The Smartphone Explosion

I've been dipping around the edges of this story with recent blog posts, but Seth Weintraub takes it a step further in this post in Fortune. Next year is likely to be the year that smartphones emerge as the default mobile device platform around the world and probably the default internet access device in terms of numbers of users and devices.

Here are some quotes from Seth's post which you should go read:

In 2011, we might see half a billion smartphones sold worldwide.  Smartphones will likely blow by traditional computers next year as the way most of the world gains access to the Internet.

Cheaper hardware will eliminate the need for subsidies and therefore will improve competition between carriers, and spur them to improve their networks.

next year, Broadcom says it will release a follow-up chip that will allow WVGA displays and as much power as today's high-end Smartphones at the same $75-$100 prices.  That Nexus S that costs $530 now off contract will cost just a fraction of that in just one year.

To be clear, that sub $100 price is not the cost of materials, it is the suggested retail price after the manufacturers (and carriers) have taken their profits.

if you thought Android going from 30,000 activations a day to 300,000 activations/day was impressive, 2011 might be an even bigger growth year for Android.

If you haven't put all the pieces of the story together, let me do it for you. Smartphones prices are about to plunge and the result will be hundreds of millions of people all over the world starting to use them. And many of these devices will be running Android, not iOS. And wireless data prices will likely come down too.

That's a big macro theme that entrepreneurs and VCs need to get in front of. We are working on it and you should be too.

#VC & Technology#Web/Tech

Comments (Archived):

  1. Steve Hallock

    I believe most people are actually underestimating the significance of this to the betterment of humankind in general. In America, it is difficult to imagine that most of the world still does not have regular computer access, let alone internet access. Many of these people do not even have reliable postal delivery. The proliferation of internet connected mobile devices is going to be game changer for general quality of life and wealth.Of course the business opportunity is awesome in the most literal sense of the world. Within the relatively near future, everyone on the planet will be connected and reachable.Inspiring and incredible.Enjoy your trip, Fred and safe travels back home.

    1. fredwilson

      exactly, really exciting and inspiring

    2. danielharan

      Very exciting. A great example of “leapfrogging”. Cell phones grew faster than landlines in Africa, creating entirely new market opportunities, e.g. M-Pesa, the mobile money transfer service.What happens when mobile phones leapfrog traditional computers and laptops is anyone’s guess, and hard to overestimate. At minimum, it should dwarf what happened with the introduction of cell phones.

    3. ShanaC

      We live in interesting times. A blessing and a curse.Howard Rhiengold writes about smart mobs, and relays stories about Malaysia and democracy through SMS. Meanwhile, I’m growing up in an era of __________ Revolution – a ton of them are coordinated by the internet and mobile phones.Meanwhile I can look up biohacks on the internet. I hear of articles about how technology concentrates wealth until it filters down en mass.I actually have no idea what could happen.

      1. CJ

        I’ve never seen wealth filter down…

        1. ShanaC

          You have a much nicer and many more clothing compared to your middle/upper-middle class counterpart at the start of the revolutionary war. That’s wealth trickle down through technological growth.Though yes, there is wealth concentration at the top in a scary way right now

    4. Adrian Bye

      inspiring comments, except most of the developing world has easy access to the internet via internet cafes.

      1. LIAD

        easy access via internet cafes is kind of an oxymoron

      2. Richard Burton

        Internet cafes have time pressure, usage-linked charges and are never in my pocket. This will allow many people to access the internet all the time anywhere they like.

    5. Dave Pinsen

      This reminds me a little of how $100 laptops were supposed to change the world a few years ago.

      1. fredwilson

        The $30 smartphone is the cheap laptop

    6. Derek Francisco

      Yep… Social entrepreneurs are already leveraging mobile to create better futures. Frontline SMS is doing considerable work in this area, even using mobile tech to improve access to justice. I only see this trend increasing, especially with more sophisticated devices (smart phones).

    7. Sam Papers

      Business. Makes me remember the book I read some time back by C.K. Prahlad, The Fortune at the bottom of the pyramid.Other perspective, Open Source seems to be winning here too 🙂

  2. ErikSchwartz

    Yup. I was totally wrong about the adoption rate of smartphones. It has taken off way faster than I (or most people anticipated.) It has been amazing to watch.

  3. Michael Dizon

    I saw you mention Phonegap in a previous post. Have you heard of Appcelerator? They’re doing great things. Cross platform development for native apps using javascript syntax. They support iOS, Android and are coming out with Blackberry as well.

    1. fredwilson

      i will check out appcelerator Michaelthanks for pointing it out to me

      1. V. Papakonstantinou

        I really like them! I grew to love their Titanium Mobile over the past year while working on some pet projects. Once you get the basic things right (javascript, UI structure, etc) you can come up with full-fledged apps quickly. Even people with no programming experience can develop a working “proof of concept” in a matter of days. I think it will be “game-changing” opportunity especially for many “non-techies” with good ideas. The above applies not only to mobile app development because they offer a cross platform (win, mac, unix) desktop app development tool that follows the same logic.I started off with PhoneGap but seemed that they were more into “consulting for developers to be” as opposed to creating a development tool. I have not followed them recently so I don’t know if that has changed.

  4. John Doe

    People seems to forget how apple owns the iPod market for a long time & it’s still now.

    1. fredwilson

      they own the music market but they don’t own the wireless market

      1. William Mougayar

        You can run apps on the new iPods.

