Are Android Users Subsidizing iPhone Users at Verizon Wireless?

Subsidies Verizon Wireless is paying to entice consumers to buy Apple iPhones might also be penalizing Android devices, some now argue. Though top Android devices cost as much as Apple iPhones, high-end Android devices often sell for prices $100 to $200 higher than the iPhone.

In other words, Verizon is trying to recoup some of its cash flow and operating margin by making Android handset users pay more for their devices than Apple iPhone users.

Verizon is betting that buyers who want the high-end Android phones will pay, so they're marking those models up.

John Hodulik, an analyst at UBS AG has estimated that the iPhone subsidy could be as high as $400 per iPhone customer. If 13 million of the devices get sold in a year that implies a which $5.2 billion hit to earnings. Some argue that devices should not be subsidized, since doing so means consumers have to sign contracts. But iPhone subsidies are quite a big expense for firms such as Verizon Wireless.

From at least one perspective, contracts and subsidies offer value for consumers and service providers, with users getting devices they want at $400 lower prices, while service providers can smooth out recurring service revenues and reduce customer churn.

Apple has set a standard entry price of its newest smartphones at $199, with higher end models available with more storage. This year however, Verizon has set a new contract price for its high end Android phones at $299.

The implications are clear enough. If you like high-end Android devices, do not buy them from Verizon.

Both the Motorola Droid RAZR and the just released Google-branded Samsung Galaxy Nexus are $299 with a two year Verizon contract, and both are listed as costing $649 without a contract.

In contrast, Apple's 16GB iPhone 4S is offered for only $199, even though it costs the same $649 without a contact. Apple is getting a $450 subsidy, compared to just $350 for Android licensees Motorola and Samsung.

Verizon's $199 Android phones, including the Samsung Droid Charge, Motorola Droid 3 and Droid Bionic, cost $499, $459 and $589 respectively without a contract, making their subsidies worth just $300 to $390, or $150 to $60 lower than Apple's, one might note.  

The closest Verizon's phones currently come to an iPhone subsidy appears to be the HTC Thunderbolt, which is being offered for $149, a $420 subsidy compared to its $569 full retail price. However, this involves a special promotional discount of $100, making the "sale" price of Android models still higher than regular price of any of Verizon's iPhones. Verizon Wireless can do what it wants, of course. But consumers should also do what they want.

75% of Enterprises Use Social Media for Customer Service

Businesses use social media for a variety of reasons. Some 96 percent of respondents told Booz  & Company that they are using social media for “advertising and promotions.” 


Some 88 percent use social media for public relations.  Some 75 percent use social media for  customer service.  Social value in business 

Tablet, E-Reader Ownership Doubles in One Month: Unprecedented

The share of adults in the United States who own a tablet of some sort nearly doubled from 10 percent to 19 percent between mid-December 2011 and early January 2012.

The ownership of e-readers also surged from 10 percent to 19 percent over the same time period. Tablet ownership doubled in two months

That is an unprecedented growth rate for any consumer electronics device. Tablet ownership also had been on a strong adoption path earlier in 2011 as well, but doubling in 30 days from a base of 10 percent seems never to have occurred before.

To be sure, 10 percent adoption historically has been an inflection point: it is the point in an adoption process that represents critical mass, after which adoption accelerates.

You'll have to click on this chart to view it in more detail, but it is one of the most useful bits of historical evidence you can use to estimate how long it might take an application, service or device to reach 10 percent penetration of U.S. households, for example.

There are some caveats. Not every innovation succeeds. This chart only shows you what happened with the most-popular consumer electronics services and products.

The reason for sharing the chart is that a panel I was recently on was asked how long it might take for near field communications technology to be adopted by a significant number of U.S. consumers.

My response, based on past work studying consumer electronics adoption rates, was that it can take quite a significant amount of time, between three and 10 years, to reach the crucial 10-percent-of-homes threshold, which seems to be the point at which any innovation really begins to accelerate, in terms of adoption.  Consumer adoption patterns

Also, the more complicated the ecosystem, the longer it will take. Apple iPhones and iPads did not take long to reach the 10-percent penetration mark, because they operate in a fully-developed ecosystem where all that is required is purchase of a product, to obtain the value.

Telco Video Subscribers Approaching 100 Million

Collectively, global telcos had a total of 94 million video entertainment subscribers at the end of the third quarter of 2011, giving them a 12 percent share of the video market. Given current growth rates the subscriber total will have passed 100 million at the end of 2011.


