Three Trends Shaping Mobile Computing

Thursday Dec 29th 2011 by Mike Elgan
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Your mobile device is now a full-fledged cash register, among other trends shaping mobile computing.

As the dust settles on the holiday shopping season, three mobile trends have suddenly become clear: Mobile devices are becoming point-of-sale devices, Silicon Valley will control them and companies will use other products to drive adoption of mobile eCommerce.

Trend #1: Phones and Tablets Are Cash Registers

Why would an online catalog design, make and sell a touch tablet? Have you ever wondered that?

Amazon.com started out as an online bookstore. Later they expanded into just about every category of product that could be sent by mail. Later still, they moved into selling downloadable content.

That sounds like a pretty straightforward business. But years ago, Amazon did something radically different. They set up a small company called Lab126 to design consumer electronics gadgets.

Following the pattern of their catalog, the first hardware device, the Amazon Kindle, was all about books. Their latest (and greatest) piece of hardware is the Amazon Kindle Fire, which you can use to buy anything Amazon sells, and “consume” any downloadable content sold by Amazon.

The clear and obvious reason for this radical departure from the core business model is that it's not a departure at all.

In all its prescience, Amazon knew that eCommerce would evolve from one in which people would use catalog-neutral devices, like PCs, to catalog-biased devices, like the Apple iPad. In order to keep people buying, Amazon had to offer its own device in this new world.

The new world of buying things is online. And the new world of buying online is via phones and tablets.

And that's why Amazon has tablets.

It's not surprising that an online catalog has tablets. What's surprising is how few tablet makers have online catalogs.

IBM Benchmark announced this week that of all online sales taking place on Christmas Day, 13.4 percent of them were made from iOS devices like iPhones or iPads. About 5 percent were made from Android devices.

The company also found that overall online purchases increased by 16.4 percent over last year.

Next year, all these numbers will be vastly higher: More commerce goes online; more online commerce goes mobile.

So while Apple and Amazon make billions mobile devices, they are viewed (falsely) as competitors to other phone and tablet makers, who will scrape for crumbs selling just the hardware itself at razor-thin profit margins.

And Mobile eCommerce isn't just an alternative to brick-and-mortar commerce. The two are merging.

Apple's iPad is the fastest-growing point-of-sale cash register. Restaurants, coffee shops, and mom-and-pop stores of every description are embracing the iPad, plus third-party solutions like Square, as a replacement for their old, proprietary cash registers.

Google Wallet seeks to provide a mobile-phone alternative to credit- and debit-card purchases.

Note that both iPad cash registers and Google Wallet are each platform-specific.

And this is where the future of revenue is for phones and tablets: Micropayments for purchases, both online and retail, as well as app revenues.

The phone and tablet, in other words, are cash registers you carry in your pocket. And the platform and handset makers, currently Apple, Amazon and Google, primarily, are in the seat of power as both retail kingmakers, and also as the companies that can get rich by taking a cut of everything people buy.

Trend #2: Silicon Valley Über Alles

Another interesting trend is the rise of Silicon Valley in the mobile space.

Apple and Google are gobbling up the market for handsets and tablets. These companies are within walking distance from each other, yet together own 82 percent and 93 percent of the US markets for smart phones and tablets, respectively.

On Christmas Day, some 6.8 million iOS and Android devices were activated -- a new record.

Before the iPhone hit, the mobile platform space was dominated by RIM, Windows Mobile, Symbian and WebOS. But since 2006, RIM’s market share has plunged from 37 percent to 10; Windows Mobile from 37 percent to 3; Symbian from 9 percent to 1; and Palm’s WebOS from 17 percent to 1.

The third player in the “retailification” of mobile is Amazon, which ¬– despite being based in Seattle Washington -- deliberately opened its tablet development lab less than one mile from Apple headquarters in Silicon Valley. The obvious reason for this is that Amazon wants to poach Apple for hardware talent, and wants to be within commuting distance for the engineers they successfully steal.

So as the market transitions from a low-margin hardware business to a massively profitable retail sales racket, control of the mobile industry is moving from everywhere to the center of Silicon Valley.

Trend #3: Everything Is a Gateway Drug Leading to eCommerce

Another phenomenon discovered probably by accident is that users can get sucked into mobile eCommerce platforms by means of affinity with other products.

Many of these iPad users got there through a process of one-thing-leads-to-another. Most started out as iPhone users who also used Windows PCs. By the time the iPad came along, they had developed trust and affinity for Apple.

Google Wallet users are arriving by means of affinity developed for Google around Google Search, Gmail and other online services that made people feel warm-and-fuzzy about trusting Google with their money.

I also believe that Google+ will prove to be a gateway drug to mobile eCommerce.

Recent data suggests that Google's social service is adding more than 600,000 users per day. The service is still in its infancy, yet is growing an order of magnitude faster than Facebook, Twitter or any other social network ever did.

Google is integrating other services, such as Gmail, Search, Reader, YouTube and many others at an unprecedented clip. All Google Roads lead to Google+. And soon enough, I believe, Google+ will lead users to mobile eCommerce -- not only on Android devices but also on iOS ones as well.

Although there are far more smart phones in the world, and all web sites including eCommerce sites get more mobile traffic from phones rather than tablets, it's on tablets where the majority of actual mobile purchases are taking place.

And in this sense, iPhones and Android phones are serving as gateway drugs to respective iOS and Android tablets, which is where the serious money is being spent.

Likewise, Amazon pushed hard to make its original line of eBook readers popular, and to get lock-in through user investment in Kindle books. And the book-only Kindle is serving as a gateway drug to the Kindle Fire, from which everything on Amazon can be purchased -- even books!

Why is this important? Because companies that don’t have a wide range of products and services that gain user familiarity and trust will be placed at a huge disadvantage in the mobile eCommerce space. It’s going to be a winner-take-all market.

These three trends point to radical change in the mobile space. Phones and tablets are becoming a point-of-sale business controlled by Silicon Valley companies that gain user affinity via products that have nothing to do with mobility.

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