a16z Podcast - a16z Podcast: Enough with the Old Stuff -- Time for New Questions in Mobile

Episode Date: December 17, 2014

It's been a long and (at times) interesting battle pitching iOS vs. Android. It's time to let it go, says a16z's Benedict Evans. It's time to move on to a new set of questions -- and ideas -- in mobile. The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Welcome to the A16Z podcast. I'm Michael Copeland, and I am here with my main man in Mobile, Benedict Evans. Can I say that out loud? You can say anything you want. Benedict, welcome. You did an interesting blog post recently about how, at a high level, like all the questions we've been asking and trying to answer over the last five to seven years aren't the questions you want to ask or answer anymore. So give us a little bit of an overview of why you want a new set of questions for mobile.

Well, I think, so there's two parts to this, is the old questions and the new question. And the old questions are things like what's going to happen to BlackBerry, what's going to happen to Windows phone, what's going to happen to Nokia. What is going to happen to BlackBerry? Well, I don't care anymore. You know, it's an interesting question for BlackBree shareholders, but they're not really relevant as part of the market. Right. But the point is all those kind of platform all questions are done. And we now know that Apple is selling the top 10% of all the phones on us, and that's growing steadily.

And Android takes the next 50% of all the phones sold on. on earth, and that's growing slightly faster. Top 10% by price? Of volume. Of volume. Of all the actual phones. And yet we also know that because Apple is, for a bunch of reasons, including the price and the operating dynamics of their business, they have a very large proportion of

the customers that any developer or publisher actually wants. And so they had 80% of all the e-commerce revenue on the Black Friday spending festival in the US and about half of global web browsing, depending on which numbers you believe. And it could be a third, could be two-thirds, depending. but, you know, they have a far disproportionately large share of actual usage and value compared to the number of units they have. And so Apple's position seems to be fairly stable. Developers aren't going anywhere.

Users aren't going anywhere. And Google's position is also very stable that they've kind of got. So they both won and they both got what they wanted. And we've discussed all of this to death over the last year, two years, three years. And actually, we kind of know what the answers are, and that's not really very interesting anymore. And actually there's a whole bunch of newer questions about what's going to happen next that are actually more interesting and more fruitful to discuss. And so I kind of broke these down in a kind of

of a sequence. And I think when we can kind of pick them apart one after another, the first one is what happens to Android OEMs, Android handset manufacturers, where that situation is now very unstable. And the second question that follows on from that is what is Android itself going to be? Both, what are those OEMs going to do? Is open Android going to be meaningful outside of China and what's Google going to do with Android? And that in turn flows into, well, what is the interaction model going to look like because clearly that changes if the operating system changes. And then you have kind of other questions like, well, what are Facebook and Amazon going to try and do? What's going to happen with wearables and what changes fundamentally

as a result of the scale of the whole industry? And so all of those things are kind of areas in which major things can change in the experience and the dynamics of mobile, whereas arguing about, you know, Windows phone or iOS versus Android is just kind of pointless really. So, and so you expect major changes, but again, not in the sort of way that we've become accustomed to seeing them. So, I mean, if we go through those sort of one at a time, you know, there's been a question for two or three years as to what was going to happen with Samsung,

which had taken half of the Android market by volume and almost all the profits, and yet hadn't really produced kind of clearly differentiated products and hadn't managed to produce any kind of ecosystem value on top of that. Right. And we've now seen in the last three or four quarters that Samsung's revenue was starting to sag quite badly, and particularly that their sales of high-end handsets are sagging very fast.

And there being, the problem, that they face is not so much resurgence of the companies we've all heard of, but just a kind of a flood of smaller companies that are riding on the whole Shenzhen ecosystem and using the whole Shenzhen ecosystem for scale. And so the question is, well, what comes next? Do Xiaomi go manage to go global? Do other Chinese voters manage to go global? Is it local players? Do we get new players emerging? Is there a new global player that's going to emerge? Is anyone going to be able to take on Android at the high end? All of those things just kind of turn over and over because, you know, we don't know what the vendor landscape's going to look like. It's sort of

like we're having the same, the PC industry, but compressed into five years instead of 20 years. All the same sorts of issues are coming up. Has Samsung's experience sort of taught the Chinese, you know, manufacturer or something? I mean, it seems like is the Android business not a great one to be in? Well, Android business of itself is a bad business unless you embrace being a commodity box shifter. And there's a business to be had there. It's not a great business, but there is a business to be had there. I think you see two or three things are different from the Chinese vendors. One of them is simply that they're