Of course, global statistics can obscure as much as they reveal. In the U.S. market, for example, neither AT&T nor Verizon competes on a national basis, and each is a relatively modest competitor. 


Comcast alone has 22.4 million subs, while DirecTV has 19.8 million. Dish Network has 13.9 million subscribers and Time Warner Cable has 12 million. 


AT&T has 3.6 million video subscribers, while Verizon Communications has about four million. Granted, Verizon ranks about seventh in size, while AT&T ranks eighth, but Comcast is about 5.5 times bigger than either AT&T or Verizon. 


That is not to discount the importance of video services for telcos, either in terms of gross revenue or as a key component of the triple play that now is a service provider mainstay. But all fixed line services collectively are unable to drive overall growth at either AT&T or Verizon. That role exclusively is played by mobile services. 

Telco Pay-TV Subscribers Approaching 100 Million

Rank	MSO	BasicVideoSubscribers
1	Comcast Corporation	22,360,000
2	DirecTV	19,760,000
3	Dish Network Corporation	13,945,000
4	Time Warner Cable, Inc.	12,109,000
5	Cox Communications, Inc.1	4,789,000
6	Charter Communications, Inc.	4,371,000
7	Verizon Communications, Inc.	3,979,000
8	AT&T, Inc.	3,583,000
9	Cablevision Systems Corporation	3,264,000
10	Bright House Networks LLC1	2,109,000
11	Suddenlink Communications1	1,268,000
12	Mediacom Communications Corporation	1,100,000
13	Insight Communications Company, Inc.	670,000
14	CableOne, Inc.	628,000
15	WideOpenWest Networks, LLC1	432,000
16	RCN Corp.1	335,000
17	Atlantic Broadband Group, LLC	258,000
17	Knology Holdings	258,000
19	Armstrong Cable Services	242,000
20	Service Electric Cable TV Incorporated1	217,000
21	Midcontinent Communications	204,000
22	MetroCast Cablevision	182,000
23	Blue Ridge Communications1	171,000
24	General Communications	146,000
25	NewWave Communications	141,000

Earned Social Media Works, Study Finds

What is the value of a "fan?" In other words, can we quantify the business value of social supporters of brands?


A study of Christmas and holiday promotions by Amazon, Best Buy, Target and Walmart suggests that social engagement can drive better results, at least as quantified by visits to retailer online sites.


The data suggets that earned social media impressions can stack up favorably against paid ads for brands that are effective with their social efforts, at least i terms of website visits. 


Using an estimated value for earned impressions of $3.55 cost per thousand, Walmart earned $417,000 worth of impressions while Best Buy earned $86,000 in impressions.


When looking at the lift received from promotions that started in November 2011, all four brands received a lift of 2.2 times or higher. Target received the highest lift between October and the end of November at 3.5 times.


For most retailers, a significantly higher percentage of fans and friends of fans visited the retailer’s website, as compared to the rest of the Internet. About 64 percent of Amazon’s fans visited Amazon.com, compared to 27 percent of the total Internet. 


For Best Buy, 18 percent of fans and 13 percent of friends of fans went to BestBuy.com, compared to eight percent of the total Internet. Earned social media:

Amazon Kindle Fire Content Sales Stronger than Expected?

RBC Capital analyst Ross Sandler polled 216 Kindle Fire owners and concluded that Kindle Fire tablets are making Amazon more money than was originally expected. Sandler originally had estimated that each Kindle Fire unit would generate about $136 in content purchases over the useful life of the device. Content purchases on Kindle Fire

But Sandler’s most-recent survey of 216 Kindle Fire owners suggests content revenue might be higher than that.

The survey found that roughly 80 percent of users already have purchased ebooks, with 58 percent of respondents buying more than three e-books within the first two months of owning the tablet.

Averaged out, that’s five e-books per quarter, which nets Amazon $15 per Fire owner per quarter, assuming an average selling price of $10 for ebooks. That further implies revenue from e-books of about $60 a year.

About 41 percent of Fire owners also say they have bought at least three apps. This will put another $9 per Fire owner per quarter into Amazon’s coffers, or $36 a year of net revenue (after splitting gross revenue with content owners).

That implies possible gross sales of about $30 a quarter worth of apps, assuming Amazon’s share of revenue is 30 percent.

