InformationWeek writes that a Google executive claims that Android will outsell the iPhone.  I don’t doubt that this could be the case.  Anytime that you have a licensable or open platform, especially one that is free, you should be able to address a larger share of the market.

But there is a big difference between the two approaches that will have a far bigger impact on where developers.  Apple is building out the infrastructure to enable mobile developers to make money (through the Apple iTunes store).  Google will most likely use advertising to enable mobile developers to make money.

Advertising has been very successful on the Internet for the “Big 10″ companies (the Yahoo!s of the world) and has paid the bills for those that use the Internet as a means of selling other types of products and services.  With the exception of the “Big 10″, the cost of deploying Internet services has been drastically reduced, making advertising a realistic means of monetization.

Advertising has not replaced other business models when the cost of developing or maintaining an application or service is high (like games).

Which gets me to my point.  Mobile developers really need both models to be successful.  For people building high cost high value applications and services, the Apple model with “one click” purchasing will be very attractive.  For people building lower cost lower value applications and services, the Google model with transparent advertising will be very attractive.

The net result will be that more entertainment driven stuff will migrate to the iPhone where the developers will be able to make money.  This will most certainly attract customers (who have a propensity to pay) and, subsequently, advertising will follow the customers.

Unless Google also addresses the storefront issue, they may initially sell a lot of phones, but customers and advertisers will flock to the iPhone.

This morning I look to MocoNews again for an insightful piece from Tricia Duryee.  Ms. Duryee interviews Steve Boom, Yahoo‘s SVP of Broadband and Mobile, after reporting on Steve Jobs‘ comment that 71 percent of mobile browsing in the United States is conducted on Safari.

Mr. Boom says that “by the end of the year, Apple guesses it will have about 10 million handsets in the market. Compare that to Yahoo, which can potentially reach 600 million subscribers today.”

Let me ask a rhetorical question.  Would you rather build a company that reaches 71% of the serviceable market (people with data plans who actually do something other than email) via a single platform and device (and a built-in monetization platform), or would you rather build a company that is going after 29% of the serviceable market but has to deal with dozens of platforms, hundreds of devices, and absent a common monetization platform?

People have been chasing the elusive 600 million number for years now.  That is the wrong target.  What is important is the serviceable market of people with data plans and a propensity to do something other than messaging.

MocoNews asks the question if Apple, with their new iPhone application model, is “tearing down the walled garden or putting up a new fence?

This is a great question, but it think it distracts the reader from the most critical issue facing mobile developers today — “how do I pay the bills?”

Let me digress a bit.

There are fundamentally four different mobile application developers today: the hobbyist, the mobile developer, the Internet developer, and the enterprise developer.

Hobbyists are in it for the “fun”. Making money is nice, but they are most interested in exploring, experimenting, and building credentials in the community. The enterprise developer is building a solution that is a means to an end, but not the end in itself. Cost and complexity are certainly and issue, but making money directly off the mobile solution is not. The Internet developer (i.e., Yahoo, Google, Amazon, etc.) look at mobile as an extension of their Internet strategy. Assuming that they are making money on the Internet, they look at mobile as a place to stake their territory and likely a loss leader for future business opportunities.

In contrast, the mobile developer needs to make money on mobile. And more specifically, they need create a sustainable business which translates into profitability.

As such, developers need distribution (a way for customers to discover and get the product they are selling), a way to monetize the product, and a technical and business solution in which the cost of doing business is less than the revenue it derives.

I think Apple is doing developers a great favor. Based on what I have seen in other markets, a 70% revenue share to the developer appears to be what it takes to create a sustainable business. Apple is doing splendid in keeping fragmentation to a minimum (both storefront, handset, and network), which bodes well to reducing costs. Apple is transparently handling transactions (in contrast to asking for a credit card for each transaction) using a mechanism well understood by their customers.

Where operator walled gardens have failed is that they don’t make it easy for developers to make money, much less a sustainable business. Discovery on a WAP portal is impossible if you are “below the fold”.  To get above the fold, developers typically have to address 80% of the platforms supported by the operator.  iTunes has dozens of “search” type features.  For off-portal applications, most operators don’t support carrier-based billing.  To do premium SMS, you have to split a nickel with a half dozen partners.  To handle credit cards you have to add an impenetrably hard user experience for a mobile phone.

So I applaud Apple’s direction and look forward to the business and businesses they enable.

Greg Brown, Motorola CEO, speaking at the Morgan Stanley Technology Conference, says that products will lead Motorola out of the woods.

