[In the first part of this two-part blog post, we introduced a second tidal wave of mobile ecosystems (after Android/iOS), mobile-first and twice over-the-top (OTT²): messaging apps. OTT² ecosystems drive engagement by commoditizing hardware, apps and services. In part 2, Stijn Schuermans explores the unexpected way in which the engagement from messaging apps is monetized. (Hint: it’s not advertising.)] In the first part of this two-part blog post, I introduced a second tidal wave of mobile ecosystems (after Android/iOS), mobile-first and twice over-the-top (OTT²): messaging apps. Messaging apps are proving to be so much more powerful than just chat. While most apps are just value-adds for iOS and Android, messaging apps are the first that can create a substantially new mobile landscape. They are important not just because of their market momentum of 100s of millions of users, but because they build on asymmetric business models, the same economics that brought Apple and Android to their dominance. By definition, a company with an asymmetric business model creates (and sometimes destroys) value in one vertical, in order to capture value in its core market. For example, Google commoditized handsets by providing the Android OS for free in order to defend its advertising business. So what is the core business of messaging apps that is being boosted? The surprising core business of second-wave mobile ecosystems [tweetable]The dominant business model for OTT² messaging apps is – perhaps unexpectedly – not advertising, but m-commerce[/tweetable]. With messaging apps, the business model focus shifts from selling the app (up-front or using in-app payments) or selling the audience (via ads) to selling goods through the app. The business model entails the promotion and sale of virtual goods (stickers, mobile games, apps), physical goods and services (like taxi rides, as explained in part 1 of this post). Mark Watts-Jones offers this handy overview of how messaging apps make money: Let’s take a closer look at some examples. WeChat’s revenue About 85% of the $1.1B that Tencent’s WeChat app will earn this year will come from online gaming, estimates The Economist. The rest will come from stickers, services like sponsored accounts, and the fast-growing area of m-commerce. Already merchants are selling goods via WeChat as diverse as fruits, smartphones (150K Xiaomi phone in 10 minutes), movie tickets, taxi rides and insurance against malignant tumors. You can pay at vending machines with the app. Entire books have been written about how to do marketing on WeChat. Line’s revenue Games accounted for 60% of the $338M that Line made in 2013. Another 20% comes from sticker purchases and the rest from business services like official accounts and branded stickers. Line has been actively testing the e-commerce waters with flash sales, hot deals and the Line Mall marketplace. Messaging and e-commerce in investments Investment activity gives another view on how crucial m-commerce is as a revenue model for messaging. Viber was acquired by Japan’s e-commerce champion Rakuten. Alibaba, China’s king of online sales, invested $215M in Tango. In the other direction, Tencent has invested in JD.com, another large Chinese e-commerce player. Also somewhat surprisingly, the innovations in this business models don’t come from US entrepreneurial hotspots like Silicon Valley or Boston. It is Asian companies that lead the way. The subscription model of WhatsApp (prior to its acquisition, at least) is the exception, not the rule. The dominance of m-commerce makes sense While advertising is certainly a popular and straightforward choice when monetizing user attention, the prevalence of m-commerce in messaging apps should actually come as no surprise. First, consumers are increasingly comfortable with buying on their mobile devices. Mobile now accounts for a quarter of e-commerce traffic, a fast-growing category by itself. On the web, e-commerce is a trillion-dollar industry, an order of magnitude larger than advertising (which broke the $100B barrier in 2012) and dwarfing other revenue models like gaming, gambling, SaaS or media streaming. We can expect the same to happen in mobile. In fact, many retailers see a substantial amount of their online audience coming from mobile devices. Counterintuitively, this growth of mobile retail might accelerate as more people in emerging economies come online. Connie Chan from Andreessen Horowitz says that in third and fourth-tier cities in China, for example, traditional brick-and-mortar retail infrastructure like shopping malls might not exist, leaving m-commerce as the more convenient option. For app developers, m-commerce is a good choice, too. e-Commerce and affiliate programs are among the highest-grossing revenue models for mobile developers, dwarfing the median revenues that developers can expect from ads or even in-app purchases. It’s no wonder then to see significant investments in mobile commerce. David Marcus, Paypal’s CEO since 2 years, has made mobile a strategic priority for the company and (as a former founder of mobile payment company Zong) has in fact been selected by eBay’s executives to do exactly that. Tencent, being of the protagonists of this story as the company behind WeChat, has recently made investments worth hundreds of millions of dollars in e-commerce companies like JD.com, Dianping (often referred to as China’s Yelp) and E-house (real-estate). m-Commerce has been hailed as the next big thing for many years – these investments indicate that things are finally starting to move in a significant way. Developers are catching on The m-commerce megatrend, especially in OTT² ecosystems, has not escaped the attention of mobile developers. [tweetable]Messaging ecosystems are fast becoming a major channel for the discovery and promotion of apps[/tweetable], a long-standing pain point in iOS and even more so Android. Look at the recent move by Tencent to enable app downloads from WeChat. It capitalizes on the trust inherent to social referrals (in earlier editions of Developer Economics, Facebook was highlighted as a main app promotion channels for the same reason). It might also tip the balance to Tencent’s own app store in a country where Google Play is mostly absent and a plethora of app stores compete for attention. The high earnings potential of m-commerce for developers is also translating in fast-growing adoption. In our Developer Economics research, we found that e-commerce sales grew significantly in popularity as a revenue model from 5% in Q3 2013 to 8% in Q1 2014. The role of app makers is changing from Developer-as-a-Programmer to Developer-as-a-Salesperson. The mobile success recipe In summary, a clear recipe is emerging for the next giant tech companies in the age of mobile. First, use ecosystem economics to create value for your users, and don’t be afraid to subsidize or undercut adjacent market arenas if that helps to boost traction. The network effects in your ecosystem will help to solidify your competitive position and make it difficult for others to attack you, including the carriers and operating systems on which your platform is built. Next, use the highest-earning revenue model on both the web an in mobile to monetize: e-commerce. Any app that succeeds in doing this, messaging or not, will have a bright future ahead. #mau #weixin #line #overthetop #viber #mcommerce #wechat #mobiletrends #kakaotalk #Tango #whatsapp #asymmetricbusinessmodels #messagingapps