Those figures suggest annual Kindle Fire revenue of about $96 a year. Over three years, that suggests $288 of revenue for Amazon, even if users do not buy any video or audio products, which seems unlikely.

More Europeans Using Mobiles While Shopping

Mobile retail is one of the fastest growing new uses of  smart phones, comScore reports, with more than 13.6 million smart phone owners in France, Germany, Italy, Spain and the United Kingdom using their mobiles to access a retail site in October 2011.

But that isn’t the most-significant new finding. The more important trend is growing use of mobile devices inside retail locations, while people are shopping.

In October 2011, nearly 22 percent of surveyed mobile users in In France, Germany, Italy, Spain and the United Kingdom took a picture of the product while in a retail store, making it the most popular e-commerce related activity.

A significant percentage of smart phone users in retail stores also texted or called friends or family about a product (15 percent). Some six percent scanned a QR code in-store.

A large share of smart phone owners also managed their bank account from their device (20 percent), used electronic payment services to purchase goods (12 percent), or searched through shopping guides for the best products (11 percent).

Target and Sears are taking diametrically opposed approaches to the challenge of mobile-enhanced shopping, in particular comparison shopping while potential customers are inside stores.

Target wants its suppliers to create "retail store only" versions of products that cannot be bought online, as well as helping Target match online prices. Target is particularly concerned about showrooming, the practice of consumers examining merchandise in a store, but buying online.

Sears, on the other hand, is going to make it easier for mobile shoppers to compare prices inside Sears locations, by adding Wi-Fi, at least at some of the Sears stores.

In fact, Sears is by offering in-store shoppers free Wi-Fi access at select stores, to provide customers with faster access to the merchant’s mobile commerce site and apps. That isn’t completely surprising.

What is more interesting is that Sears also will allow those users to access the sites and apps of other retailers, a move intended to show Sears comfort with its pricing.

With free Wi-Fi customers can use their smart phones to surf the web, shop online at Sears.com or compare prices before they purchase to make sure they are getting the best price on the products they want, the company says.

About 63 percent of smart phone users have visited a retailer’s website from their mobile device, up from 53 percent in 2010, and 41 percent have done so while in the retail store, according to a study by Hipcricket.

While mobile retail sites have historically served as “brochures,” lightweight versions of retailers’ full websites that provide limited information such as store locations, directions and hours, today’s mobile-specific retail sites are now providing more significant benefits to consumers as they move along their path-to-purchase.  

Fully 50 percent have checked a competitor’s mobile website while in another store.
The survey found that smart phone owners are visiting mobile retail sites to:

Research prices (46 percent);
Search for coupons and offers (36 percent);
Research products (28 percent); and
Purchase products (13 percent)

Some nine percent report that any of their favorite brands market to them using the mobile phone. At the same time, consumers continue to indicate a willingness to join mobile customer relationship management or loyalty programs for their favorite brands. Some 33 percent would be interested in joining such a program, but only 12 percent currently participate in one.
Mobile sites now a factor in retail shopping

Some 79 percent of U.S. smart phone owners relying on their phones to help with shopping, according to Google.


About 70 percent use their phones while shopping in-store and 74 percent of smart phone shoppers made a purchase as a result of using their smart phone.

Some 67 percent said they research on their smart phone and then buy in the store. Fully 95 percent of smart phone users have looked for local information, and as you might expect, such searches often are an immediate precursor to purchasing.  After looking for local information, 77 percent contacted a business, and 44 percent made a purchase. Reaching Today’s Mobile Shoppers

Majority of Social Network Interactions Now on Mobiles

Mobile devices, including smart phones and tablets, increasingly are used to consume content, a study by comScore indicates. 

Significantly, consumers spent more time on Facebook’s and Twitter’s mobile sites than they spent on web sites in October 2011. Every U.K. visitor spent an average of 33.3 minutes browsing on Facebook.com using their mobile device and 11.2 minutes on Twitter during the month.

In the case of tablets, that comes as no surprise: the whole idea behind tablets is content consumption. What might be somewhat surprising is the extent to which use of social networks has shifted to mobile modes.

Where it has been common to note that 40 percent of social network usage is from mobile devices, new comScore data from some European markets suggests that mobile devices now represent the  clear majority of social network interactions.

In October 2011, 76 percent of smart phone owners in France, Germany, Italy, Spain and the United Kingdom were mobile media users, meaning that they browsed the mobile web, accessed applications, or downloaded content.

