iOS vs Android – The big switcheroo

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The Digital Life pie is essential for stickiness.

  • Following 2½ years as an iPhone user, I decided to try and make the switch to Android and was amazed by how easy it was.
  • I have switched from iPhone to a Samsung Galaxy s8
  • I believe that the ease of transition came down to three factors:
    • One: Android is much better now than it was in 2014.
    • Two: I am not a user of any of Apple’s Digital Life services.
    • Three: Most apps are now free to download with either in app purchase, advertising or a subscription.
    • Furthermore, most apps now store user data in the cloud meaning that switching is simply a matter of downloading the app and signing in.
  • My thoughts after living with Android for one month are as follows:
    • Get out of jail. Android is a breath of fresh air in that I can install anything that I want with no problems.
    • The Google Play store does not offer some apps in my region but this was easily fixed by downloading Aptoide which has virus-screened versions of almost everything.
    • Furthermore, on Android anything is possible and a developer has already worked out how to re-map the Bixby hard key to Google Assistant.
    • However, this freedom comes at a price in that many things simply do not work as well or as reliably as they do on iOS.
    • I suspect that this is mostly a result of the endemic software fragmentation that exists across Android devices which remains as bad now as it has ever been.
    • I still have to be my own systems integrator.
    • For example, the weather widget that ships as default on the home screen of the Galaxy does not work properly when it comes to updating the weather information in other cities that the user has added.
    • The biometric security unlocking does not work properly all the time and apps crash and quit with greater regularity compared to iPhone.
    • Voice and radio performance: The iPhone still sets the gold standard in terms of the quality of voice calls and radio performance in areas where the signal is not optimal.
    • Fortunately, because I am not a big voice user, this is not a huge issue.
    • Furthermore, even though the s8 offers much better control of Bluetooth devices when more than one is connected at the same time, the iPhone offers better stability and reliability.
  • The main observation that I have made is that moving my Digital Life from iOS to Android was far easier than I thought it would be.
  • A major reason for this is that outside of photos and videos which are a cinch to move thanks to Google Photos, I am not a user of Apple’s Digital Life services.
  • I have never used Facetime or iMessage and as a result I was not locked into the network that Apple has created around those services.
  • This throws into sharp relief the key weakness of the iOS ecosystem which is the same now as it has always been.
  • Apple’s position in Digital Life services is weaker than many of its peers meaning that the key selling point remains the quality of its user experience and its ability to distribute the apps and services of third parties in a fun and easy to use way.
  • If Android close this usability and security gap to iOS, I think that users will be less inclined to pay a substantial premium for iPhone compared to something similar running Android.
  • This is why Apple has been working hard on things like Apple Pay, HealthKit and HomeKit but I think it needs to do much more before these can be considered really defensive.
  • Given, Google’s very slow progress in taking control of its ecosystem on Android, I think that this still gives Apple a good 3-5 years before its handset margins will come under pressure.
  • Apple’s developer conference kicks off today where I hope to see announcements aimed at keeping Apple’s differentiation over Android.
  • Furthermore, the iPhone 8 promises to be a worthy challenger to the excellent Galaxy s8.
  • I have liked Apple on valuation grounds for a considerable time but following the recent increase in its valuation, it no longer offers the same value that it did.
  • Hence, I still prefer Microsoft, Tencent and Baidu.

Research Publication – Reality Bytes – Its master’s voice

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February 23rd 2016:  Radio Free Mobile launches a new product category looking at shorter topics relevant to the ecosystem. Issue No.1 deals with the usage of voice in digital ecosystems.

RFM research subscribers will receive their copy directly by email. 

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Voice is where much excitement and hype is to be found. Every ecosystem is developing a voice controlled digital assistant with which it hopes to enrich Digital Life and control the homes of its users. However, RFM finds that voice suffers from significant limitations meaning that the user experience and functionality that it can offer is way behind that that can be achieved using a visual device. This combined with the fact that the intelligence of voice based systems remains rudimentary at best means that voice is unlikely to replace screens any time soon.

  • Three stages of understanding. RFM defines three stages in a machine’s development to be able to understand voice commands. These are: 1) High word accuracy, 2) understanding of the request in multiple word orders and formats and 3) understanding of context and circumstance. RFM thinks that it is not until machine understanding reaches stage 3 that voice can have any hope of challenging the established man machine interfaces of screen, touch, keyboard, haptics and mouse.
  • Defining voice. Despite these limitations, voice usage in ecosystems is growing very rapidly. RFM research indicates that voice usage is really growing only as an alternative to typing a request rather than as a rich two-way voice interaction with the ecosystem. Hence it is important to separate the two types of voice usage to understand voice’s place in the Digital Lives of users. RFM has termed these as one-way voice and two-way voice.
  • One-way voice is where voice is used as an alternative to using a keyboard. Most ecosystems have reached stage 1 making this use case viable. While, input is voice based, the response is delivered through the usual visual method. RFM thinks that the vast majority of voice requests in digital ecosystems use this method which will have no effect on the monetisation methods currently used by Google, Facebook etc.
  • Two-way voice is where voice is used as both input and output. It remains almost exclusively the realm of home speakers such as Amazon Echo and Google Home. RFM finds that the rudimentary AI of digital assistants combined with the limited amount of information that voice can convey, often has these systems falling back on displaying results on a screen.
  • Voice in ecosystems. Digital assistants and voice based interfaces are driven entirely by the artificial intelligence that powers them. Although the search engines are leading the development of AI, all systems are far too rudimentary to replace visual based devices for the foreseeable future. Facebook is still the laggard when it comes to advances being made in AI.

