Mobile 2011: Trends Not to Expect

1Executive Summary

Predicting what not to expect in mobile is a lot easier than predicting what will happen. You can be sure, for instance, that consumers won’t pay for on-the-go TV this year any more than they have in the past, and that carriers won’t embrace “openness” any more than they are forced to. And in areas like mobile advertising, tablet devices and mobile payments, there are several trends you shouldn’t look for in 2011 — despite all the hype to the contrary.

An explosion in mobile advertising. There’s no question that mobile ad revenues are on the upswing, and Apple’s iAd seems to be giving the space a much-needed kick in the pants. But there are still too many hurdles for mobile ads to see the kind of hockey-stick performance that has long been expected. Smartphone use is surging, but feature phones — which typically deliver a nightmarish experience on the mobile Web and also support inferior apps — are still the handset of choice for the majority of U.S. mobile users. This leaves little opportunity for advertisers to deliver compelling banner ads. Privacy concerns, too, along with a lack of local ad networks will continue to shackle the local advertising dollars that will eventually play a key role in the larger space.

Mobile ad revenues will continue to grow incrementally in a variety of segments, from in-app ads and 2-D barcodes on smartphones to simple text messaging across device types. But they won’t see the rapid growth some have predicted.

Booming tablet sales from multiple vendors. Yes, the iPad has been an unqualified success — I was a skeptic until I got one of my own — but tablets are still complementary devices that usually don’t replace any other major gadget. The general market for iPads and tablets includes early adopters and tech-savvy families, but the deeper market is uncertain in light of the segment’s lackluster track record, and is based largely on use-case scenarios. There are surely users who prefer a 7-inch form factor, for instance, and some models are likely to thrive based on specific enterprise uses. Samsung’s Galaxy Tab, for instance, has found an audience among consumers, but is also well-suited for the enterprise, thanks in part to its support for Polycom’s videoconferencing technology. And there could be some pent-up demand in the corporate world for the PlayBook, which Research In Motion reportedly will release early next year. But I don’t see any single device being a hit aside from the iPad.

Mainstream uptake of augmented reality. AR is an eye-catching technology, to be sure, and it is already being used in some pretty cool ways. That kind of traction will continue next year as AR increasingly is used in games and other entertainment apps. But some major hurdles need to be overcome before AR truly impacts mainstream users through location-based apps. GPS positioning will have to be improved, accurate indoor location solutions will have to emerge, information libraries must be expanded and business models must be developed. And more developers will need to create AR apps that are as easy to use as they are helpful. AR will make plenty of headlines in the coming year, but it won’t garner many users — and it won’t make much money.

The emergence of the mobile wallet. I know, I know, everybody is working to turn our phones into payment systems: Google is working on one, three tier-one U.S. carriers are partnering to launch another initiative (dubbed Isis) and, astoundingly, a consortium in Singapore is adding contactless functionality to phones without support of the manufacturers themselves. But the problem with all these scenarios is money: It costs manufacturers (and therefore carriers) to install contactless payment technologies in phones, and it costs retailers to install equipment that can read those technologies. Meanwhile, consumers aren’t willing to pay a premium for the mobile wallet because there’s no real value in reaching for the phone — rather than the wallet — to pay. The mobile wallet will continue to gain popularity in some markets (particularly those where bank penetration is weak), but the U.S. won’t see any real consumer uptake in 2011.

A viable new handset distribution model. The Nexus One was a phone, sure, but it was also a crowbar that Google wanted to use to remove the carriers’ vice-like grip from the world of phone sales. But Google’s strategy of simply tossing it over the fence and selling it over the Internet bombed thanks to precious little marketing and absolutely no brick-and-mortar presence. A second attempt at going it alone wouldn’t be much more likely to succeed, as Kevin persuasively argued a few weeks ago. Network operators may be slowly descending into the world of dumb pipes, but they still control the way handsets are sold thanks to their massive physical retail presence and their big marketing budgets. And that won’t change in 2011.

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  1. I think 100 million tablets is a bit aggressive, as that would mean the tablet market effectively becomes the entire low end of the market for mobile computing (that above smartphone), and I think we’ll continue to see some sub-notebook interest for years. Sure, you’ll see rapid market expansion for iPad and Android, but not sure we can get to 100 million this year.

    As for others to consider, I do think there is a chance for an enteprise tablet and RIM could be that one (and I don’t think Cisco will be a player here). Everything for RIM is contigent on the transition to its new OS.

    Lastly, I think Win7 will account for some market share, most likely starting in 2012, if for only the fact they can bring along some Windows devotees.

  2. I agree with the above list, except I would remove HP Webpad. Sure, HP spent $1.2 billion acquiring Palm and I’ve a pathetic Palm Pixi with a horrible user experience and dearth of apps. Besides, HP has a history of failures in the consumer electronics space. Remember HP TV, HP Camera, iPaq, Jornada…?

  3. Michael Scharf Saturday, January 1, 2011

    pk22901
    The most aggressive iPad sales estimate that I have seen was 48 million in 2011.

    Colin:
    While I agree with the overal comment (booming sales from multiple vendors), Primarily tablets are replacing netbooks and low end laptops, even the CEO of Best Buy has said so. So I expect that we’ll see 100 million tablets sold in 2011. But I believe that we’re looking at 3 or 4 successful entrants, and a dozen or more failures.

    Successes
    Apple
    Samsung
    HP Webpad (based on Web OS, not Win7)
    Amazon
    Barnes and Nobel

    Failures
    RIM
    Dell
    100 Chinese manufacturers

    1. Thanks for sharing your thoughts, Michael. Your insights are always appreciated.

      I completely agree that we’ll see a dozen or more failures (maybe even two or three times that many), but I think RIM has a real opportunity with the PlayBook — if it can get it to market quickly and at a competitive price.

  4. Don’t expect “Booming tablet sales from multiple vendors.”

    Colin,

    I might have missed an earlier comment; what do you make of the rumors around Apple setting up to produce 6mm iPad 2s per month?

    Do you have an estimate on iPad sales for 2011?

    Thanks,

    1. We don’t have any recent forecasts regarding iPad sales, but I’m skeptical of the rumors you cite regarding productions numbers for the iPad 2.

      The tablet market is shaping up to be far bigger than any of us thought, but by the time it comes to market there will be some pretty attractive alternatives — and that couldn’t have been said about the first-generation device.

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