managing, they're trying to glow international now, which they've never really done before. The second is that they are embracing design and brand and marketing in a way that the Korean manufacturers have always struggled to do. And so there are three or four Chinese manufacturers who are producing handsets that are much more of a level of what HGC or Nokia were doing in terms of design

and the kind of the skin on the interface rather than anything that Samsung or LG is producing. kind of interesting that they will kind of brand themselves and design. And so were we start to see these in the market? Well, we're starting to, yes, um, shami is starting to think, but it's starting to go international, but only to middle income markets, only to India and Brazil and places like that, not to develop markets. Much harder for them to come to the USA. Um, but I think the deeper point is it's not so much the individual people who are doing this. It's the broader thing was, the old question was

always, how do you compete with Samsung scale? And the answer is, well, maybe you don't need Samsung's scale, maybe you can use the scale of the whole Shenzhen manufacturing ecosystem, and that's kind of enough, at least up to a point, you know, you reach a certain point that you kind of have to have global sales and distribution and so on. But, you know, if you're doing five or 10 million units a quarter, maybe you don't need to have what Samsung's built and what Nokia built before that. I mean, there's a, that kind of leads on to the next question, which is, well, you know, if you're not a shareholder in one of these companies, why does it matter who it is at selling Android phones, particularly if they're all a commodity anyway? And the

answer is that it kind of bears on what it is that Android becomes. because on one hand you have Xiaomi trying to build oh let me put that differently Xiaomi is the first Android manufacturer that has kind of successfully built a differentiated software experience on top of Android obviously all in

obviously all the manufacturers have sort of tried and not come up with anything that anyone particularly liked in China you have this kind of no fly zone because Google services are absent and so everyone has to do their own thing anyway and Xiaomi has managed to produce kind of a combination of what you'd get from Google

and what you'd get for Apple if you were spending three times as much and produce like a kind of a nice user interface and experience on top of that and they're now trying to take that global. Now when they go outside China, they use Google services. But the big question is, given A, no one's making much money from Android anyway, B, it's very hard to differentiate within the constraints that Google sets on you if you use Google's version of Android, closed Android in effect. do you start seeing more people trying to deploy open Android

that is to say Android without Google's constraints where they're trying to build their own set of services on top of that you've seen Amazon try that and fail mostly certainly fail in phones but there's sufficiently many kind of weirdnesses about the Kindle fire phone that it's probably not a kind of a good test case overall And so it's not out of the realm of possibility that HDC or LG or some of these other manufacturers are forced to do it?

Well, the problem for them is that Google's contract says you're not allowed to sell a forked, an uncompatible, an open version of Android. Or if you do, you can't sell a single phone that has Google services on it. So you can't experiment. But again, this is to my point, that you may start seeing new companies emerge.

You've got nothing to lose. And it may try and kind of create a really clearly differentiated offer on the back of that. Now, there's a whole bunch of, you can then go off and, you know, spend an hour talking about the dynamics of Android and why this is hard and which Google services are crucial and which are not very briefly. It seems like the Maps and the App Store are crucial. None of the other services matter very much.

So then the question is, okay, are we completely sure it's impossible to compete with Google Maps? And where is it impossible to compete with Google Maps? What becomes of Nokia here? For example, does that become a viable alternative? How many people care enough about Maps that the gap is actually meaningful? particularly at lower price points and does that become an angle for someone to go and carve

5 or 10% out of the German market with 100 euro phone that runs Android apps but doesn't use the Google App Store and what app store would they use would it be the Amazon App Store so there's this sort of maybe point in this narrative here

which of course our portfolio company Sinogen could be a participant in because it could provide a platform to do that and then so the thing that flows out of that whole set of questions and again you know each of these could be an hour long conversation in their own right but then the thing that flows out of that question is okay well what do we mean when we say android um you know the reason that android exists is because google realized that smartphones were not a neutral transparent platform the way web browser was

right and that the platform owner could do stuff and that they could block google and so this shows how long ago this was google were actually afraid of Microsoft rather than afraid of Apple and so they created this mobile phone platform and it's been enormously successful for Google vast story of wealth for the entire manufacturing industry but yes that's the earlier conversation

but by the same token if other people start being able to use and being able to succeed in what Amazon tried to do then you start changing the interaction model you start saying okay it's not it's not a three by four good of icons anymore what other services are integrated how are those services integrated

and what are the means by which you access services? What happens to web pages? What happens to apps? What partnerships? Do you start having more of like an on-deck conversation? Like which decks do we need to be on? Which OEMs do we need to do pre-load deals with? Do pre-load deals start becoming meaningful again?