[What if cars were like mobile phones? There are some eerie similarities between the approaches of car makers in 2014, and operators and handset makers in 2008. Will car makers be disrupted in the same way that the mobile industry was? Senior analyst Stijn Schuermans shares his feeling of deja-vu.] “Cars are the biggest and oldest mobile devices. We are the face of mobility. We’ve been around for over a century. But we welcome the competition from newcomers like Apple and Samsung.” — paraphrasing John Ellis (Head of Ford’s developer program) at CES 2013 Let’s entertain that thought for a moment. What if cars were like mobile phones? At the moment, they would be like the feature phones of yesteryear. Today’s mainstream cars have 4 “apps”: driving from A to B (obviously), climate control, music (AM/FM radio, CDs, and more recently internet radio) and GPS navigation.Feature phones in 2008Cars in 2014TelephonyDrivingTextingClimate controlContactsGPS navigationCameraMusic In fact, this is not the only parallel we can draw between these two industries, as car makers are betting heavily on the concept of apps in the car. There are some eerie similarities between the approaches of car makers in 2014, and operators and handset makers in 2008. We’ve listed some in our latest report: “Apps for connected cars? Your mileage may vary”. QNX is the new Symbian. Genivi is the new LiMo. Windows Embedded Automotive is the new Windows Mobile. Just like mobile operators in 2008, car makers are very hopeful that apps under their control will bring significant new revenue streams from value-added services. Developers are named “partners”, but it is clear that car makers (as were telcos) are mostly see them as suppliers of content and treat them accordingly. (For the full list, take a look inside the report.) How mobile was disrupted Can we use this insight – car apps are just like mobile, shifted in time – to predict the future of the car app market? In our report “The Telco Innovation Toolbox” (2 years old, but still highly relevant), we showed what has happened in the mobile industry. From the 4 “most wanted” apps of the feature phone days (according to market research acquired at great expense, no doubt), we went to smartphones with now over a million apps, encompassing every imaginable user need. Service distribution and industry power shifted from telcos to mobile platforms: Android and iOS. Fundamentally, the basis of competition in the mobile industry shifted from reliability and scale (which network has the most bars) to choice and flexibility (which handset has the most apps). This wealth of applications unlocked a user demand that far exceeds that of a selection of “best” or “most important” features in a product designed by a single organisation. The same shift in cars? Can the same shift happen for car apps? Will the basis of competition for car makers change from reliability and scale in the production of cars and infotainment systems, to choice and flexibility of in-vehicle and out-of-vehicle services that will unlock new user demand? We believe it can, and it will. Already car makers like Ford and General Motors and over-the-dashboard players like Mirrorlink, Apple, Google and most recently, Microsoft are working towards app platforms for cars. The introduction of Apple’s CarPlay, Google’s Open Automotive Alliance and Microsoft’s Windows in the Car seems to herald a tipping point in the industry. Here are players that have a deep expertise in fostering vibrant ecosystems, in building developer communities and in enabling developers to add value. There is now a realistic and acute possibility that these new entrants will sweep away the existing car app platforms with a dominant, over-the-top solution, just as they did in the smartphone world. In short, car makers should take the following statement as a heads-up: I want to buy Carplay. I don't really care that much about the vehicle around it. — Dave Pell (@davepell) March 16, 2014 Now you know what’s at stake. Find out how the car industry is changing and what to do about it. Our full report on automotive developer programs is available as a free download. #ecosystems #disruption #WindowsEmbeddedAutomotive #GeneralMotors #qnx #developerprograms #google #Apple #platforms #automotive #carapps #connectedcar #CarPlay #MirrorLink #WindowsintheCar #microsoft #Genivi #OpenAutomotiveAlliance #devices #Ford

We just launched our new Developer Economics survey! If you’re an app developer, take the survey and help shape the opinions of Microsoft, Intel, Nokia, Amazon, and many others reading the reports from this survey – and win some cool prizes while you’re at it! The findings will be released as a free report in July. The 7th edition survey explores some key trends: How are challenger platforms moving up? Is HTML5 in decline? Who is making most money? What language do most devs use? What are the trending tools of the trade? Participants will enter a draw for some cool handset prizes: an iPhone 5s, a Galaxy S5, a Lumia 930 and more. If you’re also a VisionMobile panelist (or join the panel), you’ll get the chance to win a Lego Mindstorm robot, a Raspberry Pi Ultimate Starter Kit, a Das Keyboard or a Sphero! Take the survey

[Andreas Pappas shares our latest findings, from our Business & Productivity Apps report which takes a look at developer opportunities created by emerging trends in enterprise mobility (such as bring-your-own policies and mobile SaaS) and professional and vertical app markets (e.g. healthcare apps). This market was worth $28 billion in 2013 and is set to grow to $58 billion by 2016.] [Want to help us with data for our reports? We’ve just launched our latest Developer Economic survey – take the survey and have your say on the latest trends] [tweetable]Apps are changing the way people communicate, work and play[/tweetable]. App development has grown into a huge industry, that we estimate to be worth $67 billion in 2013. We expect the app economy to more than double in size by 2016. Most of the publicity and media spotlights currently fall on superstar consumer apps like Angry Birds or Candy Crush Saga and communication apps like WhatsApp. These success stories have certainly highlighted the massive scale and revenue potential of mobile apps, reaching from zero to tens of millions of users in record-breaking time. At the same time, a growing audience of