  5. howardlindzon

    Stock guys and institutions have been – look at triquint, apple, broadcom, atmel, MIPS $SWKS and next year it might just be google

    1. fredwilson

      not surprisingthe interesting question to me is will android’s success get $goog moving again

      1. vruz

        when google first appeared the internet and the web were already there.this time it’s a much tougher call, google is basically making a new web from scratch whereas apple has been sidestepping it at best, and to some… destroying it at look at the mobile web ecosystem and there’s no single part of the puzzle that has not been touched by google to some degree.thee teamwork google has been pulling with the major mobile makers (sole exception: apple and nokie) has been impressive.they are confident that they have what it takes, and they already have a foot in the door.when google sneaked the google search main page in every PC they had to be patient and convince everybody they were good enough.this time it’s different, google already are in your android mobile by default, this doesn’t make their dominance weaker, but even stronger than the way they had it when they had to convince every web user to join them, and every publisher and adsense client to give them has paid off handsomely for them before, when billions of people have something made by google in their pockets their dominance on the mobile web space will be even bigger.

      2. William Mougayar

        There are 4 parts to the Android money value chain, as I see it:1. Android app store (Google)2. Hardware manufacturers (Google partly with Nexus)3. Carriers4. Software Apps/DevelopersIs there a market report on exact market size $$ for the above segments and how each will grow over the next 2-3 years?

        1. RichardL

          You are leaving out a big one:1. The Internet

          1. William Mougayar

            Hi Richard- Well, the Internet is part of everything, but I was focusing on specific segments that are generating revenues, i.e. Google takes a cut from running the Android store, manufacturers make money from selling phones, bandits charge for bandwidth & developers make money from selling their apps. Unless, I missed your point, please elaborate? Thanks.

          2. RichardL

            I don’t see how you can look at segments and revenue opportunities surrounding Android and dismiss the Internet and the device’s fundamentally connected nature.Google’s revenue model is primarily based on this fact. (Google makes nothing off of Android Market, Nexus and probably handset licenses.)To view the revenue opportunities to software developers as being exclusively or even primarily from selling apps is shortsighted.

          3. William Mougayar

            I was commenting on the Android ecosystem specifically, pertaining to the economic opportunities it was creating along its direct value chain.Doesn’t Google takes a % cut from the Android app marketplace?I wasn’t implying that selling apps was a primary revenue model for developers, but that the Android app market was another segment for them, just as the iPhone or RIM segments are other segments.

          4. Guest

            30 percent of the revenue goes to carriers and operating costs…

        2. Prakash

          The app store seems to the biggest opportunity. We have to remember the ecommerce opportunity here…more and more apps will have them and all these transactions would go through Google Checkout.

      3. vruz

        the big difference between Google when they started is that the web was already there and they figured out how to make money with it.the carriers can keep the physical support. remember who won the PC wars?not the PC makers but Microsoft.Google already know how to make money, they are building out the mobile internet from scratch, a logical layer on top of the wireless infrastructure.they will practically own it.

      4. intelligent_speculator

        Android will increase the global use of the entire Google platform in a mind boggling way.The easy layup investment is $goog over the next 5 years.

  6. howardlindzon

    In fact go through this list…probably 15 stocks already up 300-500 percent this year aheadof this ….stocks always lead

  7. Eleanor

    I totally agree with you that Android has a very bright future. I feel like Microsoft is a bit of an unknown factor in this market – I usually have an opinion of how a product will fare, but my Magic 8 Ball says ‘Reply hazy, try again’ about Windows Mobile 7. It’s received positive reviews, but all I think when I look at it is ‘Zune’.

    1. fredwilson

      i am not ready to count microsoft out eitheri think they have a better shot than rim to be honest

      1. peter_burke_ceo

        exactly how I see it Fred. Msft took some time to figure out what was going on. they missed a cycle but now at least have a platform they can compete with. rimm is going to try do this “on the fly”. msft is going to sink huge resources into this effort. we all know what happens when they get serious about a market. the comments coming out of Redmond suggest to me a kind of quiet confidence like “we plan to sell a lot of phones in 2011”. How? By partnering, something neither Nokia or Rimm can muster the courage to do at the moment. Microsoft is working with partners at every stop of the ecosystem including the critical building blocks like chipsets. All this goes double if msft can convince Nokia to get on board.

      2. Guest

        MSFT is a sleeping giant and their modeling for product launches accounts for years of hemorrhaging money (see xbox) before the unit turns a profit. Agreed.Re: RIM … I’ll be bullish on them. Here is why:1) QNX could be a game changer for their UI/OS “issues”. Playbook looks sexy. 2) BES/BIS server sales to enterprise customers and telcos is an awesome business3) BBM is a way of life for business people4) No one else gives love to the enterprise IT guys

        1. Aaron Klein

          For context, I’ve been a BlackBerry guy since 2003 (except for one year I carried an iPhone and then quickly switched back.)BES may be a nice business revenue wise but the inability to kill this business is killing them.I can go buy a Droid Pro right now and get the same form factor with all of the functionality that BES delivers and it’s built into the phone.BES is an antiquated business model. RIM knows it which is why they’re trying to give away 80% of it with BESX, but it’s still horrendously complicated and difficult.RIM should deliver those features in the cloud for any Exchange or Gmail account.

          1. sheynk

            re: BES… While I agree that RIM needs to be smart and flexible about the delivery of the service, many enterprises want to host everything in their own back yard… and honestly BES is not that complicated :-)While the droid pro is a great SME device, the fact that I can’t have a “master device control” dashboard makes it a hassle when you get into large organizations that are paranoid about IT.I don’t think its necessarily right or “the future” … but then again I can still buy a machine with XP on it if I really want to.

          2. Aaron Klein

            Oh I agree – and keep the BES business for the enterprise IT guys who want that control.My problem is that they have been resistant to deliver the functionality without it. I assume that is out of fear of cannibalizing the BES business.I pay an extra $8/mo for BES on my hosted Exchange account for the privilege of filing messages into folders and having a truly synced inbox + calendar + contacts + tasks.I could get all of that (less tasks) with iPhone and Droid Pro for free.

