has the most diverse feature profile, although browsing and e-mail are the clear leading features.

Windows Mobile user profile is similar to Blackberry, but less distinctive
The priorities of Windows Mobile users are similar to Blackberry users, with the exception that Windows Mobile users are a bit less focused on e-mail and more interested in adding new software and using maps.
No feature of Windows Mobile was #1 for more than about 40% of users, indicating that it doesn’t have a very distinct feature identity in the market.

Palm = calendar
Palm users were also somewhat similar to RIM users, with the exception that they were quite a bit more focused on calendar (it was their #1 feature), and did not rank e-mail and browsing as highly. It appears that RIM and Apple are siphoning off most of the people who care the most strongly about browsing and mail.
Calendar scored higher among Palm users than among any other platform, which probably fits with Palm’s roots as a PDA company.
Like Windows Mobile, Palm didn’t have any feature that was #1 to more than about 40% of users. It doesn’t have as distinct an identity as Blackberry and iPhone do.

Google G1 isn’t very distinctive, but maps stand out
Compared to all the other smartphones, the Google G1 “GPhone” has the least distinctive feature profile. It is cited for maps more than any other phone, but only 30% of users call that a top four feature. We were surprised that relatively few G1 users said browsing is a high priority. Given Google’s role in the web ecosystem, we would have expected a lot of G1 users to be very focused on browsing. Instead, it was far below iPhone, and on a par with RIM.

Methodology
Rubicon Consulting also conducted an online survey of about 3,000 PC users in the US in March 2009. The sample was provided by a national sampling service. The margin of error for the survey is approximately plus or minus two percentage points at the 95% confidence level. The published report can be downloaded here. or here: iPhone survey whitepaper v2

(Note: This post was co-authored during my leadership of Rubicon.)