prosumer and business users depend on Box, Evernote and Trello to help them be more productive in their work. Enterprises are now allowing employees to use the apps they love at work, inside the corporate Intranet. Organisations of all shapes and sizes are integrating mobile apps within their business processes. This mobilisation creates a demand for off-the-shelf or custom mobile apps and services, translating into new and bigger opportunities for mobile app developers. Most app developers currently target consumer app markets (think games and lifestyle apps) but they could be missing out on opportunities in the enterprise (aka business & productivity) market. Our research indicates that the business & productivity app market, is not only growing at approximately the same rate as the consumer app market but is also less congested, and offers better revenue potential, for more developers. Read the report to find out more. Consumer vs. Enterprise & Productivity apps: how do revenues compare App publishers that target business and productivity markets have a much better chance of generating sustainable revenue than those targeting consumer markets, with just 32% of them below the “app poverty line” ($500 per app per month) compared to just under half of consumer-focused publishers (48%). At the same time, [tweetable]publishers that target businesses or professional users have a much higher chance to generate very high-revenues[/tweetable]: 16% of those targeting the business & productivity market generate revenues exceeding $500,000 per app per month, compared to just 6% among consumer-focused publishers. While consumer apps and particularly games (e.g. Angry Birds, Candy Crush Saga) can generate extraordinary revenues, it is quite clear that this is not the case for the vast majority of developers that target consumer markets. Business & Productivity apps allow developers to build a sustainable business around more solid business models with recurring revenues from a loyal customer base. As bring-your-own policies and enterprise app stores become increasingly popular among businesses, the market and the opportunity for developers is likely is set to expand in the next three years. Which platform should you prioritise if you build business and productivity apps? While Android is dominating the consumer market in terms of market share, iOS maintains a healthy lead among professional and business users. Data provided by enterprise cloud content platform Box, indicates that 94% of their tablet users are on iPads, while enterprise mobility management services provider Good Technology indicates that 54% of enterprise smartphone activations came through iPhone devices in Q4 2013. It is clear that Apple has an edge in the business device market and this is also reflected in revenues generated via iDevices: VisionMobile estimates that revenue generated via iOS devices accounts for at least 60% of the total revenue in the business and productivity market. For developers that target the business & productivity sector it makes sense to prioritise iOS for development over the other platforms they develop for. However, there are several considerations to take into account such as integration with existing enterprise services, which may call for an HTML approach or the specific market that you target. Where are the opportunities in the enterprise app market? There is an inherent unpredictability associated with the future use of apps and it is exactly this unpredictability that empowers developers to create innovative apps that continue to redefine whole markets and industries. Nevertheless, we can still identify a number of areas that currently attract considerable attention among businesses and where we see future value being unleashed in the business & productivity market: Vertical apps Specialised industry apps such as healthcare, real estate, finance or automotive. Vertical specialisation provides a great opportunity for differentiation and for building strong brands as the app economy diffuses into every single industry. Existing industry stakeholders can leverage apps as a differentiation strategy against “un-apped” competitors, integrating apps and exposing APIs across their product offerings. For independent developers, specialisation is a means to capture a niche and survive the discoverability labyrinth. Productivity/BYO Apps that cross the boundaries between private-use and work-use, such as storage, lists, calendars, office-type apps are key drivers behind the consumerisation of enterprise IT. Once into an organisation or an enterprise app store, such apps can spread rapidly within organisations. Mobile SaaS Software-as-a-Service, delivering CRM, HR, ERP, BI services to small businesses and large enterprises is a booming sector. Mobile apps extend these capabilities much further by allowing anytime/anyplace access to these core business services. Custom apps/services Bespoke mobile solutions delivered outside of app stores will continue to take the lion’s share of revenues within the business and productivity app market. As we discussed, the dominance of this model will erode during the next few years as app store purchases increase among enterprises. MDM/MAM Apps and services that tackle security and complexity of the decentralised IT department are already essential for any enterprise that adopts BYO policies. More sophisticated app & device management models, that tackle some of the key issues associated with this trend (e.g. managing private/work services, remote deletion of work content) will continue to be hot areas in the next few years, catering to an increasing number of use cases. Download our free “Business and Productivity Apps” report to find out more about the developer opportunity in this market and the reason you should be developing business and productivity apps. Have your say in Developer Economics research Help us continue bringing you great insights about the app economy and app development. Take part in our 7th Developer Economics survey that is launching today! Help us break our earlier world record of 7,000 app developers that took our 6th survey. Take part, spread the word, win prizes and help us do great research ! #appeconomy #businessandproductivityapps #enterpiseapp #marketforecasts

