Founder Labs Summer Edition

The Mobile Ecosystem

August 12, 2011

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@l1rs

Work
Lars Kamp

Network
Lars Kamp

Suite 1200 560 Mission Street San Francisco, CA 94105 415.894.5423 lars.kamp@accenture.com

www.sfmobile.org

San Francisco, CA 415.894.5423 lars@sfmobile.org

Companies.

Todays topics.

History

Silicon

Mobile Economics

Cloud

Whats Next?

A note on peoples ability to predict the future.

People tend to overestimate what can be done in one year and to underestimate what can be done in five to ten years. J. C. R. Licklider, 1965

J. C. R. Licklider Grandfather of the Internet

History

A bit of Silicon Valley History: General Magic, Apple spin-off, 1990.

General Magic Mission Statement, May 1990

We have a dream of improving the lives of many millions of people by means of small, intimate life support systems that people carry with them everywhere. These systems will help people to organize their lives, to communicate with other people, and to access information of all kinds. They will be simple to use, and come in a wide range of models to fit every budget, need, and taste. They will change the way people live and communicate.

General Magics Magic Cap.

Magic Cap User Interface, 1994

Three people from the team that architected Magic Cap.

Andy Rubin Tony Faddel Kevin Lynch

General Magics lasting influence on Android

Magic Cap UI, 1994

G1 HTC Dream UI, 2008

10

Source: Wired, Accenture analysis.

Google is iterating Android at a breathtaking pace

History of Android
Oct 2008 Android Market announced. First device. Apr 2009 Android SDK released

July 2005 Android acquired after Andy Rubin meets with Larry Page for support.

2005

2007

2008

2009

2010

2011

2012

Sept 2003 Android incorporated. Android uses Google as default search engine.

Nov 2007 OHA founded. Android platform unveiled.

C
April 2009 Cupcake v1.5

D
Sept 2009 Donut v1.6

E
Oct 2009 clair v2.0

F
May 2010 FroYo v2.2

G
Dec 2010 GiBr v2.3

H
Mar 2011 HoCo v3.0

I
H2 2011 IC v3.1

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Source: Google, Accenture analysis.

 including one OEM and SemiCo at a time.

Android Release

C
April 2009 Cupcake v1.5

D
Sept 2009 Donut v1.6

E
Oct 2009 clair v2.0

F
May 2010 FroYo v2.2

G
Dec 2010 GiBr v2.3

H
Mar 2011 HoCo v3.0

I
Nov 2011 IceCrm v3.1

Hero Device
HTC Dream Samsung Behold II Motorola Droid HTC Nexus One Samsung Nexus S Motorola Xoom

Nexus 3

Chip
Qualcomm MSM7201A 528MHz Qualcomm MSM7201A 528MHz TI OMAP 3430 600 MHz Qualcomm QSD8250 998MHz Intrinsity S5PC110 1,000MHz NVIDIA Tegra 2 250 1,000MHz ?

12

Source: Accenture analysis.

The IP Wars.
Me too. I will eat your babies.

Uggh, FAWK

Om nom nom nom.

13

Silicon

14

Gordon Moore.

15

Moores Law since ~1965 on the desktop.

16

Source: Intel.

Coming your way in mobile as well.

Nvidia Tegra roadmap: 2 orders of magnitude until 2014.

Today, you are here

17

Source: NVIDIA.

Massive on-deck computing power for smartphones... 1966

Apollo Guidance Computer Block I

2011
Samsung Galaxy S2

2016
Era of Uberphones

4,100 Integrated Circuits 1 MHz Clock Speed 9 KB RAM

18 Source: Computer History Museum, Accenture analysis.

~26M ICs 1 GHz 512 MB

~1B ICs 1GHz+ ~4 GB

Horizontal de-layering of the silicon industry.

