Freemium Works: Leads App Store Revenue Sources

If you look at revenue being earned by mobile apps, the "freemium" approach seems to be working. In fact, actual revenue earned by app providers leans heavily in "in direct" revenue earned from users paying for content or products supplied by "free" apps, compared to direct revenue earned by selling those apps to use.

Over the last two years, global revenues for freemium apps on iOS have more than quadrupled. In 2012, worldwide freemium revenues on Google Play have grown 3.5 times, according to App Annie. 

Those revenue growth figures do not tell the full story, unless you compare the growth and absolute revenue figures with the revenue created by apps whose revenue model is "you buy the app."

Apple Understands Product Life Cycle and Executes

Despite some complaints from iPad users upset about Apple introducing a new and "better" iPad at intervals of less than a year, Apple does cannibalize its own products at a prodigious rate, and has done so for some time.

While cynical observers might say cannibalization is a great way to force customers to upgrade, others might also argue that Apple cannibalizes products and models as a way of protecting its overall share in the device market. 

Others might say Apple under Steve Jobs, at least, understood the notion of a product life cycle and executed on its with perfection. Apple further seems to have understood and implemented product strategies that match the ways customer adoption changes over time from early adopters to majority. 

Starting with the iPod, Apple has lead with its most powerful, most expensive model first, aiming at early adopters, then introducing less costly versions as the market grows, capturing larger segments of the consumer base that do not value technology prowess so much as value. 

The iPhone launched as Apple was achieving peak iPod sales of about 22 million units. It was exactly the right time for Apple to cannibalize its own business, in that view. 

A Look at "Post PC" Device Sales

By 2016, tablet sales are projected to exceed sales of PCs, according to NPD. 

Overall mobile PC shipments will grow from 347 million units in 2012 to 809 million units by 2017.

Notebook PC shipments are expected to increase from 208 million units in 2012 to 393 million units by 2017, while tablet PC shipments are expected to grow from 121 million units to 416 million units in this period, for a compound annual growth rate of 28 percent. 

A key driver for tablet PC growth is adoption in mature markets (including North America, Japan and Western Europe), which will account for 66 percent of shipments in 2012 and remain in the 60 percent range throughout the forecast period. 

Tablet PC shipments into mature markets will grow from 80 million units in 2012 to 254 million units by 2017.

                                          Worldwide Mobile PC Shipment Forecast (000s)

Source: NPD 

“Consumer preference for mobile computing devices is shifting from notebook to tablet PCs, particularly in mature markets,” said Richard Shim, NPD senior analyst . “While the lines between tablet and notebook PCs are blurring, we expect mature markets to be the primary regions for tablet PC adoption.

                                        Emerging and Mature Market Tablet Shipments (000s)

Source: NPD

Gartner projects worldwide media tablet sales to end users are forecast to total 118.9 million units in 2012, a 98 percent increase from 2011 sales of 60 million units, for example. 

Service Providers Clearly are Cutting Spending

What seems like an endless wave of job cuts in the telecom equipment supplier industry has been going on for more than a year, separate from the background shrinkage that has been going on for more than a decade.

Among the latest is Ericsson, the largest global supplier of mobile network infrastructure, according to Bloomberg.

Ericsson AB reported a 43 percent decline in third-quarter profit as wireless operators curbed spending in a sputtering economy.

Net income fell to 2.18 billion kronor ($324 million) from 3.82 billion kronor, Stockholm-based Ericsson said today. Gross margin, or the percentage of sales remaining after production costs, slid to 30.4 percent from 35 percent, missing the 32.2 percent average of analysts’ estimates.

The clear evidence of investment in Long Term Evolution notwithstanding, it is clear enough that other projects are being postponed. Telecom capex fell in the wake of the Great Recession of 2008, as would be expected. Spending picked up by 2010, but it now appears more stringency has returned. 

The problems arguably are centered in the European markets.

Severe competition between smart phone and tablet makers will intensify in the period leading up to the Christmas and holiday season, likely signaling a tougher earnings climate.

Apple, Samsung and HTC gave cautious guidance on their fourth quarter prospects. Major new device launches and the impact of a slowing global economy are seen as issues. 

Total worldwide handset shipments reached 410 million units in the third quarter of  2012,  Strategy Analytics says.Overall global shipments of mobile handsets were virtually flat in the second quarter, rising only one percent to 362 million units, according to Strategy Analytics.

But some might note that smart phone sales in some markets, such as the United States, have been slowing for years

CEO Says Sprint Did Not Gain Control of Clearwire

Though Sprint now owns what might under other circumstances be a controlling interest in Clearwire, both Sprint and Clearwire say that is not the case.

Clearwire CEO Erik Prusch addressed that issue on Clearwire's latest earnings report. "I want to be crystal clear, Sprint has not gained any additional governance rights or board seats through their agreement to purchase Eagle River shares," said Prusch.

"The strategic investor group board seats and governance rights do not transfer when shares are sold," said Prusch. That means Sprint does not gain additional board seats whenever it buys investment stakes held by other Clearwire investors, says Prusch.

It appears that some of the confusion grows from earlier decisions by Sprint and Clearwire whereby Sprint agreed not to have management control of Clearwire. Also, Sprint has in the past declined to take steps to control Clearwire or buy the company outright.

Still, many believe, despite the logic of the latest Clearwire statement and its factuality, in a de jure sense, that the de facto reality could be different. 

Samsung, HTC, Apple Warn Abouit 4Q Earnings

Severe competition between smart phone and tablet makers will intensify in the period leading up to the Christmas and holiday season, likely signaling a tougher earnings climate.

Apple, Samsung and HTC gave cautious cautious guidance on their fourth quarter prospects. Major new device launches and the impact of a slowing global economy are seen as issues. 

Total worldwide handset shipments reached 410 million units in the third quarter of  2012,  Strategy Analytics says. Overall global shipments of mobile handsets were virtually flat in the second quarter, rising only one percent to 362 million units, according to Strategy Analytics.

But some might note that smart phone sales in some markets, such as the United States, have been slowing for years. 

Clearwire Scales Back LTE Deployment, as Planned

Clearwire plans to have 2,000 Long Term Evolution sites on air by the end of June 2013 and expects to start receiving Sprint prepayment installments in June 2013. That plan is a reduction in sites from the earlier plan to light about 5,000 LTE sites.

Clearwire has decided not to attempt to create a full national LTE network, but instead will focus on a smaller number of markets where Clearwire could hope to provide wholesale service to other carriers.