[The mobile space is about to be shaken up again. Get ready for the second tidal wave of mobile ecosystems to reshuffle the market. These powerful new ecosystems are mobile-first and twice over-the-top (OTT²): they are built on top of telco services and on top of app platforms.] It’s 2014. We’re 6 years into the smartphone revolution, and the mobile space is starting to settle down. iOS and Android are clearly in the lead among app platforms – their ecosystem strategy has created a natural duopoly in which competing platforms no longer stand a chance. Smartphone innovation is no longer radical, but mostly incremental. There are signs that smartphone users are becoming overserved by the latest and greatest flagship devices: smartphones are becoming “good enough” as such and undifferentiated for mainstream users. But things are about to be shaken up again. [tweetable]A second tidal wave of mobile ecosystems is gaining strength, ready to thoroughly reshuffle the mobile market once more[/tweetable]. These powerful new ecosystems are mobile-first and twice over-the-top (OTT²): they are built on top of telco services and on top of app platforms. I’m talking about messaging apps of course: WhatsApp, Line, WeChat/Weixin, Viber, Telegram, KakaoTalk, Kik. Gaining momentum [tweetable]Messaging apps are proving to be so much more powerful than just chat[/tweetable]. Even well established social networks and ecommerce giants are getting nervous enough to make high-value surprise acquisitions (we’ll talk about Facebook in a moment). The first indicator of their momentum is the sheer size of their user bases. Tango, considered to be a smaller player, has 200M registered users and 70M monthly active users (MAU). Wechat has passed 350M MAU, WhatsApp has over 450M MAU. Chat apps don’t just get downloaded often, but they are incredibly engaging. A large share of engagement minutes is going to staying connected with friends, family and business partners, and chat apps are increasingly the way to do so. Chat messages overtook SMS in global message volume in April 2013. In essence, the rise of messaging apps relegated telcos as a group to the status of just another communication ecosystem. Investors agree when it comes to their value, if we can believe the recent M&A, IPO and investment activity. WhatsApp was acquired by Facebook for $19B Viber was acquired by Japanese e-commerce player Rakuten for $900M in cash Tango received a $280M series D investment, including $215M from China’s e-commerce king Alibaba Line is rumoured to prepare for a $28B IPO KakaoTalk is also preparing for an IPO, aiming at a $2B valuation Unfair advantage [tweetable]Messaging apps are important because they build on asymmetric business models, the same economics that brought Apple and Android to their dominance[/tweetable]. They are subsidizing or commoditizing hardware, apps and services to grab users and boost their core business. The first examples of this are already evident. Messaging apps are of course commoditizing the quintessential telco services: voice and texting. Whatsapp announced a VoIP play. Even large operators in emerging markets with incomplete mobile penetration like China Mobile are reporting financial performance challenges, citing competition from chat apps as the reason. Tencent (known from the wildly popular instant messenger QQ and chat app WeChat) and Alibaba (China’s e-commerce champion) are fighting their battle for user acquisition and engagement in the most unexpected of places: taxis. Not only have Tencent and Alibaba both invested in taxi hailing apps (DiDi and Kuaidi respectively), they are both actively subsidizing taxi rides by giving discounts if users use their apps. The mini price war is so intense that in some cases, users actually get paid when taking a taxi. Apps like Line and Tango are taking a page from iOS and Android’s playbook, using game developers and content providers to add value to their platforms. With this “user landgrab” and high engagement, messaging apps are competing with the telco services and app platforms on which they are built, who are trying to achieve the same reach and share of attention. [tweetable]While most apps are just value-adds for iOS and Android, messaging apps are the first that can create a substantially new mobile landscape[/tweetable]. So what is the core business of chat apps that is being boosted? We’ll discuss the surprising dominant revenue model of social apps in part 2 of this post. Stay tuned! — Stijn #mau #weixin #line #overthetop #viber #wechat #mobiletrends #kakaotalk #Tango #whatsapp #asymmetricbusinessmodels #messagingapps

Business and Productivity Apps is a research report that explores the emerging enterprise app market and uncovers untapped opportunities for developers. The report identifies trends and opportunities in the enterprise app market, forecasts developer revenues and estimates the size of the market to 2016. You can download it for free here: https://www.visionmobile.com/product/business-productivity-apps/

Here’s our latest report, investigating the apps for cars market! What does it take to develop apps for connected cars? How can car makers learn from telco mistakes when dealing with mobile disruption? Find out, on our Apps for Connected Cars report: https://www.visionmobile.com/product/apps-for-cars-mileage-may-vary/

There used to be a time when developers worked hard to make their apps compatible with devices. [tweetable]Nowadays, device makers are working hard to make handsets and tablets compatible with apps.[/tweetable] Amazon built the Kindle Fire on the Android Open Source Platform in order to leverage Android’s developer ecosystem and adding value only in the missing parts of Android. BlackBerry built a “runtime for Android” into its BB10 platform in an attempt to close the app gap with its main mobile OS competitors. Jolla used a similar tactic in its Sailfish OS. And now Nokia has produced an Android phone, the Nokia X, against all expectations considering their focus on Windows Phone over the last years and the acquisition by Microsoft. The Nokia X is positioned as a low-end “stepping stone” device relative to the Windows Phone based Lumia range. How did this flip of fortunes come about? Why supporting Android apps is becoming a must Apps used to be bite-sized additions to the functionality of the mobile device; individually unimportant except for a very small number of key apps. [tweetable]The bargaining power of app makers is clear from the financial results of developers – that’s to say: near zero.