      3. scottythebody

        Enterprise will keep MSFT in the game forever. The Office/Windows monopoly is strong in corporations, and unimaginitive and generally conservative IT departments will wait it out and deploy Windows 7 Phone once all the integration and security tools are in place.

        1. erja

          Not true. Users are already knocking down the doors of IT departments just to get email access on their shiny new smartphone and IT departments are certainly not holding their breath for WP7 to become the standard. In fact, BYOP(hone) is becoming the defacto IT phone policy and it’s stunningly easy to configure email for iPhone and Android for any company with a Notes or Exchange server. The costs of forcing new employees onto one platform and/or providing cell phones of one platform to all employees will far outweigh the benefits. The enterprise will be platform agnostic, by and large.

      4. kidmercury

        my dog has a better shot than rim.and i don’t even have a dog.

      5. Prakash

        Got a chance to review a Windows 7 phone and I thought it was wonderful…great UI. This was a LG phone and they had the touch working very well. Email, browsing all seem to work well. I downloaded some apps and the experience was good (free ones). Not sure if Windows Live would work out as well as Itunes though. However, it did seem that the experience was FAR better than what I get on a BB. With ability to use Microsoft Office and integration with Exchange and Sharepoint a lot of users are going to find those features useful especially those who use the Windows OS at home or in the enterprise.

      6. Brian Magierski

        Microsoft will do better than RIM for sure. Their advantages are (1) their checkbook, (2) their access to the enterprise, (3) their developer community, and (4) they have not ceded the OS to the carriers like Android has (i.e. less fragmentation and more developer support potential). Android will own the long tail of the smartphone market. Microsoft can still do well along with Apple and Android.

  8. chrisdorr

    This is all very exciting. But the question persists: will Android provide the ecosystem that matches or exceeds what Apple provides? For example, Nokia ships a lot of smart phones (and has for years) but has been unable to really grab consumers with their services, despite having a huge footprint. Everyone who believes that Android will blow away Apple with the numbers of handsets sold misses this important point. If you cannot create an easy to use consumer experience that is the same across all the handsets and attracts large numbers of people to buy, buy, buy, you have many handsets looking for a solution that really makes money. It is just as likely that Apple will continue to lead in creating opportunities for developers and content creators to make money for the foreseeable future because the Android market will remain fragmented.

    1. fredwilson

      i don’t think agreei’ve had an android for a year and have used it as my primary phonesince the summeri download apps, use them a lot, use the browser very actively, and itworks greatdo you use an android chris? if not, you should at least try it. it’sa very eye opening experience

      1. chrisdorr

        I have played around on an Android phone as well as an Android tablet, though I have not used either on a regular basis. Both experiences were very good. I think however, one would have to use every Android model out there to really judge the Android platform as a whole. From what I have read, it is not yet consistent across all devices. Android also does not have the equivalent of an iTunes, with the huge number of credit cards already entered and with an integrated experience.I am sure over time that Android will continue to improve its experience and its ability to sell to the consumer. I just am not convinced that a greater number of handsets in the market will simply deliver greater value to Android developers and content owners without consistent improvements in these other areas.

        1. vruz

          two letters: P.C.

        2. fredwilson

          This is the debate the AVC community had on my post a few weeks back aboutwhere mobile devs should focusMy view is paid apps are largely a temporary market aberration waiting forfreemium and ad models to emergeIn the future iTunes purchases will matter a lot less

          1. Brian Magierski

            Fred – we have a view that this is all trending toward something called AppCommerce. My company, Appconomy, will be blogging about this soon. The short is that app developers will make money through in-app commerce that is embedded in the app. You download the app, and pay on a value basis – some of the payments will be for premium services or functionality that the user wants, and some of payments will be made by third parties that are paying for sponsored or premium spaces within the app.The user ultimately makes the choice within the app based on what they want or are willing to do, and the economics flow from that to the app developer and the ecosystem built around the app.The nice thing about this is it is value-driven and all done in-app. iTunes is less relevant in that respect.

          2. fredwilson

            Freeium via in app transactionsAwesome

          3. Dave W Baldwin

            you have right idea Brian.

          4. ggruber66

            Fred, what’s your horizon for “temporary market aberration”? It’s 3+ years and paid apps are still growing.Secondly, and perhaps more importantly, have you not learned anything from the Dot-com days? Advertising was supposed to pay for everything back then and the model…and the economy…failed. Nobody likes ads when they’re trying to get something done. Ads may work when you’re trying to find something, but not when it interrupts you from completing an activity.And in regard to freemium apps…do you mean ad supported/hobbled app as free and then upgrade to no ads when you buy the premium version/subscription? Seems to me that the freemium model inherently desires to move customers to a paid, non-ad supported model. Thoughts?

          5. fredwilson

            I think the open/free web has been an enormous financial success. Betweenecomnerce and marketing/advertising we are talking hundreds of billionsflowing through itI have no idea what failure you are talking about

          6. Dave W Baldwin

            As we keep evolving over the next 3-5 yrs., remember you have to deliver the product the person will want to purchase…then the question of avoiding ads is secondary because they will have already made their decision.

          7. Dale Larson

            Do you think the Mac App Store will be a similar aberration and that all software is meant to be free? Or is there perhaps a place for some paid applications on the desktop and web?

          8. fredwilson

            i think that the mobile web economic model will be similar to the webeconomic modelthere is room for paid appsbut they are delivered in a freemium model, free to use lightly orinitially, and then convert to paidso i think in app transactions will be way bigger than up front transactions

    2. William Mougayar

      Agreed, although the Android fans will tell you that that experience isn’t that bad and it can only get better. There are rumors that Apple is gearing up to ship 3 million iPads per MONTH at a much reduced price point. And I wouldn’t put it past them to introduce a lower end iPhone to gain even more market share. In retrospect, the iPod touch at ~$200 is an iPhone4 without the phone chip.

