The change in the mobile phone market caused by the introduction of the iPhone in 2007 has slightly cut the profits for the handset industry overall, but has most severely affected Nokia and Sony Ericsson, according to data released today from Deutsche Bank. The investment bank issued a note showing how Apple and Research in Motion, the maker of the BlackBerry, garner most of the profits in the handset industry despite their relatively small market share.
The report also shows an incredible loss for Nokia, which saw its share of handset profits cut in half by the shift in the handset market that occurred after the iPhone was released. In 2007 Nokia made about 60 percent of the profits in the industry, and in 2009 it had about 31 percent. Meanwhile the adoption of mobile broadband (and likely the fact that the iPhone is a consumer-focused device only available from one carrier) has helped RIM take about a fifth of the overall industry profits in 2009 as more corporations and people tried to access email and the web on their phones.
Mobclix and Nielsen Ink Mobile Ad Targeting Data Deal
Mobclix has struck a deal to integrate Nielsen’s ad targeting data into its mobile ad exchange, the two announced today, the latest effort to deliver highly targeted mobile ads. The pact allows Mobclix to resell Nielsen’s PRIZM and ConneXions products, which slot consumers into more than 150 segments based on lifestyle and usage patterns. Marketers will be able to target pitches based on a user’s age and gender as well as location, spending power and tech savviness — features that will give advertisers more confidence in a market where hard data is difficult to access.
Detailed user information has become increasingly valuable in mobile, where an explosion in the number of mobile apps has led to a glut of advertising inventory in the industry over the last 18 months, forcing CPMs (cost per thousand ad impressions) down. So app developers and content owners are scrambling to find ways to boost the value of mobile ads in order to ramp up ad revenues. Mobclix claims its new partnership with Nielsen will enable developers and publishers to produce CPMs that are 20-100 percent higher than the market at large.
Mobclix offers mobile analytics that provide developers with information about how consumers use their mobile applications, and the company claims a penetration rate of 85 percent across iPhone and iPod touch unique devices. The Palo Alto, Calif.-based startup is vying for a chunk of a mobile advertising market that will generate $13 billion in revenues by 2013, according to Gartner, as smartphones and flat-rate data plans become more affordable for mainstream consumers. The space still faces substantial hurdles, from a lack of performance metrics to consumer privacy concerns, but providing more detailed information about individual consumers will surely help entice advertisers to invest more heavily in mobile.
- Related research from GigaOM Pro (sub. req’d):
- Why 2010 Still Won’t Be the Year of Mobile Advertising
- The Attraction and Threat of Offer-Based Ads in Mobile
- Are Sponsored Apps the Key for Traditional Media in Mobile?
Images courtesy The Nielsen Company.
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Mobclix and Nielsen Ink Mobile Ad Targeting Data Deal
September 28, 2009
Why RIM’s App World Is Key to Its Long-term Success
Research In Motion shares took a beating on Friday and several analysts cut their ratings on the stock after the company posted disappointing sales for its fiscal second quarter and ratcheted down expectations for the current one. But while increasing competition and ever-dwindling price points may make for a rough few months in the smartphone market, RIM’s long-term prospects will hinge on the success of its new app store.
Smartphone manufacturing is becoming a cutthroat business as the space heats up. Verizon Wireless — which has provided a huge boost to BlackBerry sales with its buy-one, get-one offer — is slated to launch several competing devices in the coming months, and the iPhone appears to be making substantial headway into the enterprise. In the meantime, margins are thinning as carriers look to target data-hungry customers with high-tech handsets that sell for less than $100. Those factors don’t bode well for RIM, whose products aside from the Storm are “largely unchanged from a year ago,” Deutsche Bank analyst Brian Modoff wrote in a research note released today:
“We see several dozen new smartphones coming on stream in the next six months. This includes solid offerings from Motorola, Palm, HTC, Samsung and LG. Our checks with carriers indicate that they are looking to drive smartphone prices to subsidized levels below $100. RIM may be able to manage its bill of materials down in this environment, but we think price declines will have an impact on gross margins. And this transition will likely be a painful process.”