If the Mobile World Congress is any indicator of where they are starting, they have one helluva hole to get out of.  As many readers most certainly saw first hand, the Motorola booth in Barcelona 2008 looked alarmingly like the Motorola booth in Barcelona 2007.  Most of the phones were knock-offs of previous models (Z10 replacing the Z8, mahogany RAZRs replacing gold or whatever), in stark contrast to what I saw in other booths.

Nokia, Samsung, and SonyEricsson clearly took “market segmentation” to heart, where Motorola seems to be trying to hit all pegs (square, round, whatever) with the same round hammer.  Sure seems to be a case of engineering driving product marketing rather than the other way around.

While the handset side of the business looks stale and overly rigid, the platform side of the business looks to be lacking in leadership.  Other than S60 & BlackBerry, I think Motorola has announced that they are supporting just about every other platform on the market.

Mr. Brown says that they will be refining their software strategy.  They should do this with a machete, not a fine tooth comb.

Many who write about these platforms have deep biases to one technology or another.  At my company we currently develop for Windows Mobile, PalmOS, BlackBerry, Java, S60, UIQ, and the iPhone (those we have announced).  As a mobile consumer software company we have little choice if we want to service the addressable market.  Do I have technical favorites — yes.  But it doesn’t matter if I can’t buyild a sustainable business.  I would prefer to develop, test, and support no more than 3 platforms — plenty enough for technical and market competition.

Most consumers at the point of sale have no idea what operating system is embedded in the handset.  As I have written before, visiting a high street store in the UK, very few of the phones on display actually operated and the feature card never listed the operating system.  Retailers are not stupid people — if they felt that the platform would sell the phone, they would market that feature.

So why on earth does a company like Motorola develop to so many platforms?  Developers really don’t want it.  Consumers don’t care.  I’d be willing to bet that there isn’t that much pricing leverage anymore (since Motorola buys one of everything).

What Motorola should do is rationalize the platforms exposed to their developers and partners (I’d choose Windows Mobile & Java), normalize & abstract the underlying operating system platform (so I don’t care as a developer), partner with your competitors to limit the number of browsers in the market, and bake a “storefront” client into each phone (a la Nokia and SonyEricsson) to make it easy for developers to reach & monetize the market.

At the recent Smartphone Summit at CTIA, I sat on a panel with Johan Sandberg, CEO of UIQ. When asked about what was needed to make mobile services more successful in the future, Johan smartly replied “we need to make it cheaper to fail”. I could not agree more. One of the major differences between the wireline Internet and the mobile Internet is that you can successfully start-up a wireline Internet company using a couple of credit cards. Development and distribution is relatively low-cost given that most people are reachable using one of three browsers supporting XHTML and AJAX technologies. If at first you don’t succeed, tweak it and try again. Everything is in a perennial “beta” state.

Compare this with the mobile Internet. The browsers are sorely lacking in features and fragmentation is considerable given the impossibility of most subscribers “upgrading” the browsers they already have. Network latency only compounds the problem, leading most developers seeking widespread adoption to look towards client-server architectures.

We currently support client development on Windows Mobile, BlackBerry, Palm OS, Java, Symbian Series-60, UIQ, BREW, and we are hard at work on the iPhone as well as on various interpretations of AJAX and Linux. I truly believe that you have to be willing to roll up your sleeves and do the hard work if you want to be successful in today’s mobile environment.

This week, Google finally made it’s grand entrance into the mobile arena with Android and the Open Handset Alliance. I have already had a dozen people ask me what I think about this move. My initial reaction was more of a “so what”.

This seems to be the case of a company not really understanding what the market needs. If I look at the current value chain or ecosystem and their needs, neither Android or the Open Handset Alliance seem to be nailing anybody’s need.

Let’s start with developers. There is no doubt that developers would like to have a deeper and richer programming environment on the phone. But if you spend time with the OS vendors for phones today, they will tell you that they could offer a richer programming environment but they do not for reasons of security and privacy — mostly brought on by the mobile operators that buy these phones to resell to consumers. Until the operator’s indicate that they will relax these concerns, I am skeptical that we will see widespread availability of truly open Android phones (vs. neutered Android phones).

Furthermore, Android says nothing about addressable market. Other than hobby shops and verticals, most developers need to focus their efforts on the devices used by their target demographic. For Android to be truly relevant, millions will likely need to be sold. Apple has done quite well with the iPhone, but consumers by the iPhone based on the form factor and user experience — not the operating system. Android will need to be in some really cool devices from really strong brands to see that kind of success.