    3. RichardL

      Android is now besting Apple iOS in features and experience in Maps, GMail, Browser, Search, Navigation and Voice Control.Android is at parity in many other application domains. And many of the domains where Apple’s ecosystem leads are not very defensible.Don’t take this wrong, Apple offers a very stong premium product (arguably the best), but you are understating the real fomidable gains Android is continuously making in features and usability with Android.

      1. chrisdorr

        But are Android developers and content providers really making money? Or put it another way, are they making as much or more than they make on Apple? Or as Cuba Gooding’ character said in Jerry Maguire, “Show me the money!”.

        1. Aaron Klein

          I don’t think the future revenue models of the mobile web are 99 cent apps.If that is iPhone’s strategic advantage over Android, it’s not much of one.

          1. chrisdorr

            I think it is likely to be a dual revenue stream, paid and with ads. You will need both to succeed. Note how YouTube is trying to add a paid model to its revenue streams. Even Google realizes that ads will not be sufficient by themselves in the future.

          2. Aaron Klein

            For a lot of apps, you’re right. (Angry Birds, the flashlight app, etc.)That’s just not the stuff that excites me about the future of the web.There are more ways to monetize users than advertising or 99 cent apps.

          3. ShanaC

            SaaS is pobably a much more powerful model on phones than “normal computing”- the getting something done right now model is what powered the strength of email- it will power the next generation of phone apps.

        2. RichardL

          As an app developer I can attest that monetization through iPhone App Store sales is not all that it’s hyped up to be.I don’t know any independent iOS devs who are making any money through the App Store.Sure there are a few Cinderella stories that we keep reading about, but even among those devs profits are slim and repeat success is a struggle.If you look at the top paid and top grossing apps on the App Store right now you will see that the overwhelming majority of them are published by Electronic Arts and its subsidiaries.This just makes plainly clear something that has been obvious among the developer community for some time — the vast majority of app downloads and sales go to a tiny fraction of the market. The typical iPhone app makes nothing from the App Store. There is no “long tail” on the app market.It is true that Android Market monetization is even worse than iPhone App Store in this regard, but that just emphasizes the point that app store market monetization is not a sufficiently viable revenue stream on its own without a lot of luck or love from Apple promotion.

          1. Aaron Klein

            I think the reason for this meme is the confusion of marketing vs. distribution.Sure, App Store and Android Market have “top apps” but that’s the 1% of marketing thrown in on top of their 99% focus on distribution (e.g. features and screenshots, payment, download, installation).I’m still surprised at the startups I see who throw their apps up there and go “why is nobody buying it?”You just got the equivalent of a few inches of shelf space at Best Buy. If you don’t undertake marketing activities to drive demand to your newfound distribution capability, very few people are just going to happen across it AND buy.

      2. ggruber66

        Richard, first of all, I don’t think that comparing feature to feature is the right way to evaluate one platform versus another. It is experience that matters most, whether you’re talking mobile phones, airlines, hotels or virtually any other product or service. And Apple beats Android on experience hands down (both quality and consistency), although Android is catching up, albeit mostly by copying what Apple has done well.And Robert Scoble has a good post today that goes right to your comment on Maps, Gmail, Navigation, etc. (not sure if the Louis Grey article Scoble refers to is your source for the comment).

        1. RichardL

          I saw Louis Grey’s article after I read Fred’s article and posted here. My impressions on the state of iOS and Android are my own, but I did notice a similar sentiment in Grey’s post. Android doesn’t require apologies or conditional recommendations, and I do not agree with Scoble.But the horserace between the platforms is not really all that relevant to the proposition that Android is a juggernaut poised on the brink of huge expansion.

  9. William Mougayar

    Assuming that Android smartphones out-of-the-box experience continues to improve, there still is the problem of carriers control on pricing and plans. No matter how you slice it, you either pay big bucks to get an an unlocked phone or you pay less and get locked into a long term contract where they milk you later.In an ideal world, all Android phones should come unlocked and with an absolute freedom of carrier choice with no contracts. Then, if I had money to invest in a crazy idea, I would open a retail network of Android Stores, totally independent from the carriers, same as Apple’s stores.To see the future of the smartphone explosion, we must also look at how the non North American countries (especially less developed countries) are adopting them. They are more price sensitive therefore are being more creative in user choices of plans, hardware prices and openness.

    1. Hank Williams

      I think you’ve missed the point. $75-$100 will be for an unlocked phone. So when you are saying “you either pay big bucks to get an an unlocked phone or you pay less and get locked into a long term contract where they milk you later.” you are contradicting the entire point of the article which is that next year smart phones will be as cheap as feature phones are today.

      1. William Mougayar

        If that’s the case, I’d like to see more unlocked smart phones at double that price, today. (aside from Virgin and Wind Mobile)The hardware manufacturers are locked-in with the carriers who are their distribution channels.The paradox here is that Android which is based on an open platform gets locked back in with the traditional carriers as the distribution gatekeepers.

        1. vruz

          yeah right…> fastboot oem unlock

    2. RichardL

      Even without the new generation of chipsets such as those from Broadcom this is already incorrect.Counter example: Virgin Mobile’s contract-free Samsung Intercept Android phone – $200-250 out the door. $25/mo for unlimited data, unlimited texting, 300 voice minutes. No contact, no fine print. (Virgin Mobile uses Sprint’s network which is still better than AT&T.)

      1. William Mougayar

        Virgin and Wind Mobile in Canada are the exception of course.

