Three seemingly disparate news items – Facebook Home, Google’s alleged (and denied) bid for WhatsApp, and Apple’s removal of AppGratis from the App Store – together give convincing evidence that we are moving up the mobile hierarchy of needs. And that’s a concern for Apple in particular.
One of the more famous theory’s in psychology is “Maslow’s Hierarchy of Needs”; the general gist is that until lower order needs are met, we don’t really pay attention to or pursue higher order needs.
Maslow’s Hierarchy of Needs.svg, courtesy Wikipedia
Maslow’s hierarchy of needs is a theory in psychology proposed by Abraham Maslow in his 1943 paper “A Theory of Human Motivation”…Maslow’s hierarchy of needs is often portrayed in the shape of a pyramid with the largest, most fundamental levels of needs at the bottom and the need for self-actualization at the top…
The most fundamental and basic four layers of the pyramid contain what Maslow called “deficiency needs” or “d-needs”: esteem, friendship and love, security, and physical needs. If these “deficiency needs” are not met – with the exception of the most fundamental (physiological) need – there may not be a physical indication, but the individual will feel anxious and tense. Maslow’s theory suggests that the most basic level of needs must be met before the individual will strongly desire (or focus motivation upon) the secondary or higher level needs.
An interesting concept, but I’m not writing about psychology; rather, it’s the model that is exceedingly applicable to mobile.
There is a “Mobile Hierarchy of Needs”, and understanding what needs have already been met, and by who, helps clarify the current basis of competition, who the relevant players are, and who is winning or losing.
The Mobile Hierarchy of Needs, Ben Thompson
A quick overview of the levels:
Hardware — At its most basic level, a mobile device needs to be functional. It needs to make and accept calls, maintain a data connection, have a functional screen and input method, etc.
For more than two decades this was the center of all innovation in mobile, beginning with the Motorola DynaTAC 8000X in 1983, and arguably peaking with the Motorola Razr in 2004, a massive hit based on hardware alone. This era was ultimately dominated by Nokia, which offered the best technology in highly functional form factors. Some aspects of RIM’s success lay in hardware as well, particularly their keyboards.
Software — Software refers to the core operating system, and usually means two things:
The enablement of functionality beyond phone calls and messaging, such as email, web browsing, and media playback
The overall ease-of-use
RIM, Palm and Symbian led the way in adding additional functionality to phones; the iPhone famously made such functionality easy-to-use.
Apps — Apps infinitely increased the potential jobs to be done by a mobile device. The App Store was launched by Apple in 2008, and both the App Store and iPhone market share exploded. At every keynote since then Apple executives have take the time to highlight the number of apps, the number of downloads, and the amount of developer payments. It remains an advantage for Apple today, particularly when it comes to new IP, but Android has significantly closed the gap.
It is much more difficult to compete on the app level than on hardware or software because it requires the creation of a two-sided market: you need both developers and users. Without a critical mass of monetizable users, developers won’t build for a platform; without the particular set of apps that a user needs, they won’t buy into a platform.
Services — Services utilize mobile devices as the interaction layer for a service hosted in the cloud. That interaction layer is usually delivered as an app. Some critical services such as maps, app and media stores, and email and calendaring are delivered as part of the OS; both iOS and Android let you supplement the built-in apps with alternative apps and/or services from the app store, but iOS does not let you change the defaults.
There are a host of other services delivered through apps via the app store: social networking, video-on-demand, news, etc.
The iPhone completely upended the Mobile Hierarchy of Needs by delivering superior hardware, superior software, and a year later, a superior app store. These advantages peaked with the iPhone 4, which featured a retina screen, amazing build quality, iOS 4 which filled in the largest remaining functionality hole (multitasking), and a two-year-old app ecosystem that already featured 225,000 apps and over a $1 billion paid out to developers.