[/tweetable] Six years into modern smartphone platforms, a full 60% of developers are still below the “app poverty line”, i.e. earn less than $500 per app per month, according to our latest Developer Economics survey (download the full Q1 2014 edition for free). However, apps in aggregate have now become a must-have and a big driver of competitive positions. It’s no longer enough to build your own app ecosystem, or even feasible for that matter. iOS and Android form a de-facto duopoly that is impossible to compete against. [tweetable]To survive as a mobile device maker you need to tap into Android’s app base[/tweetable] (as iOS is closed for other device makers). To convince consumers to buy your device, you need apps. Not just any apps, mind you. The hot apps of the moment (they usually are found on iOS first, Android second), as well as a long tail of apps catering to every imaginable use case. They need to look good and be fully featured too – lowest common denominator apps won’t do if you want to put a device in the market. To convince developers, you need to deliver many users at low development effort. The best way to do that is to produce an Android-compatible device. The second best way is to bet on HTML5 with many good cross-platform tools and advanced APIs – something that both Blackberry and Windows Phone have struggled with as well. A good long-term strategy? Both on the user and on the developer side of the ecosystem, device makers will fight a serious uphill battle if they don’t support Android. But is supporting Android a good strategy for Amazon, BlackBerry or Nokia in the long term? For players like Amazon and possibly Nokia who add value on top of Android, the move is in principle sustainable. As we explained in an earlier article: you don’t need to make an OS to win in mobile. Amazon and Nokia are basically replacing Google’s cloud services with their own (and in Nokia’s case: Microsoft’s), and use the Android OS for all the rest. This enables them to add value where it really matters, i.e. where Android and Google are weak. In Amazon’s case it’s crystal clear: the e-commerce giant leverages its promotion prowess and credit cards on file to help app developers monetize better. Device makers who try the Android compatibility approach can still lose out to fragmentation however. We argued in the Naked Android article that only a few companies in the world have the clout with developers to convince them to spend the effort on replacing cloud service APIs. GlassBoard developer Justin Williams illustrated that perfectly in his recent post, where he muses on whether or not to adapt his app to the Nokia X. (Short answer: he won’t.) [tweetable]For Blackberry and Nokia-X-as-a-stepping-stone-to-Windows-Phone, there is little hope that supporting Android will get them out of the slump.[/tweetable] They might attract opportunistic developers looking for a few extra users, but those developers are not likely to add to the momentum of the Blackberry and Windows Phone ecosystems. “Moving up” to the native ecosystem on those devices means that developers need to rewrite their apps. This idea clashes with the opportunistic motivation that attracted them in the first place. That’s my take. I’d love to hear your opinion. What do you think that device makers should do? — Stijn #handsetmanufacturer #amazon #nokia #kindle #mobilestrategy #Blackberry

I ‘m part of a hardware research group at Telefónica Digital called “Physical Internet Lab”. Three years ago we started a small group under the Emerging Technologies area of the company focusing on the Internet of Things. The commitment of the group was (and is), in ambitious terms, “to democratize the Internet of Things” opening it to as many makers, developers and users as possible. Our goal has been not entirely altruistic: Telefónica as a network operator has a lot of value to add in the Internet of Things economy. On day to day basis we build prototypes and products, usually connected objects or components like the Thinking Things building blocks. Setting up the lab three years ago was no easy task. We wanted to work at the crossroads of the Internet, the Things and the People. But our development skills were almost 100% software related. In the process we built a team skilled on all three sides. And we figured out how to do agile hardware. Of Agility and Hardware We ‘ve come full circle. Telefónica I+D (the Telefonica Digital development branch) was created 25 years ago to produce hardware innovations such as X.25 and ATM switches. We did that in the classical engineering fashion: writing long and rigid lists of requirements, splitting the work across solution providers, integrating and then testing following a waterfall schema. Over time Telefónica I+D adapted quickly to the technology changes and by the mid-nineties we were developing mostly software. First we followed the same engineering process; then we moved towards more iterative methods. In the last 10 years we have adapted fully to agile methodologies. As we were building the laboratory we found ourselves getting back to hardware. But the company now could not understand a slow-moving unit. The lab had to be agile. So we had to bring agile methodologies to hardware development. The first difficulties came with the corporate facilities. Hardware work demands physical proximity and we could not afford to have a distributed team depending on collaboration tools on the Internet. At the same time, soldering fumes or drilling noises were not welcome in our modern, bright, open spaces. So the team had to move to a closed office in an old building in Madrid city center. Moving to the city center was a boon: in minutes we could reach many shops and services, buying anything from hammers to plastic boxes. Visitors now found it easier to visit us in a centric garage-like office. This was great for our open approach as we wanted to help and interact with other companies and organizations. Purchasing tools was another problem. The corporate procedures were tuned for large-scale purchases such as server farms or external services. Buying a handful of resistors for 10 euros could take several weeks, creating bottlenecks to our work. Fortunately the purchasing department showed a great deal of sensibility. We worked together to redesign the process. Now we buy any component or tool in a single day while still working by the book. Putting together the Agile team Hardware work implies multiple teams across several companies with extremely specialized profiles. When setting up the lab we opted for a small and autonomous team, able to build a hardware prototype with no external dependencies. A small team allows us to work closely integrated, in the same location, continuously coordinating our work. A small team also means that budgets are smaller and is well suited to experimenting, failing, learning and adapting. Basic agile methodologies such as Scrum expect some degree of overlap between the specializations of team members, so that different people can execute the same tasks naturally balancing the work load. But hardware work is different. It demands a lot of specialization. In our case most of the tasks can be executed only by one team member. As a result, the Scrum methods and tools have to be modified to reflect this reality. Our internal workflow follows many steps. The first step is the Industrial Designer, a role which is somewhat of a novelty in the Telefonica Digital payroll. Carlos (that’s his name) starts his work in the CAD station designing the physical product: plastic pieces, metal straps, cloth, magnets. Then he builds the design using the currently available 3D prototyping tools such as the laser cutter, the CNC tool (i.e. a computer controlled drill) and a variety of 3D printers. These tools give much flavor to the lab. In some cases we start from an existing object that we hack so that we can explain a new concept. Carlos at the same time designs and