Is User Apathy About Smartphones Becoming Apparent?

I've written before that I had my doubts about the supposed conversion of the world's mobile population to smartphones. And in particular, that many supposed "smartphone shipment" graphs include the use of locked-down smartphone OS's in places like Japan, and smartphones bought just because the user liked the looks of a device, rather than caring about the software.

(Note to US readers: many people buy smartphones in Europe because they're Nokias (NOK) or high-end SonyEricssons (SNE) and have nice design / camera / music functions - but neither know nor care that they're "smart". Many Nokia N95 owners would rather eat their own shoes than look for and downloads apps to their phone). Michael Mace's coruscating post about Nokia's weird attempts to stimulate interest in downloadable apps for handsets in the US is right on the money).

So there's only a small proportion of mobile enthusiasts/geeks who actually WANT smartphones because of applications. Obviously there are people who want (or are given) a particular capability for business use (step forward BlackBerry and some Windows devices), or who buy Apple (AAPL) iPhones because, well, they're iPhones.

So against that backdrop it's interesting to scrutinise Symbian's sales, which look pretty lacklustre to me. Its latest results press release talks up its cumulative 200m deployments, but that hides a less pretty picture looking at shipments:

Q108 - 18.5m

Q407 - 22.4m

Q307 - 20.4m

Q207 - 18.7m

Q107 - 15.9m

Q406 - 14.6m

In other words, sales are down not just seasonally since Xmas, but are even below the level of mid-2007. Against continued shipment growth of the overall market to above 1.1bn phones a year, that's not looking too promising for some observers' expectations of 30% penetration of smartphones in a few years' time.

My personal expectation is that a ceiling of 15%-ish is probably more realistic, with some grey-area definitional fuzziness around what exactly constitutes a smartphone - for example, if it's got a Linux kernel buried down in the guts of the device.

What's behind the fall? I suspect a number of factors. The Wow factor of the iPhone is one. The shift by European operators to 18 month contracts is almost certainly another. I'm not sure on shifts in the mix of OS's in DoCoMo's sales recently. But the main answer has to be that Nokia doesn't seem to be pushing the open OS harder down into the mid-tier. Put simply, customers would rather have that extra $4 of software spent instead on a better camera, or more memory.

Comments

[King Solomon]

I believe the British also ridiculed Columbus back in the day as He also sailed west towards uncharted waters.

[nightmage80]

I think the price point is the biggest problem. You can get a family plan with 4 phones for around $80 or you can have one phone with the internet on it for about $100 per month or about $350 per month for a family of 4. Do you really want to spend that much money on a phone? When these costs drop, interest will grow in smart phones.

[Werlingdervish]

Ditto User 1968424 This is exactly the price increase I experienced with an iPhone for my family of four and the monthly service increase is the real negative that I feel compelled to warn others of.

[Jon T]

The major problem they have is the Symbian OS. It just isn't the future.

[User 196886]

Are you serious, Dean? Don't you know quarter-to-quarter comparisons are the only relevant measure of growth? Even if your numbers are right (what do we consider a "smartphone?"... we only have two time relevant comparisons here: Q4 '06 to Q4 '07 and Q1 '07 to Q1 '08. Accordingly, these numbers show 53.4% growth and 16.4% growth. I would not call this "sales being down." Horrible article, in my opinion, and incredibly misleading.

[mikefarr]

Have you actually used those phones? Apple comes out with the first phone whose browser is actually usable and immediately their small percent of the market had over 50% of the web accesses in the first months. More people surfed the web from a slow iPhone than from Sun Microsystem computers. Looking at how people use phones with a terrible, confusing, difficult user experience is not a good predictor of how they will Apple phones.

[aardivark]

You nailed it right on the head, people who own Nokias and SonyEricssons aren't interested in the 'smart' capabilities of their 'smartphones'. --Because they are excruciatingly painful to use! On the other hand iPhone owners, over other smartphone owners, are disproportionately accessing the internet. Most of them weren't doing that until they got the iPhone. It's the convenience baby, most people think they can do without mobile internet until they get an iPhone then they're hooked.

[cvlr]

I think Smartphone sales on the whole must be growing fast. Looking only at Symbian is the assumption limiting the article. What have the sales of Samsung's Blackjack I & II smartphones done in this timeframe? I think their combination of function and price has accelerated smartphone adoption in the US, though they have displaced quite a few Treos. Much better than the 2 Treo's I carried for several years.