In the last three years, Android has largely responded on all three fronts:
Hardware — High-end Android phones such the upcoming Samsung Galaxy S 4 and the HTC One feature higher resolution screens than the iPhone, and the One has build quality to match. Moreover, Android offers a nearly infinite array of screen sizes
Software — Android 4.1 “Jellybean” finally addressed many of the Android UX bugaboos that made it more frustrating to use than an iPhone. Many, including myself, still prefer iOS, but the software “need” has been met
Apps — Android Play now has over 800,000 apps; again, there may be a dispute about quality, and Android still gets buzzworthy new apps after the iPhone, but you can absolutely find what you need
The iPhone and, say, the Galaxy S 4 both have “good enough” hardware, “good enough” software, and a “good enough” app selection (and the end-game for “good enough” is commoditization and razor-thin profit margins). The next means of differentiation and competition is in services. It’s a competition that will be waged not only by the operating system vendors and device manufacturers, but also by pure service plays such as Facebook (on the big side), and outfits like AppGratis (on the small side).
The Galaxy S 4 certainly seeks to compete in the upper-left quadrant, but its true value lies in building brand in the lower right. That’s why everyone heard about the launch, even as most of the world actually buys the Star, Neo, Win, Trend et al.
HTC Corp., Taiwan’s largest smartphone maker, posted its lowest quarterly profit on record after the delay of its newest flagship phone caused revenue to miss the company’s target.
First-quarter net income plunged 98 percent to NT$85 million ($2.8 million), the sixth straight decline, according to data released by the Taoyuan, Taiwan-based company yesterday. The average of 19 analysts’ estimates compiled by Bloomberg was for profit of NT$600 million.
HTC lost early momentum for its HTC One handset in February as a shortage of camera components forced it to delay shipments in key markets by as much as a month. Prospects for revenue to rebound this quarter may be limited as the new device becomes widely available less than a month before Samsung Electronics Co.’s new Galaxy S4, which goes on sale in the U.S. on April 26.
HTC is a smartphone-only vendor with limited capital reserves
HTC foolishly wastes cash on acquisitions, including VIA and Beats, and pisses off the carriers to boot by allowing their phones to be unlocked
HTC underinvests in marketing, including above-the-line (advertising), commissions, etc.
Samsung does the opposite, plus a whole lot of other interesting stuff (lots more about this soon)
HTC sells relatively few phones compared to Apple and Samsung, resulting in less cash for marketing
Less cash for marketing means fewer phones sold; fewer phones sold means less buying power in the component markets
Less buying power for components means their “Savior” phone is late, which means they get less cash less cash
The One is finally arriving in stores, and it is, by all accounts, an amazing piece of hardware. Anandtech has one of the best, most comprehensive reviews I’ve ever read:
The HTC One is an incredibly ambitious phone. I can’t think of the last time I’ve been excited not just because I’m reviewing a triple-A handset, but rather because there are innovative new features inside and ambitious risks taken by the OEM. In the case of the One, there are a number of them — front facing stereo speakers, an all metal unibody construction with unique antenna design, display just short of 5.0-inches, and of course the 4.0 megapixel camera with OIS and comparatively huge 2.0 micron pixels. The result is a phone that’s not just exciting because it’s something new to review, but because it’s different and uniquely better for the right reasons…
I’ve never given any smartphone an editors choice award before, though I daily regret not giving the One S an award of some kind. For the HTC One I’m giving our Editors Choice Gold award, which is our second highest award. The One is an incredibly awesome device.
Making lovely bits of hardware is a necessary, but insufficient, condition in this business.
I desperately hope HTC pulls through; I have a very soft spot in my heart for them from having lived in Taiwan. But while product garners the headlines, it’s only one piece of the mobile puzzle.
I read two great interviews tonight, and its the combination of the two that really captures why I’m skeptical about Facebook Home.1
First off was Mark Suster interviewing Clayton Christensen. The interview – as is the case with most things Christensen related – is fascinating and instructive, and well worth a read. However, I want to focus on the idea of “Jobs to be Done.”2
As a general rule, if you have a product that doesn’t get the job done that a customer is needing to get done, then often you have to offer it for zero. Because if you ask for money for it – because if it doesn’t do the job well, they won’t pay for it. So go back in the early years of downloading music. You’ve got Kazaa and a bunch of people – it was free, right? But it was an open, modular system at the beginning, and you had to be a teenager to be able to use this stuff. Adults couldn’t. And Apple came along with a proprietary interdependent architecture. And because they were proprietary and interdependent they could take it all the way from iStore all the way through. People were so delighted to have something that did the job well that they were willing to pay!