The 62 percent growth in the total number of mobile media users in 2011 is largely attributable to the acceleration in smart phone adoption, better network quality, and the increasing ubiquity of aggressively priced data plans, all of which facilitate the consumption of mobile media.

Among the five European countries analysed, Germany stands out with the fastest growth rate of 89 percent while the United Kingdom had the largest audience with 20.4 million mobile media users via smart phones.



Different devices are used to consumer content during an average weekday, comScore has found. Tablet usage experienced the highest relative percentage of its activity in the late evening between 9 pm and 11pm.

Otherwise, mobile and tablet consumption patterns were quite similar with mobile traffic showing peaks during typical commuter travel hours (around 9am and 6pm). Computer-based traffic had its highest relative consumption during typical office hours, spiking around lunchtime.

Device usage dynamics look different on weekends, with usage patterns of all three devices aligning more closely with one another. Two spikes occurred throughout the Saturday analysed, with the first peak around 11am, followed by another uptick in usage around 6pm.

Original Content and Content Curation: Both Add Value

It is not news that media now is shaped by Internet and application trends, just as the telecom business is refashioned by Internet apps.


Consider YouTube, which is reshaping the notion of what "video entertainment" is, or video game experiences, which likewise are seen by some as the future for much of the "movie" business. 


In the communications business, the big change is the ability application providers now have to use any broadband connection to deliver an experience, application or service. 


But all rules of thumb have to be qualified. The conventional wisdom for Internet content is that, to make Google happy, content has to be original. On the other hand, according to David Karp of Tumblr, there are nine content curators for every content creator on his site. How sharing disrupts media


Reblogging, on Tumblr, is so easy that the vast majority of Tumblr sites actually create little or no original content: they just republish content from other people. 


Some might argue that "adds no value." If you think about it, that's not actually true. Busy people always can save time if somebody else is doing a good job sorting through 


Such linking, liking, re-posting, re-tweeting and so forth is a "voting" mechanism, allowing social tools to amplify and point to content people find interesting or useful.


That grows audiences for people who do create original content. The "is it better to create original content or curate it?" argument is misplaced. Both have value, and both create value. 

Tumblr had 14  billion page views in December 2011, up from three billion in 2010.

Telefonica Invests in Cloud Computing Firm Joyent

Joyent has rasied $85 million from Spanish phone company Telefonica's Telefónica Digital division. $85 million investment


Joyent provides infrastructure for customers such as LinkedIn, THQ, Gilt Groupe and Kabam. Within the cloud computing business, Joyent provides "infrastructure as a service," namely access to computing and storage resources on a rental basis. 


With the new partnership, Joyent will be able to bring its services to more countries thanks to Telefónica data centers throughout Europe and Latin America.

Two Different Responses to Mobile Shopping

Target and Sears are taking diametrically opposed approaches to the challenge of mobile-enhanced shopping, in particular comparison shopping while potential customers are inside stores. 


Target wants its suppliers to create "retail store only" versions of products that cannot be bought online, as well as helping Target match online prices. Target is particularly concerned about showrooming, the practice of consumers examining merchandise in a store, but buying online. 


Sears, on the other hand, is going to make it easier for mobile shoppers to compare prices inside Sears locations, by adding Wi-Fi, at least at some of the Sears stores. 


In fact, Sears is by offering in-store shoppers free Wi-Fi access at select stores, to provide customers with faster access to the merchant’s mobile commerce site and apps. That isn’t completely surprising.

What is more interesting is that Sears also will allow those users to access the sites and apps of other retailers, a move intended to show Sears comfort with its pricing.

With free Wi-Fi customers can use their smart phones to surf the web, shop online at Sears.com or compare prices before they purchase to make sure they are getting the best price on the products they want, the company says.

About 63 percent of smart phone users have visited a retailer’s website from their mobile device, up from 53 percent in 2010, and 41 percent have done so while in the retail store, according to a study by Hipcricket.

While mobile retail sites have historically served as “brochures,” lightweight versions of retailers’ full websites that provide limited information such as store locations, directions and hours, today’s mobile-specific retail sites are now providing more significant benefits to consumers as they move along their path-to-purchase.  