[samij]

maybe you should familiarize yourself with the concept of seasonality of sales :)

well you mentioned "the Wow factor of the iPhone" as a reason for "apathy about smartphones" so let's take a closer look:

quarter iphone sales symbian sales growth from year before
4q07 2,139m 7,8m units
1q08 1,703m 2,6m units

it's apathy when symbian sales growth alone is 2-3 times that of the "wow factor" phone sales, and the symbian phones are sold 10x more than iphones? hmmm, yeah right...

[dithers]

Good talking points in this article.
I agree that most dont give a damn about downloading apps - but then apps on the Nokia N95, for example, are like going to the dentist.
Smartphones will drop in price, and eventually, most phones will be loaded with features.
So most phones will be smartphones, and most people will have them, by default.
Thats my 0.10c.

[PK de C'ville]

Dean,

"...who buy Apple (AAPL) iPhones because, well, they're iPhones..."

If you're suggesting that they buy the fad or the glitz, think harder, my friend. The iPhone actually is the world's 1st and only enjoyable, powerful, reliable, mobile/pocket computer. It will be the platform of choice for mobile apps, soon to number in the thousands.

The iPhone is not a fad, it's an unassailable engineering and marketing marvel.

You're pretty close about the 'smartphone apathy' ; how about 'smartphone disgust'? Of course, the iPhone is often described with words like 'lovely', 'great', 'I want one.', 'can't wait'...

Your assignment: compare and contrast!

That would hit the nail on the head.

[Texrat]

There are some fundamental flaws in both the article and the fanboy responses, but I'll be kind and just point out a few:

-The assessment of smartphone desire ignores the reality of paradigm shifts and demographic differences. Claiming that US users don't want to download applications is overly broad and ignorant. People tend to not want what they don't know. Education works wonders, and THAT is Nokia's real challenge here. Remember, at one point the average consumer didn't *need* a cell phoen at all. Wasn't that long ago, either. Things change. Companies drive that. That makes dithers' comment above on target (although I question the difficulty of installing apps on the N95).

-The OS does not alone make or break a smartphone. Linux is just as capable as supporting smartphone functionality as any other OS-- even more so in some cases.

-Given its functionality, many consider the iPhone to be a smartphone, and many market measurements are placing it in that category for comparisons. Treating it as alien to smartphones is disingenuous. Some people are confusing novelty with overall functionality.

-The iPhone is not the Holy Grail.

-I own a Nokia smartphone. It is very easy too use.

-Symbian sales are down, in large part, to guess what: a downward economy. I realize that comes as a shock to the ivory tower theorists who still insist the months-long recession isn't here yet, but those of us paying attention for the last 2 years have a clue.

[Yourope]

Unfortunately iPhone isn't that good, only the hype is.

alatest.co.uk/cellular...

[DeanB]

Most of the discussion on my post is on my blog rather than Seeking Alpha.
disruptivewireless.blo...

Various comments here are misrepresenting my argument. In particular, I'd argue that US users are *more* likely to download apps to smartphones because they tend to "deliberately&quo... buy smartphones in the first place & have a heritage of using PDAs. Conversely, European tend to get smartphones because they want a Nokia with a 5MP camera, and it comes with an OS by default.

Assorted comments have inferred all sorts of rubbish about my views on iPhones, none of which is supported in the text or indeed my opinion. The post isn't about Apple. For what it's worth I quite like the iPhone (it's much better than I'd expected), bought my father one as an Xmas present, and might get a 3G one myself when available. I don't think it's a fad, but neither do I see it having a huge impact in the global scheme of 3 billion mobile users. It's a bit like the original PDAs - fantastic gadgets for *people who care about that sort of thing and have the money to spend on them*

Data pricing is an issue everywhere, although cheap flatrate is becoming more common. Sub-$10 per month for a decent amount of data per month (perhaps 50-100MB) is pretty typical, although I know the US can be more expensive, and roaming is horrible.

Although many people assert that "everyone" will want access to the Internet on mobile devices, at present that is just an assertion. I think the demand, economic feasibility, and practical constraints (eg enough spectrum/cellsites) is lower than many evangelists would hope for.

As for adding extra *applications* to a mobile device, that's purely a specialist sport, and likely to stay that way. Most "Normal people" don't want to download apps to phones, even iPhones. (This is a flaw in Google's Android worldview too). Browsers and Web 2.0 and AJAX helps a bit, but still won't get close to ubiquity.