  10. Leonid S. Knyshov

    Considering our investment in mobile commerce, this is good news for us.My phone is faster than some of my laptops. We now have dual-core 1.5Ghz chips shipping inside phones. Add a bluetooth keyboard and a VGA port and you have a full-blown system. With Citrix and RDP clients, I already could control servers from my Windows Mobile phone back in 2002 from a ski slope. Now it is simply a lot faster and becoming mainstream. Citrix is working on deploying GotoAssist Express client to the iPad platform, for example.Of course, we have been here for a while. I could do some of this back in the days of Palm dominance with Palm IIIxe + Stowaway keyboard + DocumentsToGo. The difference today is ubiquitous mobile broadband.The one thing where Apple excels, however, is the overall user experience. I tried some of the tasks on iPhone and on Android, and the slower iPhone delivered a better experience.Android needs to be polished up to get to this point and quickly. Microsoft still hasn’t realized they need to abandon their mobile IE nonsense and simply deploy webkit.

    1. Aaron Klein

      not that I’m planning on buying one, but MSFT has announced webkit and silverlight in an update release to WP7 early next year.

      1. Leonid S. Knyshov

        I just checked, fairly thoroughly, and can’t find any such announcement.Silverlight is what I would have to use to develop for WP7 today.As of 12/13/2010, I see that Microsoft made no decision with regards to porting IE9 to the platform and I’d expect that to happen sooner than them switching to Webkit.Microsoft really needs to get with the program and ship a decent browser in the phone. The mobile experience is getting increasingly richer and the IE that’s shipped in Windows Phone 7 is simply not capable of rendering it properly. My UX when viewed on iPhone is indistinguishable from a native app.Here’s a true *facepalm*”Getting reacquainted with an old friend: IE Conditional CommentsConditional Comments have been part of Internet Explorer since version 5. They enable developers to include or exclude lines in the HTML document based on a features existence or version. On Windows Phone 7 we have added a “IEMobile” feature. Its version information matches the mobile token in our user agent string introduced here.” – source:… – that thing is based on IE7 desktop. My research indicates no native HTML5 from Microsoft itself until end of summer 7.5 OS release.I’d rather just code for webkit and deliver uniform UX on all devices. WP7 is just an added expense to development at this point. Have no choice but to support it, but the UX we deliver on WP7 is suboptimal.I tweeted Joe Belfiore (WP7 is his baby) about this.

        1. Aaron Klein

          I stand corrected – it’s HTML 5 that Microsoft has committed to support, not webkit in particular.Here’s the story:…Thanks for the correction.

        2. Prakash

          I agree that the IE on MS phones suck. They really got the phone UI going very well and wonder how long it would take them to get the browsing experience right.

  11. LIAD

    clear innovators dilema for Apple.Android is playing a textbook low-end/new-market disruptive strategy.Apple can’t and won’t compete on price – a superior UX & design at a handset premium of 3/4x just won’t cut it for the majority of consumers.Even if they introduce an “iPhone mini” at 2x the price of a baseline Android – still not good enough.In 2011 Joe Public, even more than usual, will care about dollars and cents – and not interface icons and efficiency of the menu navigation system.—–Hows MSFT’s distribution in the developing world? Could that alone put them back in the game?

    1. fredwilson

      i talked to my kids about this at lunchwe decided that apple will be the BMW of the marketand that Android will be the GM/Ford

      1. Aaron Klein

        As a taxpayer, I hope Android will be the Ford.I don’t want the feds to bail out Android. 😉

      2. SteveD-

        I agree! Ferrari, Gucci, Cartier. There will be users willing to pay a premium price for iOS. This has always been Apples model.

      3. William Mougayar

        In that case, is Nexus S the Cadillac / Corvette ?

      4. kidmercury

        i like an analogy to speculation.iphone is like the slot machine. best suited for those with limited intelligence and a high degree of naivete. a fun means of speculation (for those who enjoy losing money) but not for serious adults who wish to make a positive contribution to is like startup investing. its about bringing innovation to the world. inspiring and enabling dreamers. using capital markets to create prosperity for all. best suited for mature, diligent, intelligent, charismatic,and noble individuals who seek to leave the world better than they found it.

      5. Amin

        I think Android will be GM/Ford, Honda, and BMW;Microsoft will be Toyota and Mercedes Benz;and Apple will be Jaguar.That may be giving Microsoft too much credit though.

    2. ShanaC

      A lot of illegal programs, which they sort of depend on to get people hooked and eventually needing a legal version. It’s actually a brilliant strategy.

    3. vruz

      Well I don’t see there’s a dilemma for Apple really.They’re already the biggest computer company in the world, and second only to Exxon mobile in market cap.You can’t be the everything to everybody.

    4. vruz

      $MSFT’s distribution in the rest of the world is next to nil.probably even worse than in the US for a simple reason: windows mobile licencing.the rest of the world is very price-sensitive, add a few dead weight bucks to the total cost and you’re easily the worst competitively priced mobile in the market.

      1. fredwilson

        Its hard to compete with free

        1. ggruber66

          Actually it is easy to compete with free because free is never really free or there is no sustainable business model and then free goes out of business. There are always costs of a sort, it just depends how you pay.And how many dollars is MSFT charging for the WP7 license (real question, I have no idea)? How much of Apple’s price do you attribute to the iOS license cost?

  12. kidmercury

    Yup. I’m cheap and recently got an android. Android will embarrass crapple, that is a given. But i think android’s reign will be limited; it is still just an extension of the application layer. As the collapse accelerates, new systems that break out of the current spectrum allocation system will emerge. This is part of the revolution of the governance layer IMHO.

    1. huh

      that doesn’t make any sense, you know.

      1. kidmercury

        thanks for your comment. if you have any questions that will help me elucidate my message, feel free to share them.