Let’s look at the handset manufacturers. The handset manufacturers sell phones based on form factor, price, and 2-3 features understandable by the mass market. As I pointed out in a recent post, when I was in the UK a couple of weeks ago, the OS was not considered a feature of the handset — you could not tell what OS a phone used at the point-of-sale. For most manufacturers, most of the profit associated with a new handset comes in the first couple months of launch — when the price point is high and there are no competitors. As such, most handset manufacturers are incentivized to user mature operating systems for their big volume handsets — no sense in risking profit for something that has no material relevance at the point of sale. Hence Nokia’s allegiance to Series 60 and Motorola’s investment in UIQ. The one shining light for Android is if they provide a “killer app” that is exclusive to the Open Handset Alliance handsets.

Let’s look at the mobile operators. Mobile operator’s are looking for ways to differentiate from their competitors, increase subscribers, reduce churn, and increase ARPU. One way they do this is to get exclusive handsets or first mover advantage. So it is not surprising to see some operator’s on the list of partners. Traditionally, mobile operators have struggled with handset manufacturers to differentiate the handset. It was in the handset manufacturer’s benefit to keep differentiation low so they can increase volumes and reduce costs (one reason why GSM handsets are cheaper than CDMA handsets). Having an “open handset” is one way to get that differentiation. But “open” brings with it the challenges of “security” and “privacy” that I mentioned above. It cuts both ways. As such, I expect most operator’s to neuter Android handsets to meet their own requirements, subsequently reducing the addressable market for developers.

Lastly, we have the consumer. Consumers mostly buy handsets based on form factor and price within a “lifestyle” category — messaging, music, and photography being three of the more common. If the Android can create a new category that is meaningful to the consumer, then I think it has a chance. If not, then and Android phone needs to compete with the all of the other phones with respect to form factor and price.

Will Android solve world hunger for data services? I truly hope so. I’d love to reduce the cost and time-to-market for innovative services. I’d love to make it easy for subscribers to discover new services and developers to distribute the ones that they build. But nothing in the press releases or websites leads me to believe that they are solving problems in the critical path. I hope I am wrong and I am looking forward to the SDK for a glimpse on which way the wind will blow.

According to Frost & Sullivan via MocoNews, growth in off-deck mobile content will result in content aggregators seeing revenues of $167.7 million in 2011.

This is a pretty pathetic figure given what I know of the current value chain and revenue share splits.  Assuming this is top line revenue, the aggregators are seeing no more than half that figure and from what I know about the VC community, nobody will want to invest in a business whose total market size is less than $100 million in five years.  And even if this is bottom line (after revenue sharing), it is still an awfully small business.

The winners in this space will be those who have additional sources of revenue — like advertising and licensing. In the spirit of full disclosure, my company, Handmark, competes in this space.

I was in London two weeks ago for the Symbian Smartphone show.  My company was releasing the Symbian Series-60 version of our flagship product called Pocket Express.

I was going to meet with some people about UIQ and since I had never actually owned a UIQ handset, I thought I would hit the high street and pick one up.

I went shopping in Slough and along Oxford Street in London and probably went into close to 20 stores.  Everything from Carphone Warehouse and Phones 4 U to the operator stores like O2 and Vodafone.

The in store experience in each of the stores was pretty much the same — a wall of inoperable phones with a small card listing the price with and the price without a contract.  Typically 3-4 bullets indicating the features (xMP camera, MP3 player, etc.) and nothing more.

The screens were dark.  As I said, they were inoperable.  Dead pieces of plastic. Some had stickers on the screen showing what they would like if you could turn them on.

As for buying a UIQ phone, it was quite a challenge.  None of the handsets talked about the operating system or even about the ability to download software.  At best they said “web browser”.

My colleague asked several of the shopkeepers about data plans and to the last one, they had no idea how to talk about them.  With one exception — 3.  No surprise there.

So it was a bit depressing.  Having been in this industry for more than 7 years, I had hoped that selling phones had advanced beyond this stage.  Clearly, consumers still buy phones based on price and form factor and little else.  For those of us making a living on data services, its clear that the “consumer market” is still a tough row to hoe.  Better focus on those who already demonstrate an understanding and willingness to use data.

And I never did get that UIQ phone.  There were a couple of Motorola Z8s, which I really like, but I wanted a touch screen phone.  I did find one Sony Ericsson P1, but I just couldn’t bare to buy such an ugly phone (sorry guys, I can’t believe this comes from the same design shop that puts out your other wonderful devices).  So I am waiting for the new SonyEricsson w960.

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