It's a smartphone world !!! Or isn't it ???


Since my first experience with a PocketPC Phone Edition in 2002 I've come to the conclusion that the world was going in the direction of Smartphones, that those might one day replace the computers that we have at home, and that this move was happening in fast speeds.

The world continued going round, technologies were in constant change, and the appearance of the iPhone and Android in the late 2000's made me feel my prognostic was completely right. Until something strange happened to my life: I began working in a company which has in Feature Phones (those simple phones that don't allow you to install software on them) its main market, and received a view of a completely different world.

I must say I was shocked. After so many years of belief, I was suddenly seing some data that showed me I was living a lie!

Well, no, not exactly a lie, but in best case a very partial truth. This discovery was the moment that made me begin looking back at the assertions I had within me and re-check their truthfulness, timing, localization, and all other kinds of details.

So let me begin trying to explain here the world of conflict I live in nowadays, and see if I can ask the right questions and give what might probably be the right answers for them.

How can it be that a company has its main market in Feature Phones?

This was the first question I asked the CEO of the company which was trying to hire me. And the response was surprisingly logical.

Well, the company I work for is called EMOZE (www.emoze.com). Those who were in Barcelona at MWC 2007 can probably remember them. They develop a platform of Push Content (Push Messaging + Push Mail) which enables feature phone users to send and receive mail from different services (Exchange, GMail, Hotmail, and others) in real time, and chat real time device-to-device, device-to-Facebook, to GoogleTalk, and other platforms. In the Feature Phone world, this is something that is almost unexistent.

They actually began with a Smartphone product, running on Windows Mobile, and nowadays have also an excellent product running on Android. But looking at what I am going to try to make clear to you and to myself in the next lines,  they decided back in 2009 that their real market, at least for the next years, is feature phones.

Is feature phones a market?

It definitely is.

Let's take some pictures of a research done by Vision Mobile lately (download the whole research here) which tell the whole story, and try to explain them in simple words.

In the graph above you can see the penetration of Smartphones and the Feature Phones, in relation to the main world continents. Orange is Smartphone, Grey is Feature Phone. So, what do we see there?

First we see very clearly an European market divided almost half-half, where 51% of the phones are Smartphones, and 49% of them are Feature Phones. Then comes the US, with a division of 63% Smartphones and 37% Feature Phones. I believe that my country, Israel, could even be over this mark today, but it too much of a small market in order to have any influence in such a research.

Following that, we notice Asia Pacific, Africa & Middle East, and Latin America, all of them with over 80% penetration of Feature Phones, and less than 20% Smartphones. These also happen to be the continents that hold most of earth's human population, and at least 3 of the 5 largest emmerging economies. Is this a market to overlook and just pass by?

Now let's drill down to the most hostile market for the Feature Phones, the USA. Look at this graph coming from ASYMCO:

We are talking about a market of nearly 230 million devices. Differently that the previous image, this graph gives around 55-60% market for non-Smartphones. Probably the difference would be explained by the different definitions of what is a Smartphone.

However, this is not what I am striving to show; if we look at the different platforms at the Smartphone market, we can understand how difficult it is to commercialize an application in this world, and how difficult it is to develop a truly mass-market desirable cross-platform application among all these platforms. On the other hand, Feature Phones were built to be simple, so they have much less. So they have left much more for serious developers to do.

I won't say that development is simple in the Feature Phone world. There are also many platforms: MediaTek, BrewMP, S40, Spreadtrum, Infineon, and others. You have to be in all worlds. Additionally, considering that feature phones are usually cheap devices very small in memory resources, you have to have a lot of functionality in a very small footprint. So integration with the phone's own functions must be the best possibly.

Luckily their technologies are not too different, and all device makers in this market are looking for that application that will give their phone competitive advantage.

Did we talk about device makers? So let's take a look at another graph from the Vision Mobile research:

This graph shows the penetration of each manufacturer in the market. You can notice that with rare exceptions, we are mostly talking about the same manufacturers.

But there is one additional manufacturer in the blue ring called "Other". This includes hundreds or thousands of local manufacturers who design their devices with ODMs in China and sell them in their countries, in numbers that vary from 300,000 per year and until some millions of devices per year. Together they make a very interesting market.

The Appstore factor

In a smartphone world, the concept of the Appstore did a very good thing: it brought the control over the applications installed in the phone to the user, who can choose between free applications, cheap and not-so-cheap applications.

The feature phones don't have an Appstore. In practice, all the experience with Java applications have just proven that there isn't place for anything in this world which is not native. And native means "compiled together with the operating system as an integral part of it".

Is this good or bad?

People who want freedom to download all the applications they can wish to have should get a smartphone. They will not be satisfied by the number of applications they can install on the limited memory of a Feature Phone.

On the other hand, I can feel quite certain that I am not wrong to say that "with the exception of Angry Birds, NOBODY has become a millionaire out of their activity in Appstores. You are there, selling your application for $3-$5, trying to be seen in lists of hundreds of thousands of applications which do what you do, and to compete with free solutions. It is cold out there!

In the Feature Phone world, if you have a good solution for something which is deeply needed, you are in good shape. You will be competing with 2-3 others in best case, and any contract with a small local manufacturer guarantees a nice income, even if you are selling your solution for $1 per device. And the end user, at the end of the line, won't probably feel the cost of the inclusion of your software in the device.

Conclusion

Yes, it is a world for serious developers only. You should be a serious development company, able to integrate your software again and again for each new model that every manufacturer using your products develops. But it is a market of hundreds of millions of devices.

Last months I've heard rumours that Microsoft would be buying Nokia's Smartphone division, and Nokia would be taking focus on their low and medium tier phones. Considering that Nokia hasn't ever really managed to build a groundbreaking excellent Smartphone, and considering that just last week they sold their "billion-and-a-half" phone, this would probably be the best thing that can happen to Nokia. There is a monster market out there waiting for them to focus on it, while the company looses money on the distraction of trying to build smartphones.

And the last question, that must be asked: Will this ever be a Smartphone world?

Well, I am sure it will. Smartphones will eventually get to the price of 20 to 30 dollars for the end user, and this will change the whole game. But we still have some years until this happens, and this is enough to both enjoy the current market of feature phones and at the same time get technologically ready for embracing Smartphones when the right time comes.