  13. ShanaC

    Depending on how these phones are setup, we really could educate people on the power of the internet or lock them off becoming very content oriented. I really hope that the introduction of Cheap phones will echo back to cheap big computing -and eventually create lower barriers to creating a thing. (I mean I know with open source a lot of this world has gotten cheaper -that doesn’t mean it’s as accessible learning-wise)

  14. Aaron Klein

    Hugely excited about this trend for the developing world.My last two trips to Africa, I’ve watched everyone using SMS and it’s revolutionizing economic development, health care, education – everything.I’m in the process of raising $35K to build a school in rural Ethiopia next year. A friend asked me why that wasn’t a waste of effort.”Put education in their minds and a smartphone in their hands, and corrupt governments will fall,” I said.PS: You can learn more about the school here:

    1. fredwilson

      This is amazingI’d love to hear why you chose Ethiopia

      1. Aaron Klein

        A personal connection – my daughter was born in Ethiopia. We met her for the first time in an orphanage there on Christmas Day 2009. She arrived home with us this last New Year’s Day.So it’s “our second homeland” and I went back this last September to scout out how we can make a difference.The school there is privately run in partnership with a church and local government. Tuition is $1.50/month, only 40% pay tuition and costs are $11.23/month. The delta is underwritten by scholarships while they build sustainable micro-financed business enterprises to fund the whole operation.Africa is amazing. Everyone is an entrepreneur. You have to be one to survive.The smartphone revolution is going to play a key role in making all of this work.

        1. fredwilson

          That’s a fantastic story in so many ways.

        2. Dave W Baldwin


        3. petey

          way to go capitalism!

  15. Phil Swenson

    But will people opp for the $75 phone off contract when they can get a much better/cooler phone for $75 on contract?

    1. Aaron Klein

      Obviously, it depends how cool the off contract phone is and whether there is real differentiation.They certainly will if they can’t get a contract (prepaid customers without credit) or broke their phone while on contract.

  16. Steven Kane

    Some years back, the late, great Arthur C Clarke wrote a novel (sorry I can’t recall the title — senility strikes again!) which posited a future where, at birth, every human baby is assigned a personal device, belonging only to them, a cross between a smart phone (though so much more) and a personal sentient AI. The device and relationship are so advanced sophisticated nuanced and subtle that the AI — in the form of the handheld device, which gets upgraded as hardware advances though the AI’s personality and memory persist — becomes each person’s closest and most essential lifelong companion, confidante, collaborator… and closest friend.Here we go…

    1. fredwilson

      I saw some of that at breakfast today with one of my children who was in afunk and turned to her best friend for solace. Two weeks with family 24/7can be hard 😉

    2. kidmercury

      yup. the new form of the turing test is a spiritual one. unless mankind evolves spiritually, we will be enslaved by technology. if we do pass the test, then technology will further liberate us. IMHO

    3. Dave W Baldwin

      This will be an exciting decade.

      1. Steven Kane

        True.But all decades are exciting.And there always has been, and always will be, an amazing revolution,on the horizon.”Life goes on within you and without you.” – George HarrisonHappy New Year!;)

  17. kirklove

    The way you state it implies a winner (Android) and a loser (iOS) while it may not have to be that way at all. The smartphone market is huge. Quite big enough for two, three, or even four players to hold healthy chunks of it (just like with browsers such as IE, Safari, Firefox, and Chrome).Android may very well pass iOS in phone numbers, though it’s not really fair if you don’t measure all iOS devices such as touches and iPads. Plus, the jury is still out on the numbers of a Verizon iPhone. Personally I think they’ll be huge.I love iOS. I find it infinitely better than Android. That being said, as an avid iOS user I’m thrilled Android exists. Healthy competition benefits me the consumer and I’m all for Google and Apple pushing each other to out do the other.

    1. ShanaC

      we did that with computing. It didn’t work out so well

      1. kirklove

        Sorry, I’m not following your train of thought. Could you elaborate?

        1. ShanaC

          We used to have large amounts of different desktops. Then windows decided to sell generic versions of DOS, and suddenly the whole atari/commodore/other market disappeared. Apple remained because it had certain industries locked in (graphics, publishing) and 90% of the world went to windows.When was the last time Atari made a machine you would use? For native applications, its very hard to code for 4-6 platforms. The biggest install base ends up with a network effect because people want the applications that run on it. So the larger your platform is adopted, the more apps, the more apps available, the more people adopt it.You can max out on maybe three platforms like this.

          1. kirklove

            I’d be happy with two or three. I don’t want to be stuck with just Android.

          2. Tweedle

            Microsoft never made a platform I would use willingly.

          3. ShanaC

            OK, but what does that have to do with the Network effect of Microsoft andapplications on their platform? I have a point in saying Android could workthat network effect to its advantage.

    2. fredwilson

      I am not suggesting winner take all. If I came across that way my badBut developers need to pay attention to a shifting marketWe are moving from niche to mass very quickly now

      1. Dave W Baldwin

        It would probably help if you would remind people the key to the Android prediction is looking to the future. If you build something looking to be latter 2011+, being ready for the Android OS is essential.

  18. michael kimsal

    “number of activations per day” has got to be a short-lived metric, unless we take it to me something else in the near future.The numbers may seem staggering, but the race upwards can only go so far. If Android activates, say, 1 million per day, Apple does the same, and various other players manage to be collectively doing another half million, that’s 2.5 million activations per day – about a billion per year. There’s only – what? – 6 billion people on the planet.2 years from now when there are billions of android/apple/etc devices ‘activated’ and being used all the time, the ‘activations per day’ metric will have to give way to something else, because it will start slowing down. And no one likes slowing metrics. “Devices per person” may start to be the new measure of value for device makers, and we’ll be convinced to start getting multiple devices – one for home, one portable, one for car, one for work, etc. They won’t all be the same devices, but we’re seeing it a bit with iOS items – ipad/macbook/iphone isn’t uncommon at all.Curious why “wireless data prices will likely come down too”. I suspect given the monopolies and high barrier to entry, we’ll see entrenched players fight lower prices for at least the next year or two.What is of more concern to me is the explosion of these devices around the same time we’re out of ipv4 – what is the status of ipv6 support amongst all the major data carriers? Will we be socked with continued high prices justified by the infrastructure costs they will have to bear to upgrade equipment? As much as I’d like to see data prices come down soon, I just don’t think it’s going to happen in 2011 (speaking only for US)

  19. paramendra

    Google does not need to “get” social, they got Android.