This is the key point: people value tools that help them get jobs done; the particulars of the job differ by person, but the means of valuation is universal.
The second piece was this Wired interview with Mark Zuckerberg on the occasion of the launch of Facebook Home. Again, I urge you to read the whole thing, but for the purposes of this article, this quote jumped out at me:
Home turns your phone into a Facebook device. Even with the lock screen on, a photo stream of your friends’ activities fills the screen. Updates appear on your home screen, too. What’s more, Home makes Facebook the primary means of communication on your device. The company’s messaging software merges with SMS, and you can continue using its “chat heads” to text while inside another app. Zuckerberg believes that the social network plays too big a role in its users lives to be drowned out by a vast sea of apps. “Apps aren’t the center of the world,” he says. “People are.”
Apps versus People. According to Zuckerberg, that’s the dichotomy. And he’s wrong. He forgot about jobs to be done.
Here are my (carefully curated) home screens:
My iPhone Home Screens
I’m sure few take the time to arrange their home screens so carefully. So ignore that.
Rather, focus on how many of the icons are about “People.” By my count:
Dock: 1 (Messaging – the second folder in the dock). You could make an argument for Twitter and email (the fourth folder in the dock), but for me those represent information and work, respectively. Still, three at most, although in the most important spot on my screen.
Screen 1: 1 (Facebook)
Screen 2: 1 (Contacts)
Screen 3: 1 (the Social Networks folder on the third row, which is actually mostly alternative Twitter clients)
That’s four in total across three screens. People matter to me, but I use my phone for so much more.
So what if I consider “Jobs to be Done”?
Dock: 4 – Keep current on news, use my phone as a communications device, track my time, track work and logistical information (email)
Screen 1: 14 – Access websites directly, take pictures, get directions, track time, calculate numbers, translate Chinese, take notes, check up on friends (mostly my wife), control AppleTV, listen to music, listen to podcasts, track to-dos, read, work on this blog
Screen 2: 12 – Get apps, look up words, look for places to eat, look up contact information, look at photos, access my files, check the weather, find new beer, look up scores, look for specific locations, find that web page that I opened from another app, approve my daughter’s jobs-to-be-done (how meta!)
Screen 3: 50 – All the other jobs that I do on my phone, albeit too infrequently to take up space on the first two screens; look up travel information; watch video; connect on specific social networks (or switch Twitter clients – again); go directly to specific web pages; waste time; entertain my daughter; entertain my son
Total tally: 151 apps, 80 jobs to be done, 4 foci on people
Apps aren’t the center of the world (or of the preceding sentence, for that matter). But neither are people.
The reason why smartphones rule the world is because they do more jobs for more people in more places than anything in the history of mankind. Facebook Home makes jobs harder to do, in effect demoting them to the folders on my third screen.
Facebook Home launched this week, both as an app for top-of-the-line Android devices, and preinstalled on a mid-range HTC phone called the First. It’s an interesting move on multiple levels, particularly the fact that it is not a fork but more of a services layer. Moreover, it’s a services layer that still has access to the Play store. It’s very smart of Facebook to compete on a level where they have expertise, as opposed to building out an entirely new version of Android.
Broadly speaking, it’s symbolic of a larger move up the stack: hardware is good enough, OS’s are good enough, apps are good enough, so who has the best services? It’s a trend that should worry not just Google, but also Apple. Services aren’t exactly their strong suit. That said, I’mskeptical about Facebook’s prospects in mobile generally, and Home doesn’t really change that calculus.