1970s
Vertical Suppliers Texas Instruments

1980s
ASIC Vendors VLSI Technology

1990s
Fabless Semis Qualcomm

2000s
IP-driven Design ARM

2010s
SW-driven Design Various System Porting IP Design & Distribution EDA

ASIC Vendor Fully Vertically Integrated: Design & Foundry System Manufacturer (Foundry)

Design & Distribution (Fabless)

IP

Design & Distribution EDA EDA

Foundry

Foundry

Foundry

Ratio HW : SW Engineers

1:0

1 : 0.5

1:1

1:2

1 : 2+

Sources: ARM company website, Cadence company website, Accenture analysis. HW engineers refers to design, SW engineers to validation. Copyright 2011 Accenture All Rights Reserved.\ 19

19

ARM vs. QCOM.

500 450 400 350 300 250 200 150 100 50 0 Jan-06
ARM announcement that major OEM acquired architecture license in July 2008

Daily Stock Prices ARM vs. QCOM Indexed, 01/01/2006 03/30/2011

ARM 460 Index 05/12/11

QCOM 106 Index 05/12/11

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

20

Sources: Google Finance, Accenture analysis. Copyright 2011 Accenture All Rights Reserved.

20

Apple: A single application processor for all devices.

iPhone iPad

Apple TV
21

Time Capsule ?

2 philosophies: Discrete baseband & CPU vs. a single, integrated SoC.

Apple: Discrete BB & CPU HTC: Integrated SoC with BB & CPU

iPhone 4
Qualcomm Baseband Apple CPU

HD7
Qualcomm Snapdragon SoC

Physical separation of computing for RF and applications through different chips

Logical separation of computing for RF and applications but physically on same chip

22

The likely future, just untethered.

23

Economics

24

Explosive growth for mobility.

We really see Mobile a bit like Search was in 2001, 2002, 2003. All these formats are so new it is a mistake to say today whatever we have is a good proxy for what the future will look like. I actually have a new metric to report in Android of 550,000 phones activated a day. That's a huge number, even by Google standards. Larry Page, Google CEO Q211 Earnings Call, July 14th, 2011
Mobile quoted 39 times during call

eBay mobile apps have been down-loaded more than 45 million times [with] $4 billion of volume on eBay Mobile: [] the mobile device is absolutely lowering the boundary or blurring the boundary between online and offline; [] this has created incremental opportunity far greater than what we would've expected. Joe Donahoe, eBay CEO Q211 Earnings Call, July 20th, 2011
Mobile quoted 62 times during call

We were thrilled to sell a record 20.3 million iPhones compared to 8.4 million in the previous June quarter. This represents 142% year-over-year growth. [] iPhone continues to be adopted as the standard across the enterprise with 91% of the Fortune 500 deployed or testing the device, up from 88% last quarter. Peter Oppenheimer, Apple CFO Q311 Earnings Call, July 19th, 2011
iPhone quoted 48 times during call

We [...] have articulated a very strong innovation-oriented strategy and mobility plays a very strong part in that. [] If you look at our results this quarter you'll see that it's not only the new categories that drive growth for us, it's also the traditional core business of SAP. [] Mobile will change the way we work and the way we live. Jim Hageman Snabe, SAP CEO CNBC Interview July 27th, 2011

25

Software-driven innovation.

The problem is, in hardware you can't build a computer that's twice as good as anyone else's anymore. [] But you can do it in software. Steve Jobs, 1994

Steve Jobs 1994 Rolling Stone interview

26

Source: Rolling Stone Magazine.

SW is fueling the app store economy: ~350,000 apps.

ESTIMATES

Catalog Size Apple App Store vs. Android Market

2008-2011, by Number of Available Apps at End of Quarter 350,000 300,000 250,000 225,000 200,000 149,000 130,000 97,000 74,500 52,610 740
Q1'08 Q2'08

310,000

25,300 20,100 13,200 5,200 11,500 4,400 600 2,900

Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09

56,200 35,200

Q1'10

Q2'10

Q3'10

Q4'10

Q1'11

27

Source: Apple press releases & earnings calls, Google, AndroLib, PCWorld, Distimo, Accenture analysis. Catalog size for Apples excludes books. All numbers rounded.

The early days with iOS & Android: A mobile revolution.