  20. RocBusinessman

    Now if only competition would drive the price of data access down. $70/month for 5gb of limited internet is not a sustainable cost for the “unwashed masses” to be buying smartphones in droves.

    1. fredwilson


  21. zubinwadia

    If I remember correctly, Sony Ericsson Research (a biased source) projected 3.8BN phones with mobile web access by 2015. I believe this projection can be realized through the proliferation of WebKit and HTML5.I fully expect HTML5 optimized applications to have the largest and fastest distribution channel by then. That’s where my company (CiviGuard) is betting where the puck will be.>>>>>>>+1 on the assertion that $GOOG will see a run up in the next two years… I think the Youtube/Display Ad division is doing exceptionally well… and Android will be a $4BN unit in another 24 months. The only correction risk in the short-term would be the regulatory inquiries spoiling the party.

  22. Benedict Evans

    One of the things this points to is that a $200 iPhone is far more important to Apple, strategically, than a Verizon Wireless iPhone. I hesitate to assume they won’t make one. The iPod went from $400 to $150. The iPad is a $500 Mac. Apple has always refused to make a poor product to hit a price point – but one of the changes in Jobs v2 over Jobs v1 is a willingness to go cheap if the product is still good.Not an easy problem, of course: how do they make a $200 iPhone with the right fit & finish that doesn’t cannibalise the $500 iPhone or fragment the platform? But with $50bn in the bank and Jobs as CEO-for-Life, they can be as radical as they want.A little perspective, though: Apple was probably having this conversation sometime in 2009, and locked down the summer 2011 iPhone spec before the iPhone 4 was announced.

  23. dmgerbino

    Great comments on Seth Weintraub’s Forbes article (… ) here (and at Forbes too).My take on it is a bit different then most. I did not see it as an Apple/Google/Research In Motion/Microsoft thing.Seth’s most important fact to me was this: “In 2011, we might see half a billion phones sold worldwide. Smartphones will likely blow by traditional computers next year as the way most of the world gains access to the Internet.”Regardless of the business you are in, if you have an internet component to your business, you better know size your mobile audience now and keep tracking it. There are many companies out there who still create internet facing products and services that are locked to computer platforms. If you are not looking at mobile, it maybe too late.That is what I got out of Fred and Seth, your mileage may vary.@dmgerbino

    1. Laser Type

      Fortune, not Forbes

      1. dmgerbino

        Thank you for the correction.

    2. fredwilson

      That’s my main takeaway too. Thanks for emphasizing it

  24. CJ

    I’m not convinced of this trend in the US. Verizon has just launched 4G service with a horrible pricetag, Sprint charges extra for theirs as well, AT&T has dropped unlimited data as an option and there is talk that other carriers might follow suit. Carriers are reluctant to give up their locked in model as Apple has seen when their rumored plan to include a silicon Sim chip was squashed due to carrier backlash. On the plus, I have seen one smartphone available in the US without a contract and it resides on Virgin Wireless, it’s a bit over $100 but it runs Android and is almost as good as the Sprint Epic, a Galaxy S phone that is close to the top. So while I think the macro theme is true, I doubt the US will be on the cutting edge of the trend.

    1. Dr. Thomas Ho

      I thought Virgin Mobile’s Android phone was at least $200. Did they CUT the price already?

      1. CJ

        You’re right, it’s $250…thought it was on sale for $180 in the past week but I could be wrong.

        1. Dr. Thomas Ho

          I think Target had it on sale for $200 before Christmas

    2. Dave W Baldwin

      It will be interesting to watch the inevitable battle between vehicles and carriers.

  25. cityville cheats

    the bad thing that I noticed here in the philippines is that most people owns a smartphone yet they can’t fully utilize it cause mobile carriers and telcos overprice internet use. or even if they provide a cheap one their service sucks… I won’t own a smartphone if that’s the case.

  26. Wouter Deelman

    Mobile operators have been promoting 3G internet for a long time. Now, the accelerating adoption of smartphones is changing online marketing and customer service in a radical way. The mobile industry is at a tipping point. Here’s our blogpost/PPT presentation on whether the combination of 3G + mobile internet are the perfect storm mobile operators have been hoping for.

  27. Andrew Wong

    Interesting. Seems like everyone is only mentioning Android or iOS. I wonder if BlackBerry will still be relevant in the next couple years, especially after watching this All Things D video today –

    1. no


    2. Walt French

      Allow me to second “no.”How can world-class email security (compromised by host nations’ security policies, including the US’s) compete with phones that either do twice as much (just as securely) or cost half as much (where email goes utterly unused)?Not only was RIM totally blindsided by the iPhone, nearly 4 years later they still don’t have a competitive phone OS, competitive hardware, a consumer-focused ecosystem or even a credible roadmap for developers or IT shops. While Nokia has been dumbfounded that the category they invented (and in which they still engineer very nice hardware), RIM’s Playbook is its only tangible nod at This Modern World.And the Playbook won’t do a thing for the billions of people who merely want to run apps or the web on their phones or the tens of millions who want a convenient home PC that they can use to tap into their corporate apps/mail (unless they’re tethered to their corporate-imposed BB).Dead Man Walking.