builds, which is a bit out of his job profile. Software developers are multi-taskers, too – they design and type, while software architects can also code. In the hardware industry this is somewhat unusual and typical engineers expect someone else to physically build what they have created. In the lab we follow the software philosophy. It is leaner, and gives the designer a real feel of the piece or circuit construction. This approach demands some tolerance and patience from engineers who have to get their hands dirty. The same philosophy applies to the next step in the workflow: the electronics engineering part. The electronics engineer first designs new circuits, then prototypes them. We even design and build the PCBs to check that everything fits in place. The agile doctrine underlines the importance of early user testing. Early use provides rapid feedback focusing the most important characteristics of the product and showing what isn’t relevant for customers. To shorten the time-to-test we use 3D printing and prototyping technologies. In electronics engineering we massively use Open Hardware. Open Hardware gives us access to lots of ready-to-use designs that we can employ in product testing. In a sense, Open Hardware behaves now like Linux and Open Software in the mid-nineties. It allows us to focus on the real technical or design challenge rather than reinventing the wheel for every test. Electronics and physical design teams work side by side, so they can verify in real time how components fit in the same object. Our objects become more than simple plastic boxes, as they are tightly coupled with the internal electronics. Electronics engineers work also with the firmware developers. The firmware developers write the code for the embedded microprocessors. They also have to deal with connectivity issues and power management. In our Physical Internet Lab, electronics and firmware engineers work side by side. In most situations knowing what will firmware do simplifies hardware design. Similarly, software developers can ask for fine changes in the hardware designs nearly in real time. On the other side of firmware sits backend development. In our typical systems architecture, distributed devices communicate with a backend service in the cloud. We push as much intelligence as possible to the backend service, so our designs can evolve without touching the deployed hardware or executing firmware updates. We like to think that the back-end gives every object nearly infinite computing power and knowledge, as it can interact with any other Internet service. Again back-end and firmware developers work side by side. This tight collaboration resolves any integration problems before they appear, and encourages electronics and firmware developers to take issues to the more powerful (and more agile) back-end platforms. The final technical step is the front-end development, usually based on web and native apps. Again we do a lot of work locally in the lab, well integrated across the team. The frontend is also tested in complete end-to-end scenarios. Automatic testing tools execute scripts that run against the firmware and the frontend. And of course, there is a Quality Assurance side. We are extending continuous integration, test driven development and automatic testing to the embedded firmware. At the same time we have to handle more hardware specific tasks such as sensor calibration, assuring robustness and strength. Physical Interaction Design The web/application interface and physical design are the two endpoints of the “development chain” of our group. They form the two interfaces exposed to the final user. At the final part of our workflow, the physical interaction designer, works with both web / app and physical design. The physical interaction designer is responsible for the design of the connected object as a whole. He takes care of building a single object with a coherent interaction model in the physical world and in the Internet. Without the physical interaction designer we would have to separately design the physical object and the application or web interface. The result would be a split-personality product, usually an amalgamation of data stuck on top of a square box. The physical interaction designer combines the capabilities of the physical object and the Internet interface in a coherent manner. Physical interaction design, bringing together the Internet and physical objects is a completely new field. There are a handful of specialized schools in the world, and we are working too with UX designers with strong industrial design background. Everyday physical objects have usually long stories and designs optimized through centuries of use. We still have a lot to learn on how to take the Internet beyond of the smartphone/tablet/PC onto this physical object world. Customers will not adopt Internet of Things devices if they are a step behind of the design standards they have become accustomed in software interfaces. Agility plays a role here, once again. Developing and prototyping quickly we can try interaction designs with users, test our assumptions and build a sizeable bunch of knowledge around user interaction with connected objects. External providers Of course we have to work with external providers, especially when dealing with complex technologies or industrialization. For development we often use online services for as PCB manufacturing or 3D printing. They are extremely easy to use, robust, fast, and offer a direct web interface instead of long negotiations with a salesperson. For the final manufacturing we interact with real, serious manufacturers. Agile, as a software development doctrine has no solutions to this task. But Agile can be seen as a spin-off of Lean philosophy, which was created to deal specifically with manufacturing issues. One of the main lessons from the Lean methods is that service providers have to be tightly integrated in the business process. We have found this is very important also for us. The lab has spent considerable efforts building trust relationships with service providers and manufacturers, integrating their teams with the lab. Schedules and plans are shared under an openness philosophy. We have established even real time communication so their teams get continuous feedback from the engineers in the lab. The future of agile hardware We have yet a long way to create a truly Agile Hardware lab. Physical work is sometimes slower than software development. Some other times (especially when prototyping on Open Hardware designs) they are blindingly fast and have to pause and wait for software components. Speed differences keep the group working on different “user stories” at the same time. External dependences are many, and the lab will never be, in that sense, completely autonomous. But we can find yet faster service providers and build leaner and more integrated workflows with them. Regarding Quality Assurance we have to handle correctly the physical device characterization and fit the expensive and slow certifications in the product workflow. The bright side is that Agile methodologies provide and require continuous improvement. Every sprint or work cycle forces us to learn and adapt our methodology and organization, looking for a better process. Perhaps in a couple of years we’ll have a completely different process in a completely different lab, and it will be all right. #agile #hardware #iot #software