Arguably more important, at least in the long-term, was Google’s announcement that they are forking Webkit and building their own rendering engine called Blink. This makes a ton of sense strategically; I believe Chrome and it’s derivatives, including Chrome OS, are Google’s central strategic priority going forward. Giving Apple veto power over a central component was untenable. Still, it’s more bad will for Google, and a headache for Apple specifically and web developers generally.
It was a crazy week for me personally; I had a an emergency appendectomy on Tuesday that kept me home for the week. Of course that was to stratechery’s benefit: five full articles, 22 linked list items, and this summary. So much for last week’s pace being unsustainable! We’ll see how a normal week goes, but in the mean time, I greatly appreciate your spreading the word about stratechery and following @stratechery.
You’ve built an enormous business around a desktop website. Unfortunately, people around the world are spending more and more time on mobile devices. The vast majority of these devices run software from only two companies. One of these companies is actively competing with you.
You cannot put your future in a competitor’s hands. So what do you do? Do you enter uncharted territory, make your own mobile operating system, and hope people switch?
Of course not. You make your competitor’s system yours — overnight.
Mat Honan perfectly captures why I’m hesitant to cast ultimate judgement on Facebook Home:
Over the past few days, lots of pundits have been asking who this is for. Facebook gave us an answer today: It’s for people who don’t care about a rich, full experience on the Internet, yet love Facebook. People who want to run apps, but are overwhelmed by them. People who want to connect with friends and family, but want it to be super easy to do so. For many people, Facebook is the Internet, just as AOL was before it. And just as Facebook is the best way for them to experience the Internet in a browser, Facebook Home is going to be the best way for those people to experience the Internet on a phone.
There was another important lesson that came out of the skirmish between the iPad maker and the propaganda apparatus.
On the internet, which the party can corral with the “Great Firewall” but cannot really control, and particularly on Twitter-like Weibo, the backlash against the state and the cheering for Apple was devastating.
“Our support for Apple doesn’t mean we agree with the company’s insincere behaviour; it mostly represents our contempt for China’s shameless [state] media,” wrote Wan Tao, the young chief executive of a Chinese technology company.
Apple may have played this perfectly: appeased the Chinese government, enhanced their brand with the upper class, and inoculated themselves from Western criticism if they’re banning apps on the Chinese government’s behalf.
A glowing profile of Facebook’s business to date by Kurt Eichenwald:1
The Google concept of demand fulfillment—someone searches for a pink shirt and is shown an ad for a pink shirt—had an important place in Internet marketing, the pitch went. But Facebook was about generating demand by showing users content that they might not have otherwise considered.
It’s long, but worth a read; it presents the optimistic take on Facebook’s future by framing their targeting efforts as the natural next step in a century-wide evolution in advertising, from print to radio to TV to search.
I’m clearly skeptical2 of Facebook’s long-term prospects, especially on mobile, but cautiously so. The truth is that Facebook has never really been that interesting to me for the exact same reasons that Twitter is: I have a wide array of interests, am intensely curious, and have little desire to dwell anywhere for long – physically or intellectually. But then I remember that most people settle within miles of their place of birth, have the same friends for life, and I remember that I’m not Facebook’s target customer.
As an aside, Facebook’s PR department is developing a nice little knack for producing these profiles the same week they have major announcements ↩
I’ve been playing around with a retail HTC One and felt compelled to share my thoughts on the device. It’s rare that I’m so moved by a device to chime in outside of the official review, but the One is a definite exception…
The One is without a doubt the best Android smartphone I’ve ever used. HTC’s build quality and materials choices have been steadily improving over the past couple of years and I honestly don’t know a more fitting name for its latest flagship other than the One – it’s the one to get. Even iPhone users looking for something different might be tempted by the One.
But they won’t switch, and neither will anyone else. Samsung’s success vis a vis HTC is guaranteed by their superior supply chain, distribution, and marketing. The relative quality of the product won’t make a difference.
At least that’s my theory – we’ll find out if it’s right.
(As an aside, it feels like a lot of theories about smartphones are on the verge of being proven or disproven).