  28. John

    Just bought a droid for my wife. Under $250 for the phone, $25/month unlimited data and 300 minute plan with no contract. Who needs minutes when you have unlimited data? Yes, I’d say the mobile world is changing.

    1. Dr. Thomas Ho

      Who’s the carrier?

    2. Dr. Thomas Ho

      This sounds like the SAMSUNG INTERCEPT on Virgin Mobile:http://www.virginmobileusa….Are you sure you bought a Droid?

  29. Pete

    Just hope you are not blind-sided Fred.You are pushing an agenda here….

  30. hephail

    In India, the main driver is going to be Nokia, followed by all the Indian brands, such as Micromax and Videocon.

  31. Facebook Applications

    yea i am very mush agreed that smart phone explosion is great in markets and its all about its game and apps

  32. Mark Essel

    I appreciate the design for mobile first theme even more now. Not only is it a simplified and streamline UI (best practices) but it will likely be the default interface next year for many people around the world.Mobile is already the system I use for capturing net information (50%) and blogging (95%), and I have desktop, laptop and tablet options. They’re just not always with me.

  33. KiteZA

    Very exciting news, particularly in the developing world. A few other commenters have pointed out the rapid growth in Africa, (for example more people owning cellphones than landlines). This trend can only benefit from reduced prices and further development.Health programmes via sms (mPedigree), low-cost communication on data connections (MXit), literacy programmes (M4Lit)… valuable and important services that will be improved by a ‘smartphone explosion’.Developing for mobiles should be a priority for those looking to expand into the developing world.

  34. RichardF

    I hope you are right about data charges coming down, I don’t see that happening anywhere in the world particularly quickly at the moment. In the UK it will follow the same pattern that it did for the cost of network calls and roaming i.e the operators will charge as much as they can until the regulator steps in. It’s an ologopolistic market.

  35. brisbourne

    If we really get $100 smartphones in 2011 the ramifications will be both huge and awesome – but that timeframe seems aggressive to me. In most areas tech moves faster than people expect and I’m a big believer that the pace of change is accelerating across the board – but in the case of smartphones I still think they will get better before they get cheaper, and hence the subsidy regime will survive a little longer.Another big driver will be the emergence of non-cellular networks as alternative carriers of data (and hence voice). First LTE and then new protocols in the TV whitespace.

  36. Vance Lucas

    Sounds like we need to pick up stock in wireless carriers. They seem to be poised to be the largest winners overall, because with each new smartphone activation, a new $30/mth+ charge is added to your bill in the form of data and text messaging charges — for each line.Also – time to get busy making some more Android/iPhone apps 🙂

  37. Allen Laudenslager

    RocBusinessman is dead on. It ain’t the cost of the dog, it’s the dog food! To use the GPS on my phone it’s $10 bucks a month and I’ll cut it once I learn my new city well enough. Mostly I use the “find” feature as a portable yellow pages. Once I learn which pet supply is closest and where the home center is I will probably cut the service to save a couple of buck for something else.Remember the internet on your phone was driven by asia where wired internet connections were hard to get and very expensive the wireless got in before a cheaper infrastructure got built. The only people willing to pay the monthly connection cost are people who can “justify” that cost. On the road a lot and that’s business customers an young folks who are away from their homes a lot.

  38. Roy Nallapeta

    It would be interesting to see how the smart phone systems revolutionize areas like payments, credit cards, and everything else. With cheaper costs for phones, common man is now exposed to more possibilities and resources that he could ever think of. This I guess then literally translates to new business opportunities. 2011 will certainly be an interesting year. However I would like to see less of a walled garden approach from players in the field and would be great if BB wakes up to the new reality.

  39. nestrealty

    Amazing statistics…so much so that I can’t even fathom some of those numbers. Obviously for this to happen, the cellular service needs to improve in small and medium-sized cities.

    1. Dave W Baldwin

      You are correct. That is in the works, but in some cases the Fed $$ is not getting to where promised to expand services to the lower populated regions. It will happen though.

  40. Guest

    doesn’t matter if US customers still end up buying smartphones on subsidized model since apparently most of them don’t really understand that iphone 4 is not really available for 199 dollar, but this is going to be huge for the rest of the world, with the caveat that we really do get 85 dollar phones of the quality of nexus S by end of 2011

  41. Abhishek

    I would like to see this phenomenon from a developer’s perspective:Do more android phones means more money for the android application developers? I doubt it.Low end android phones will be bought by people who will not be doing lot of shopping from the android market.Yes if your application is free and you have found out some other revenue model based on mass, it may work. But selling your application on android market and earning lot of money will still be a challenge for the developers.Google checkout also slows down this process. For e.g. It is not available in India right now and as an Android developer based in India, I am not able to make my only Android Application paid!I think next year also iPhone / iPad developers will earn more from iPhone 4 / 5 (may be) and iPad 2!What do you say Fred?

    1. Sandeep

      google checkout is available in India, I just bought the full version of talking tom for my kid 🙂 through android market via google check out

      1. Abhishek

        Hi Sandeep,I was referring to the Google Checkout for merchants. You can not sell android application if you are a developer based in India as you can not register as a merchant in Google Checkout as of now.

        1. Sandeep

          oops thanks, but people in India like me are willing to buy 🙂 I hope google allows that soon enough for the Indian developers based in India

  42. Raul Moreno

    Do you own any shares in google? If most phones are running android, and not iOS, What impact should this have to the google stock price?

    1. fredwilson

      no i don’t own $googi bought some in the 2008 crash but sold in mid 2009

  43. ShanaC

    i think you’re model will be the long term model (a plug and play computer to screens/keyboards/whathaveyou and a mobile touch device the rest of the time) but I think we’re a while from there