[tweetable]Facebook will live or die by user engagement, especially on mobile[/tweetable]. Whatsapp sends 18 billion and receives 36 billion messages a day. Let’s say it takes about 7 seconds to send a message and 3 seconds to read a message. This is based on watching how my teenage kids use Whatsapp texting and sending pictures. The math is simple: ((18B messages * 7sec + 36B messages * 3sec) / 60) * 30 = 117B minutes per month People have limited time and attention. So most of these 110+ Billion minutes were taken from the potential Facebook mobile engagement minutes. Wow! That is the cost of doing nothing for Facebook. There is more Whatsapp is growing at about 1M users a day. That means Facebook looses at least an additional 12.4 Million engagement minutes each and every day. For simplicity I take into account only Whatsapp users that are active daily, which are 70% of 450M monthly active users: 3.9B minutes per day / 315M daily active users = 12.4 minutes per day per user Now what? The Whatsapp blog says: “Here’s what will change for you, our users: nothing. The company remains independent and loyal to its promise of “No ads!”. There will be no immediate monetisation opportunities for Facebook. What can be there for Facebook beyond averting future disaster of Whatsapp killing Facebook mobile engagement? Or even worth, falling into Google’s hostile hands? Mark Zuckerberg writes about the acquisition: Our mission is to make the world more open and connected. We do this by building services that help people share any type of content with any group of people they want. WhatsApp will help us do this by continuing to develop a service that people around the world love to use every day. Will we see 450M mobile numbers brought in by Whatsapp coming into play helping Facebook connect people? Time will tell, but the potential is there for Facebook to become huge integrated communication provider on par with China Mobile, the world’s largest mobile operator. (China Mobile has 700M subscribers but, given that many people have two phones, the number of users is much lower and close to 450M of Whatsapp monthly active users.) – Michael (This article was originally published on Michael’s personal blog – here) #acquisition #facebook #whatsapp

Here are the stories of two successful birds on the app store. See if you can spot the difference. Flappy Bird was a mobile game developed by Dong Nguyen, a Vietnamese indie game developer, in a few evenings after work. He launched the game in May 2013, but only 7 months later (in January) did it unexpectedly gain immense traction. It reached the top of the US charts, and Nguyen was reportedly earning about $50,000 per day from ads. He couldn’t cope with the pressure and abusive comments however, saying it “ruined his simple life”, and removed the game from the app store on February 10th. Angry Birds was developed by Finnish game maker Rovio Entertainment. It was a runaway success… on the 52nd try! (That’s how many games the good people at Rovio had developed before Angry Birds). Rovio has expanded to be a successful franchise and merchandising business, counting its revenues in the hundreds of millions of Euros. Today, Rovio employs over 700 people according to its website. Why did Flappy Bird become a flappy Icarus, crashing after flying too close to the sun, and not a new Rovio? In truth, Nguyen and Rovio represent very different groups of developers. Their motivations are not at all alike, and so neither is their behavior. Developer motivations wildly differ Dong Nguyen and his indie game studio .Gears sits on the border of a Hobbyist and an Explorer profile in VisionMobile’s developer segmentation model. Hobbyists are motivated by the fun of making an app, and like Nguyen often do it in their spare time after work. They don’t care about success – killing off a successful project that interferes with their sense of fun and peaceful life wouldn’t seem strange to them. Arcade games like Flappy Bird and the other .Gears projects are a typical project for Hobbyists (professional game developers rarely touch the arcade category). Our Flappy Bird protagonist also shows traits of an Explorer, however. He presents a formal face with the .Gears studio, complete with email address and copyright notice. Put simply, Explorers are “practicing” to become successful app developers (either as contractors or with own apps): their main motivation is learning how to become professionals and they define success by knowledge gained as well as having a lot of fun developing. Some speculate that Nguyen might have tried to artificially boost the app using review bots, which would be more Explorer than Hobbyist behavior. (Nguyen himself denies having done any kind of promotion.) Whether Hobbyist or Explorer, Nguyen clearly wasn’t in it for the big money. Contrast that with Rovio, a clear Hunter company. Hunters are revenue driven: their goal is to build a successful business and make money from apps. The 50+ games that Rovio built before Angry Birds are a testament to their persistence in achieving that objective. Success is measured strictly in business terms: app revenues (in the case of Rovio enhanced with merchandising) and user reach. Hunters are professionals, out to build real, lasting companies, exactly what Rovio has achieved. The difference couldn’t be clearer. Understanding the motivations of developers is key to understanding the choices they make. This includes fundamental choices, like the one between lifestyle and business success that Dong Nguyen faced when his project became a huge success overnight. It also includes all the minor and major decisions that app development involves: business models, tools, platform selection, and much more. [tweetable]If you’re working with developers, gaining insights in their motivations is crucial[/tweetable]. — Christina & Stijn #angrybirds #dongnguyen #flappybird #rovio

We’re pleased to announce the publication of our new Developer Economics report: State of the Developer Nation Q1 2014. This, 6th edition of our ongoing Developer Economics series presents the latest trends in app development, based on our survey of over 7,000 developers. The report features in-depth analysis and insights into the key issues in the app economy, including platform prioritisation, going beyond tablets, trending revenue models, and making the right choices in developer tools. The report is available for free download here.