Google Enterprise – No G man.

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G Suite and Chromebook upgrades are too little too late.

  • Functionality upgrades to the mobile version of G Suite (Office-like apps) and enhancements the Chromebook proposition are not likely to alter the downward trajectory that I see for Google in the enterprise.
  • Google has announced upgrades to the iOS and Android versions of Docs and Sheets that include more advanced editing and formatting.
  • It has also moved forward with its intention to enable Android apps on Chromebooks by stating that all Chromebooks launched in 2017 will be able to run Android apps (although not all of them will be able to do so right away).
  • In theory both of these moves could help to enhance the appeal of using Google for Digital Work as well as Digital Life but I see a number of problems.
    • First: Ever since Microsoft released free Office 365 apps for iOS and Android, I feel that Google has been losing the Digital Work game.
    • I think that this is because Office 365 with basic editing being free on iOS and Android obviates the reason to use G Suite at all.
    • I think that the same goes for the other Office alternatives such as Libra Office and so on.
    • Office is by far the leader when it comes to functionality and compatibility and now that it is free in simple user cases, it makes very little sense to use anything else.
    • Second: I do not think that adding Android apps to Chromebooks will do very much to enhance their appeal.
    • This is because the vast majority of Android apps are designed to be used with a device that uses touch as its input mechanism rather than a keyboard and mouse.
    • It is also worth noting that enabling Android apps on Chromebooks will have the side effect of bringing Office 365 onto the platform.
    • Consequently, I think that the user experience of Android apps on Chromebooks will be substandard, pushing users back to their smartphones and tablets to use them.
    • Furthermore, I think that the keyboard and mouse input system is increasingly the domain of the content creator with content consumers overwhelmingly finding touch based devices cheaper and easier to fulfil their requirements.
  • Consequently, I do not see either of these actions improving the appeal of Chromebooks nor increasing the use of Google Docs by content creator users.
  • I see content creators preferring Windows or Mac OSX with a keyboard and mouse and content consumers sticking to iOS and Android on a touch based device.
  • I think that the combination of Office 365’s superior functionality and the free basic functions have obviated the reason to use anything else which will lead to a long-term decline in G Suite.
  • One area where Google has a chance with the enterprise is in the cloud, but there it is already very far behind both Amazon and Microsoft and will also have to contend with Alibaba’s clear intention to take AliCloud international.
  • The net result is that I continue to see almost all of Google’s growth remaining in consumer where mobile and YouTube are still growing very nicely.
  • Finally, I think that this growth is already fully priced into the shares leaving me still preferring Microsoft, Baidu or Tencent over Alphabet.

Samsung – Good mileage.

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Samsung’s cycle still has some distance to run. 

  • Although Samsung appears to have recovered its mojo, I think that it is merely enjoying a product cycle which at some point will come to an end.
  • This mojo was underscored by a successful launch event for the Galaxy Note 7 that went hand in hand with an improved Gear VR and a sales promotion that should help consumers to swallow the blistering $850 price tag.
  • The most notable upgrade was the inclusion of an iris scanner that makes unlocking the device very simple and fun.
  • This successful event comes on the back of two excellent quarters where margins in handsets have rallied to 16.3% in Q2 16A from 10.9% in Q2 15A and a 20% rally in the share price so far this year.
  • However, the big question is where does it go from here.
  • The good news is that I think that current cycle has some distance to run but the bad news is that all cycles come to an end.
  • I am convinced that there is nothing special (other than its price) about the Galaxy s7 that has made it a success.
  • Instead a confluence of events and good management by Samsung have meant that the Galaxy s7 is doing far better than Samsung could have hoped.
  • I do not think that iPhone users are switching to Android.
  • Instead those who currently own an S4 or an S5 are taking advantage of attractive pricing on a great product to replace their devices sooner than they normally would have done.
  • This results in a classic product cycle where sales rally for a period of 6-12 months while users upgrade and then return to baseline.
  • This is exactly happened to Apple with the iPhone 6 and is now happening to Samsung with the s7, albeit to a lesser degree.
  • This cycle has led to Samsung shipping large numbers of the s7 which has also had the effect of consolidating unit volumes into fewer numbers of models.
  • This always leads to better margins because components can be acquired in greater volumes and development only has to be done once.
  • Samsung has also been very efficient at cutting its cost base and is being far more cautious with costs than when Galaxy ruled the Android world.
  • Hence, I think that Samsung’s handset margins will stay strong for the balance of 2016 and then return to 9-11% which is I think is sustainable long term.
  • However, analysts like straight lines and I suspect that many will now be forecasting that 16% is the new normal for Samsung.
  • As a result, I suspect that by the end of this year 2017 estimates will be much too high.
  • Consequently, I see disappointment in Q2 17 next year but until then, I think Samsung’s rally can continue.
  • Even including a 20% discount for inferior corporate governance, I can still comfortably value Samsung at KTW1.9m some 23% higher than the shares are today.
  • Hence Samsung remains with Baidu and Microsoft in my top 3 for 2016.