And the thing that I think sits underneath all of that is the question that's not entirely clear what Google wants to do with Android in the next five years. It is entirely possible, for example, that we could be sitting here using Chrome-based phones in which Android is a sort of legacy runtime. But Google clearly wants to blur the difference between web pages and apps.

So Chrome meaning web-based? Yes. Back to the web. Yeah, exactly. With Chrome apps that are delivered over the web. And of course, from Google's point of view, you get kind of a weird set of dynamics here because at one level within Google,

they want everything to be the web because everything is indexable and iniquable. And that's, you know, what they do. They can see everything. They can link to everything. They know what everything is. They know how everything works. And if stuff is inside an app, yes, you can sort of deep link to it,

but you don't get anything like the richness of knowledge that they get from looking the web. And so they'd like everything to be the web. On the other hand, the way that they retain control over the Android OEMs is with their API layer, which is all about what happens on the handset. And so if you go to a handset where everything's happening inside web views and all the APIs are happening on as API calls on the web and payments and all that stuff is done through a set of neutral kind of APIs

and what have you, then it doesn't matter if you don't, then the value of Google Play Services is the value of GMS evaporates. Right. But you... And so then at that point, you know, you kind of wind back and you say, well, then there's no difference between an iPhone and Android phone because you can access all the apps that you could get on Android.

You can get inside Safari on an iPhone. So you get these kind of weird sort of shifting layers upon layers upon layers. I mean, the joke that I used in the and then, and so that, and that's just kind of Android. But you've described the world that we were in already as this post, you know, Netscape, post-page rank world. Exactly, but it's, it's both,

it's post-Netscape, but it's also not, we haven't stopped yet. So for 20 years we had this, you know, there's this period in the mid-90s where it was like, is it gopher, is it point cast, is it push, is it this or it's that? And the answer was no, it's a web browser. And for 20 years, we had this monoculture of, sorry Mark, we had this monoculture of the web browser, and the mouse and the keyboard, and that was the internet experience.

And yes, you had email and Skype and Spotify and a few things around the side. But basically the internet experience was a web browser in a kind of rectangular box on your monitor. And obviously with smartphones, we don't have that anymore. So we're post-net escape or perhaps pre-netcape. And variably as a consequence of that, the page-rank model broke down as well. But my point is there was this period of kind of swirling uncertainty from like in the mid-90s and then it settled on the browser. We're in a period of swirling uncertainty now.

It's not clear that it's going to settle because you have, you know, you have a degree of sophistication in the smartphone operating system that you didn't have in the desktop operating system in quite the same way and the dynamics are very different because you have both Apple and Google kind of pushing very hard

to differentiate on the stuff that happens. So back to the sort of point about for Google you've got this kind of weird concerns to conflict because on the one hand you want everything to be on the web on the other hand you want to control Android with these APIs and you want to kind of push services down on the one hand you're kind of pushing services

out of the web onto the handset but on the other hand you want stuff to be out of the handset onto the web, depending on which tier within Google you're thinking about. And then you have this other strand going on, which is a kind of a broader, a non-Android point, which is that you have both, you have all these layers of aggregation. And so you said, okay, is your service hard to find in the app store? Is it hard to find on the web in Google? Is it hard to find inside Twitter or Facebook?