App & Mobile Web Usage Growth, US
Ads Requested, April 2008 March 2010
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Apr-08
RIM Others incl. Palm & Windows

Ads Requested (Millions)

32% Monthly Growth

(Nov08-Mar10)

19 % Monthly Growth
(Apr08-Mar10)

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

28

Source: AdMob, Accenture analysis.

But: An app is not a business model.

Retention Rates of Mobile Apps Over Time, 2010

100% 90% 80% Retention Rate

100% 90% 80%

100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% News (9.8%) Entertainment (2%) 0 0 30 60 90 120 30 60 90 120 Days After First Measurement 150 150 180 180 10% 10% 0% 0% 0 0 30 60 90 120 30 60 90 120 Days After First Measurement 150 150 News (9.1%) Games (2.4%) 180 180

70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0%

Source:

29

Flurry, Accenture analysis. User retention defined by the number of users who downloaded an application and launched the application at any time in the past, and also launched the app within the last seven days, e.g. "30 days ago" represents any new user that launched a given app in January and also again within the last seven days. "60 days ago" represents new users identified in December and also used within last 7 days. Sample based on relevant 5-6 apps per category with at least 120 days of data availability in the Flurry system.

90% dead after 90 days.

iPhone App Retention
As of January 2010, by Application Category

Android App Retention

As of January 2010, by Application Category

30 Days
News Social Networking Games Lifestyle Entertainment Average Retention Rates
52%

90 Days
20%

30 Days
58%

90 Days
18%

40%

9%

38%

5%

34%

10%

34%

10%

35%

9%

38%

7%

33%

4%

42%

16%

39%

10%

42%

11%

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Source: Flurry, Accenture analysis.

Enter analytics

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 and push notifications.

32

Facebook: Putting a social layer into your app.

News and Media Companies 90% more articles are read 85% more time is spent Commerce and Sales Companies $5.30 of direct ticket sales
resulted from sharing links

4x increase in traffic from

Facebook

57% more money spent per user

8 minutes longer on site 22% more pages are read

40% increase in referral

traffic from visitors

Increase in traffic and time spent on websites through Login with Facebook

Increase in sales through user of social plugins: Like and Share

33

Emergence of solid mobile business models.

Location Inventory Discounts Transparency Reviews

Finds deals at local retailers of national chains

Real time visibility into restaurant inventory

Real-time discounts on local merchant offers

Compare local price with best prices on the web

Crowd-source reviews before buying decision

34

Ephemeralization: Progressively accomplishing more with less

Buckminster Fuller

35

Early ephemeralization aka appification: Devices are being replaced by apps.

2006 TV 2011 and Beyond Video

Phone

Voice

MP3 Player

Music

Camera

Camera

Credit Card
Copyright 2011 Accenture All Rights Reserved. 36

Payments

Software eating people and things.

People

Things

Taxi Dispatcher
37

ATMs

Keys

And its only the beginning.

Global Mobile Shipments

2005-2015E, Millions
2,500
1,971 2,076

10 15 CAGR
Total Devices 8.4%

2,000
1,557 1,718 582

1,854

Millions

1,500
1,002 82 1,188 124 1,190 151 1,128 173

1,389 303 453

707

820

926

Smart Phones 25.0%

1,000

833 57

500

777

920

1,064

1,039

954

1,085

1,105

1,135

1,147

1,151

1,150

Non SPs

1.2%

0 2005 2006 8% 2007 10% 2008 13% 2009 15% 2010 22% 2011 E 2012 E 2013 E 2014 E 2015 E 29% 34% 38% 42% 45%

SP Share of Total
38

7%

Source: IDC Accenture analysis.

Mobility hardware: This morning at Coupa Caf in Palo Alto: Bump Cube

39

A quick note on distribution of mobility hardware.

40

26,500 Apple retail employees selling your HW to 250M+ annual visitors in 323 stores in 11 countries.
New York Paris Tokyo

Sydney

Munich

Shanghai

41

Source: Apple.