The BlackBerry has deftly morphed from a business-focused handset to a more consumer-friendly device, and sales have been impressive even as Apple’s iPhone has taken consumers (and the entire smartphone industry) by storm. The Curve actually outsold the iPhone in the first quarter of the year, and RIM claims that more than 80 percent of its new customers last quarter were non-business users who chose the BlackBerry over devices such as the iPhone, Palm Pre and Android devices. But with a slew of attractive new smartphones coming to market and pricing continue to fall, I think that kind of momentum will be impossible to maintain, and I expect RIM to lose ground over the next few months.
Which is why RIM’s app storefront will be key to the firm’s long-term success. Just as Apple’s App Store and iTunes drive sales of the company’s hardware, App World — which has received generally positive reviews — must be attractive enough to lure users away from all the other smartphones on the market. And while Apple has built its empire largely on the strength of free or cheap gimmicky apps, I think RIM has a real opportunity to market App World as a high-end retail for on-the-go users — allowing the company to polish its image as it creates a lucrative new revenue stream with premium mobile applications.
That won’t be easy in the fiercely competitive space, of course, especially when carriers like Verizon Wireless are trying to elbow it off the app distribution playground (GigaOM Pro, sub required). But if RIM can continue to attract developers and build out an attractive storefront — and if it can churn out sexy, user-friendly handsets — it will fare well in the superphone era.
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Why RIM’s App World Is Key to Its Long-term Success
July 21, 2009
Apple and RIM Share Small but Lucrative Piece of Cell Phone Pie
Apple commands a relatively paltry share of the worldwide cell phone market, despite the success of their iPhone. That’s because, regardless of appearances, the field is overwhelmingly dominated by regular old dumbphones, which still outsell smartphones by a wide margin. In fact, Apple and RIM still only command three percent of global cell phone sales taken together, with all smartphones only accounting for only 13 percent of mobile phones worldwide.
The secret to the success of both RIM and BlackBerry? That tiny three percent market share accounts for 35 percent of the world cell phone industry’s profits. For the sake of comparison, consider that Nokia, the largest mobile phone maker in the world, made 46 percent of cell phones last year, and reaped only 55 percent of the profits. All of this is according to Deutsche Bank analyst Brian Modoff, recently featured in the Wall Street Journal (subscriber content).
Modoff goes on to predict that this year, RIM and Apple’s share could grow to five percent, and give them 58 percent of total profits. As long as they keep making incremental gains, and stay atop the burgeoning smartphone market, both companies stand to make huge financial leaps in a market that still has plenty of room for growth.
The reason Apple and RIM make so much money off of their handsets compared to ordinary cell phone manufacturers has to do with the subsidies wireless companies are willing to offer on the devices. iPhones are subsidized, on average, to the tune of $400, while BlackBerrys generally get $200 knocked-off per unit. The average non-smartphone device only receives about $100 in subsidies by comparison, resulting in a comparatively tiny profit margin.
For both companies, the next step will be trying to wrestle service providers into offering low-cost alternative data plans in order to convert more regular cell users into smartphone owners. As demand for their products continue to grow, and as other phone manufacturers like Nokia start to see just how much more lucrative the smartphone market is, makers of the devices will begin to have a lot more sway when it comes to convincing providers to amend their offerings.
Just look at what Apple has already achieved with the iPhone. They’ve successfully fielded a device that cuts into the provider’s ability to make money off of games and application add-ons, navigation software charges, ringtone downloads, and so on. AT&T’s concessions to Apple in those areas represents a huge blow to the power wielded by wireless providers, and I wouldn’t be surprised if they could wrest away more control in future exclusivity dealings.
Photo courtesy of flickr user JazarellaMozarella
July 20, 2009
iPhone — 20% Profit Share of Mobile Industry?
The Wall Street Journal (via MacRumors) published a report stating that while Apple’s iPhone, and RIM’s BlackBerry make up only 3% of mobile phone sales last year, the gobbled up a huge 35% take of the profits. iPhone specifically was pegged at 1% of sales and 20% of profit. Boom! indeed.
Says Deutsche Bank analyst Brian Modoff:
The disparity will become even starker this year when the two will take 5% of the market in unit terms but 58% of total operating profits.
While feature phone maker Nokia can compete due to vast economies of scale, their profits have been declining, as have Sony Ericsson. Palm’s Pre is seen as something of a wildcard, depending on developer support and distribution reach.
For their part, Apple is set to announce Q3 results tomorrow, July 21, at 5pm ET. TiPb will provide our usual coverage of the conference call, especially as results pertain to the iPhone.
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