Mobile Device Adoption: Targeting the Next 50 Percent

Fifty-five percent of American mobile users now own a smartphone. That’s about 130 million people, which is a big pool of potential customers for your app. But what if that addressable market doubled?

It won’t happen easily or soon. The low-hanging fruit -- techies, prosumers, business people -- has been picked. Meanwhile, T-Mobile USA is among the mobile operators scrapping the tradition of handset subsidies. If that becomes a trend, then feature phone owners who want to upgrade tomorrow will have to shell out at least twice the amount they would today.

“One way or another, you’re going to have to pay some significant cost at some point, whether it’s up front -- $500 or $600 for the smartphone -- or $200 up front and $20 every month,” says Ramon Llamas, IDC research manager.

That’s one barrier. Another is the cost of a data plan, although that’s becoming less of a hurdle thanks to the growing selection of cut-rate, unlimited-data plans, such as those from Straight Talk and T-Mobile. The roll-out of Long-Term Evolution (LTE) could enable even more aggressive pricing strategies because the technology significantly lowers an operator’s cost of delivering data service.

“Carriers are interested in smartphone growth since they can compensate drops in voice and SMS revenue with data flat rates,” says Brent McMicking, who manages Intel’s phone launches worldwide. [Disclosure: Intel is the sponsor of this content.]

Who’s Using -- and Not Using -- Smartphones
The analyst firm iGR recently asked over 1,000 U.S. consumers about their plans to buy a phone in the next 30 days.

“The majority of those who were likely to buy [a phone] say they would probably buy a smartphone,” says Matthew Vartabedian, iGR vice president. “Not surprising. What I did find interesting was that older respondents (35+) with feature phones were about 10 to 20 percent more likely to buy a smartphone than younger respondents. Younger respondents (18-34) were more likely to buy multiple smartphones (two or more), which is also interesting. The survey data suggests that older consumers are already choosing smartphones.”

The catch is that not every first-time smartphone owner uses many -- or any -- apps. “[After] six months, my father-in-law has yet to use his iPhone 4 for anything except voice and text,” Vartabedian says. “He uses the preloaded weather and stock apps, but that's it. Maybe some Web browsing. I think he generates about 20 MB of 3G data in a month. I don't think he's even opened the App Store.” 

Smartphones Take Off in Developing Markets
There are a couple of reasons why it’s worth looking at smartphone adoption outside of the U.S. The first is that there are big potential markets, at least for those developers willing to localize their apps, such as in terms of language.

The second is because the strategies that vendors are using to upsell foreign consumers could be applied in the U.S., too. One example is the Yolo smartphone, which Intel and Safaricom recently launched in Kenya. It’s noteworthy because it’s the first smartphone to feature a processor and reference design created to reduce manufacturing costs without cutting corners such as performance. For example, the Yolo smartphone has 1.2 GHz processor, a 5 megapixel camera and support for 21 Mbps HSPA+ service.

That feature set is a break from tradition: In both developed and developing markets, affordable has been synonymous with pokey processors, limited memory and other shortcomings. Those undermine the app user experience.

“In India, Indonesia and China, they’re cutting corners left and right,” Llamas says. The device build [quality] is rather cheap, so people are replacing their phones every six to eight months.”

The Yolo smartphone sold out within two weeks of its debut. That suggests that a lot of people in developing countries who don't own a smartphone already understand the benefits of owning one, such as the selection of apps. Translation: There’s pent-up demand not only for smartphones, but also for apps.

“In emerging markets, smartphones will be the first computer device for many people and provide a deeper Internet experience versus feature phones,” McMicking says. “Pent-up demand for smartphones is a function of perceived value and the overall experience, of which apps are a part. The opportunity for developers is to reach a new set of customers.”

Upcoming Devices from CES

Last month’s 2013 International Consumer Electronics Show let consumers and enterprises glimpse the shape of the future hardware market.

Make that shapes. The variations on display included small tablets rivaling Apple’s iPad Mini, Windows 8-based tablets, enormous tablets exceeding the screen real estate of most notebooks, and large-display smartphones that edge into the tablet territory. The show also pointed to the future direction of Ultrabooks and underscored speech recognition as an increasingly prominent feature for a range of hardware types.

Hardware Options

In the tablet space, a number of products debuted with 7- or 8-inch displays and prices below the $329 iPad Mini. Another trend: the arrival of new Windows 8 tablets. Acer’s Iconia W510 and Asus VivoTab, both present at CES, come with 10.1 and 11.6 screen, respectively, and both have keyboard docks.

At the other end of the tablet spectrum, Lenovo introduced its, well, brobdingnagian IdeaCentre Horizon, a 27-inch tablet. Lenovo describes the device, which uses Windows 8 touch capabilities, as a table PC. The company says the IdeaCentre Horizon will support “touch screen game-play among several players” but can also serve as a desktop PC.

The hardware options shown at CES also included convertibles, devices that can shift from one form factor to another. One example: Lenovo’s IdeaPad Yoga 11S, a Windows 8 convertible that users can operate like a laptop and then flip the screen and deploy as a 11.6-inch tablet.

The “phablet” form factor, a smartphone/tablet hybrid, also grabbed some attention at the show. Lenovo, for instance, announced the K900, a smartphone with a 5.5-inch screen, which employs Intel’s Atom processor. [Disclosure: Intel is the sponsor of this content.]

The Ultrabook category -- the subject of numerous product announcements during CES 2012 -- continued to have a presence at this year’s show. Convertibles such as Dell’s XPS 12 and the touch screen-based HP Envy TouchSmart were among the Ultrabook products on the floor.

What Developers Need to Know

The range of form factors is an important consideration for developers targeting mobile devices. But from the user perspective, size and weight aren’t the only importnat variables. For enterprise customers, in particular, the form factor becomes an issue only after other requirements are met, says David Berg, vice president of product strategy at Shunra Software, which provides network virtualization solutions for testing mobile apps and other software.

“Essentially, [employees] want to be able to do their jobs with as few impediments as possible,” Berg says.

The critical components for accomplishing that objective boil down to enterprise connectivity -- the ability to remotely tap corporate IT assets in a secure fashion -- and the ability to both create and consume content, according to Berg. After customers feel they have addressed those two items, they will then think about a smaller and more efficient form factor, he adds.

Mobile Plans

Companies such as Intel, meanwhile, outlined their plans for the mobile market at CES. The company’s rollout includes a smartphone platform, based on the Atom processor, for emerging markets. Safaricom Ltd., a communications provider in Kenya, recently announced Yolo, a smartphone based on Intel’s platform.

Intel also discussed its “North Cape” specification, an Ultrabook detachable reference design. The design calls for an Ultrabook form factor that can convert into a 10mm tablet. Intel launched the Ultrabook-branded device market in mid 2011. The new Ultrabooks will employ the company’s 4th generation Intel Core processor line, formerly known as Haswell.

In another glance at the future, Intel suggested that more Ultrabooks and all-in-one systems will begin to offer applications for voice control, citing Dragon Assistant. The voice assistant application was launched in September and stems from collaborative work between Intel and Nuance Communications.

Nuance, for its part, provided a look at its Wintermute technology at CES. The company, which provides voice recognition technology for personal assistant applications, describes Wintermute as a cross-device persona project.