The Apple Store: $13B in sales, with more $/SqFt/Year than Tiffany & Co.
Scale of Retail Operations
Q3 FY2010 Q2 FY2011 Retail Retail Revenue Stores ($B) (#) Retail FTEs / Space part-time (M SqFt) employees (K) 2.5 30

Retail Revenue Metrics

$ / SqFt / Year ($) $ / employee / Year ($K) $ / Day / Store ($K) $ / Store / Year ($M)

13

323

$4,793

$397

$102

$37

3.1

233

$3,010

$337

$36

$13

50.3

4,172

58

180

$866

$279

$33

$12

419

8,970

985

2,100

$425

$200

$128

$47

9.3

204

23.8

52

$391

$179

$125

$46

42

Source: SECfilings, Accenture analysis.

Cloud

43

Who is building a cloud?

Prineville, OR USA

Lockport , NY USA

The Dalles, OR USA

Maiden, NC USA

Morrow, OR USA

Dublin, Ireland

44

Stuff you can do with the cloud (growing as we speak).

~65M+ Users Gaming Daily

~50,000+ Searches Served Per Second

~ 7,000+ Tweets per Second

~41B API Calls per Day

45

Stuff you can do with the cloud and your phone.

46

Industrialization of the mobile cloud...

Cloud Today Device

HTTP
(custom libraries)

Tomorrow

SDKs

47

 will bring massive off-deck computing to mobile.

Mobile Dev Center AWS SDKs for Android & iOS

Android Cloud to Device Messaging Framework

Project Hawaii & Project Maui on Windows Phone 7

48

Source: Corporate websites.

Googles Spanner: 107 = 10M machines.

49

Source: Google.

Ephemeralization of the back-end.

50

Whats Next

51

Jevons Paradox

It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth." William S. Jevons, 1865

William S. Jevons From the Book The Coal Question

52

As computing gets cheaper

U.S. Asset Prices, 1945 - 2008
Normalized, 1995 = 100 105
Computers and Peripheral Equipment

Normalized Price: 1995 = 100 (log)

104

103

102
Other Equipment

Transportation Equipment

10 1950
53

Industrial Equipment

1960

1970

1980

1990

2000

Source: The Business Impact of IT, based on U.S. Bureau of Economic Analysis data.

 companies consume more of it.

U.S. IT Investment, 1970 - 2008
Investment per Employee & Nominal Annual Investment 3,500 350B 300B 250B 200B 150B
IT Investment / Employee

Anuual Investment per Employee ($)

3,000 2,500 2,000 1,500 1,000 500 0 1970

100B
Annual Investment

50B 0

1975

1980

1985

1990

1995

2000

2005

2010

54

Source: The Business Impact of IT, based on U.S. Bureau of Economic Analysis data.

Nominal Anuual Investment ($B)

Plenty of cash.
Cash on Hand for Select Tech Titans
Cash and Cash Equivalents, as of 1/26/2011

44 39 35 27 29 22 11 10 7 6
55 Source: SEC filings.

Total of 226B

And then there is Facebook .

Worldwide Facebook Users
based on 3 User Growth Scenarios, EoY (2011-2015) 3 2 2.5 2.3 2.1 1.9 1.7 1.5 1 1.3 1.1 0.9 0.7 0.5 2011 $8.10 0.7B $5.7B 2012 $8.18 1.0B $7.3B 2013 $8.20 1.3B $9.6B 2014 $8.32 1.7B $12.8B 2015 $8.54 2.2B $16.8B Scenario 2 Avg. ARPU EoY Users $B Rev.
Total of ~700-800M global FB users by end of 2011

Y-o-Y Growth Rates 11-15 US EU 15% 15% BRIC 268%* 90% RoW 33% 33%

2.52B 2.22B

4% 4%

1.27B

-2%

-2%

45%

20%

56

Think again

People tend to overestimate what can be done in one year and to underestimate what can be done in five to ten years. J. C. R. Licklider, 1965

J. C. R. Licklider Grandfather of the Internet

57

Lessons learned. A few thoughts on:

Your Team: Whos in charge? Build: iOS vs. Android vs. HTML5 Pitching: Killer exec summary Funding (Angels): Oceans 11 Funding (VC): Lots vs. little
58

Good Luck!

59