Welcome to the brand new Developer Economics report! Now in its fourth year and 6th edition, the latest Developer Economics survey reached over 7,000+ developers across 127 countries, setting new standards in developer research. Get your free copy here and read about the movers and shakers in the app economy. Dive deep into our rich dataset and discover how developers select and prioritise platforms, which developer tools they use and how their choices translate to revenues. As always, we have a lot more data available so get in touch (moredata@visionmobile.com) to get the data you need if you can’t find it in the report. The mobile Developer Mindshare The latest Developer Economics research shows that 84% of mobile developers are now developing for Android or iOS (or both), the two clear winners in the developer mindshare race. While Android amasses hundreds of millions of new users every year, sales of iDevices are still rising, attracting developers that are more interested in revenues rather than reach. HTML5 continues to play an important role in mobile development, providing diverse development paths for those developers that want to extend their web skills or web assets onto mobile. [tweetable]37% of developers rely on HTML5 for developing mobile websites and web apps[/tweetable], but more developers use HTML5 to target native platforms via hybrid apps or converted or translated HTML5 code. Microsoft remains the outsider in the ecosystem battle but has gained some ground in the past few months owing to rising sales of Lumia handsets. Windows Phone still faces a long and thorny road in its quest for mobile mindshare. Meanwhile [tweetable]Windows 8 remained stable at 21% Mobile Developer Mindshare[/tweetable] – the Q4 uplift in Surface sales is likely, however, to generate some developer interest that could push Windows 8 ahead. Getting your priorities right Developer Mindshare tells just one side of the story. In a multi-platform race, mindshare is nice to have but what matters most is getting developers to prioritise your platform against the others. This means more, better-quality apps and faster updates, keeping users happy. [tweetable]Android is now the priority platform for 37% of developers, with iOS at 32%[/tweetable]. But there are large variations in developers’ priorities: iOS is still the priority platform in North America and Western Europe, with Android claiming pole position in most of the other regions. There are also significant differences across developer segments: [tweetable]Android is very popular among hobbyist developers who may find the start-up costs somewhat lower[/tweetable], but iOS is preferred by Hunters, who target app-store revenue and Guns-for-Hire, who target development contracts. HTML5 is prioritised by 14% of developers, although a large number of these developers target Android or iOS via hybrid apps, rather than building true cross-platform apps. With 83% of developers prioritising Android, iOS or HTML5, the other platforms face a mighty challenge: if they are to become key players in mobile, they need to convince iOS or Android developers to switch their priorities. But looking at the revenue distribution for developers across platforms, it becomes clear that that is not a compelling proposition for the majority of developers. Revenues We’ve often argued that revenues are not the most important factor for all developers. But at the end of the day, you need to make money, whether that is via app stores, advertising, e-Commerce or any other way you can think of (selling t-shirts to your users or accepting bitcoin donations). We calculated median revenues to demonstrate the revenue disparity across platforms. The revenues shown in the graph below are the revenues that developers can realistically expect to earn per app per month. This graph is a picture saying a thousand words and reveals why more than half of the developer population are still investing in a platform that has less than a third of the user reach of Android. There’s a lot more information on revenues and revenue distribution across platforms in the report, and a lot more graphs and data points that you need to know about if you’re in the app business. We don’t want to spoil the fun so go ahead and download your copy of the report and tell us what you think. If you don’t find the information you need, then do get in touch at moredata@visionmobile.com to see if we can help. Follow me on twitter @PappasAndreas #ios #html5 #mobiledeveloper #windows8 #Android #apprevenues

In our June 2013 paper “The M2M Ecosystem Recipe” we argued that the Internet of Things is ready for a broad developer ecosystem. We may have finally found a promising candidate in an unexpected corner of the world (or perhaps not): China. Stijn Schuermans investigates how the open hardware platform alliance of Baidu and JingDong stacks up against our 3 control point model. Is there reason to be bullish on this initiative? The Internet of Things is ready for a broad developer ecosystem. That was the key message of our June 2013 paper “The M2M Ecosystem Recipe”. Since then, we’ve been on the lookout for an IoT platform that covers all three crucial ingredients that are necessary for the ecosystem to take off: service creation, service distribution and service consumption. We may have finally found one, and in an unexpected corner of the world (or perhaps not): China. Two Chinese internet giants are reported to cooperate on an open hardware platform. The first partner is Baidu, China’s answer to Google. The other player is JingDong (JD.com, formerly known as 360Buy.com), a major e-commerce player in China. Baidu and Jingdong will work together to create a technology platform for IoT. They will also leverage their expertise to provide distribution channels, marketing resources, and data to hardware developers through the open platform. Furthermore, the platform will serve as an incubator for smart hardware products with “Baidu Inside” and “JD+” branding. Let’s see how the announcement stacks up against our three control point model. Is there reason to be bullish on this initiative? Service Creation The announcement mentions the open hardware platform, cloud storage, a substantial set of functional libraries like video, image processing, security and location based services, as well as technical and product assistance and data. The alliance can draw on two sources of expertise: the partner’s substantial in-house knowledge of internet technologies, and the manufacturing know-how present in China above all other countries. There is little doubt that our protagonists can cover the technical side of an IoT platform. The other key aspect of service creation is building an active developer community that can provide support to its members and share expertise. Also here the alliance can draw from successful local examples like eoeandroid.com, an Android developer community that counts its members in hundreds of thousands. It has been done in China before. As we know, getting the technology right is the easy part. What about the business side of the equation? Service Distribution Service Distribution is about connecting developers to users, enabling choice for users and an accessible market for developers. JingDong’s e-commerce platform puts the initiative in pole position in this respect. To developers, it provides a significant existing user base to promote hardware products to, as well as monetization tools. Users already come to JingDong for the large variety of products that can be found there. JingDong also has the expertise to handle physical distribution and shipping – a notoriously difficult part of IoT to get right. Service Consumption What remains is the nasty discoverability problem. Once again, a search engine and a retailer seem a match made in heaven to provide the necessary assistance to developers and users alike. Baidu promises to launch a “Baidu Inside” website to showcase products released by open platform partners. Jingdong will leverage its marketing resources and distribution channels to assist platform partners, as well as establish new product categories on its e-commerce website, such as “Trial Product” and “New and Exciting Product”. The “Baidu Inside” and “JD+” labels are an excellent opportunity to do quality gatekeeping. Both companies’ background in the internet business should give them ample expertise in personalizing the discovery process. Meanwhile, in the West… We are currently tracking 40+ Internet of Things and M2M platforms. While about half of them have a hardware component, the focus is overwhelmingly on cloud services. While this tendency to focus on the Western strength – software – is natural, shipping hardware products is a lot tougher than getting the data streams flowing. Western initiatives have arisen to help bridge the gap between software developers and hardware experts (we’ve listed some examples in the figure above). None of them, however, have the advantage of being so close to the hearth of manufacturing (China) and of being backed by two major internet ecosystem companies. Are you still comfortable, Western IoT platforms? – Stijn (@stijnschuermans) #connecteddevices #iot