Fully 50 percent have checked a competitor’s mobile website while in another store.
The survey found that smart phone owners are visiting mobile retail sites to:

Research prices (46 percent);
Search for coupons and offers (36 percent);
Research products (28 percent); and
Purchase products (13 percent)

Some nine percent report that any of their favorite brands market to them using the mobile phone. At the same time, consumers continue to indicate a willingness to join mobile customer relationship management or loyalty programs for their favorite brands. Some 33 percent would be interested in joining such a program, but only 12 percent currently participate in one.
Mobile sites now a factor in retail shopping

Some 79 percent of U.S. smart phone owners relying on their phones to help with shopping, according to Google.


 

About 70 percent use their phones while shopping in-store and 74 percent of smart phone shoppers made a purchase as a result of using their smart phone.

Some 67 percent said they research on their smart phone and then buy in the store. Fully 95 percent of smart phone users have looked for local information, and as you might expect, such searches often are an immediate precursor to purchasing.  After looking for local information, 77 percent contacted a business, and 44 percent made a purchase. Reaching Today’s Mobile Shoppers

Text Messaging Maturing, Begins Decline

There is growing evidence that the high-margin mobile text messaging market is past its peak.

Danish SMS traffic, for example, decreased by over 20 percent in the first six months of 2011, according to Strand Consult, and the trend will continue in 2012.

Social media networks appear to be the reason people are sending fewer text messages.

Text messaging volumes and revenue are not declining in all markets, but is slowing in most developed markets. The most-recent data from the CTIA suggests slowing growth in the U.S. text messaging market of about nine percent.

In the Danish market,  three out of four mobile operators have been experiencing a steady decrease in their test messaging (short message service, or SMS) traffic month after month.

From 2010 to 2011, TDC experienced an SMS traffic drop of 17 percent, Telia lost 18 percent and Telenor 26 percent, while the fourth operator 3 was the only operator that had growth in their SMS traffic.

That 3 saw text messaging growth is largely attributable to the fact that 3 is gaining customers and share in the market. SMS traffic on the 3 network grew by 29 percent.

But, overall, the number of Danish SMS messages fell during the first half of 2010 to 6.4 billion and to 6.2 billion during the first half of  2011. That is a drop of about seven percent from 2010 to 2011.

Facebook messaging is the reason for the drop, Strand Consult argues. We often forget that all products have a life cycle. Fixed line voice is past its peak, and now text messaging likewise seems to be nearing or past the peak of its product cycle in some markets, though it will continue to grow in other younger markets.

So what are Danish operators doing? They are bundling mobile broadband with SMS and MMS packages as part of a smart phone purchase. That means service providers get paid even as the volume of text messages declines. 

There is

Finland's largest carrier, Sonera, for example, recorded a 22 percent decline in texting on Christmas Eve in 2011, versus the same night in 2010.

It isn't that people are communicating less. They are just using different methods of communicating. Text Messaging Declines  

Hong Kong also apparently saw a similar decrease on Christmas, dropping 14% from the same day in 2010. Netherlands service provider KPN provided an early warning when it announced significant declines in messaging volume earlier in 2010. KPN text message declines

Dutch telecoms regulator, OPTA, which shows a significant decline in the number of SMS sent in the Netherlands in first half of  2011 compared to the previous six-month period.

The country's largest operator, KPN, has also reported declining year-on-year messaging volumes over the last few quarters due to what it calls "changing customer behavior."

Wireless Intelligence says text messaging volumes are falling in France, Ireland, Spain and Portugal as well.

According to OPTA, the total number of SMS sent in the Netherlands stood at 5.7 billion for the first six months of the year, down 2.5 percent from 5.9 billion in the second half of  2010, even though total text messaging revenue rose slightly (0.6 percent) to EUR378 million during the period.

That should not come as a surprise. The number of over the top and social messaging alternatives has been growing for years. But there is a "network effect" for messaging, as there is for any other communications tool. Until a user is fairly sure that nearly everybody he or she wants to communicate with can be reached by a particular tool, adoption is slower.

But there always is a tipping point, where the expectation changes from "I doubt this person uses this tool" to "there is a good chance they use this tool." Finally, there is the point of ubiquity, when the assumption simply is that "everybody" uses the tool.

Also, the history of text messaging and email are instructive. Though most cannot remember a time when it was so, email and messaging services once upon a time ere not federated. In other words, you could not send messages across domains.

History also tells us what happens after federation: usage explodes. With alternative messaging platforms, we still are not in a "full federation" mode, where anybody can send messages to any other user, irrespective of what device, operating system, service provider or application they prefer to use. That day will come, though.

The.maturing market seems now to be a growing factor in the text messaging part of the mobile business.