It's kind of which aggregation system are you buried in? Right, and all those are different aggregations. Yeah, and then when you go to, you know, when you go to China, then you have WeChat and ByDMAPs and all sorts of other things, which you're providing again, these new kind of sites of aggregation and discovery and agglomeration and everything else. And so you get this kind of weird cycle where you unbundle websites out of the web browser into these multiple apps, but these apps themselves are also bundles

because, you know, there's just a whole stack of web pages zone, you can't get to individual ones. And then you have Facebook or you have deep link. or you have messaging, which I'll come back to in to a moment, and then you unbundle stuff out, back out of those web pages, and you bundle the back into Facebook or Facebook Messenger or Twitter. And then you have all these notifications flooding out of all 45 different apps on your phone. So then you've got a stream of notifications in the notification panel,

and on both iPhone and Android, that's kind of a broken experience just because there's too much stuff in it. So it's like, well, how many different ways can we cycle between aggregated, not aggregated, bundled, unbundled, messaging, pages, apps, and back again, all in one cycle. I mean, the line I used to be on my bogpost as a quote from a sort of a PG-Woodhouse novel where someone says that when he catches up with somebody, he's going to shake him to the frosts and then pull him inside out and make him swallow himself.

And you feel like, you know, what's happening now is apps are kind of being pulled inside out and then swallowing themselves and then being pulled inside out again. And I think messaging is an important kind of part of that because when you look at the sort of the shift to actionable notifications, you know, with message buttons and payloads and so on inside the notification, so you don't even have to open the app. and then you look at watches where a large part of the watch use case is in whether explicitly or implicitly it's displaying notifications and messages or it's just displaying, you know, very, very small pieces of information

with a yes or no button even if it's not explicitly presented as a message. You get this kind of unbundling characteristic and then, of course, to the extent that watches take off, that drives back onto the smartphone interaction model. All of which is to say, I mean, this is, again, there's this line from this is a thing called Zawinsky's law that says every program attempts to expand. until it can read email and you're kind of you're kind of getting that now on smartphones which is like every every website attempts to expand until you can turn but get people to install an app and then every app attempts to expand until you can send notifications and then every notification expands until

it becomes an app and then every nap and then you need Gmail for your notifications or you need like a news feed aggregator for your notifications so we've got this kind of spinning or like a walk like a watching cycle right everything goes around and around and round and as I said um wearables feed into that because they impose this new kind of discipline on what some of your interaction with those things might be. And are wearables in the way that they unbundle things sort of, I don't know, a chink in the hegemity of Apple and Android? I mean, do you see... I don't know about that. I just think that they just add this other layer of complication. What they also, I think, of course, do is reinforce an app model as opposed to a web model, incidentally. I mean, wearables,

I mean, I wrote, again, I wrote a long blog post about the Apple Watch. I think I have two kind of tools, two lenses through which to look at watches in particular. And one of them is to think of when I saw the first iPad, the thing about the iPod was, if you wanted a very slim, easy-to-use 10-inch tablet to carry everywhere with you, it was clear that this was the right one, and all the ones that had come before were not nearly as good. But it also wasn't clear whether you wanted such a thing at all. and the Apple Watch is kind of the same thing that if you want to carry a little colour screen on your phone

which you can do certain computery things with on your wrist that you can do certain computery things with the Apple Watch is the one and you know there'll be others you know maybe the next Motorola 360 will be a bit better and you know it won't be the only one but you know we kind of got to the point that the things are there if you want them

but the question is well why do you want them you know they're small enough and the battery lasts all day but okay fine but do you actually want to do something with that and then the other lens that occurred to me was to think back to the original mobile phone Because if we'd all been sitting here in 1995 saying, do any of us need a mobile phone, we'd all have said no, because we've already got telephones. We've got a telephone on your desk and you've got one at home and there are these pay phones everywhere. So why would you need a mobile phone?

And most people actually genuinely felt they were never in a mobile phone. I mean, I remember, you know, like mid-early 90s, why would I ever need? I'm never going to have a mobile phone. And so again, you know, you look at watches and it's quite hard to work out whether they end up like kind of like a segue or a Google Glass as this kind of blind alley or whether this is. is kind of a new category in the way that tablets or mobile phones themselves became. Then there's kind of another strand within this that again kind of flows out of this interaction model question. And also I think flows out of the thing that I said earlier that for Google, you know,

let me phrase this slightly differently. Facebook and Amazon's motivation on mobile is very similar to Google's motivation, which is that the web browser was this neutral transparent platform. And, you know, having a web, Facebook making a web browser or Amazon making a web browser there would be a kind of pointless thing to do. And frankly, Chrome on the desktop wasn't, you know, terribly valuable of itself. It's when you're signed in on every device

and you have Chrome on mobile and you have Google Now and everything else. That's when the browser became important. But even then, you know, I don't think Facebook care what browser you look at them in. I mean, it doesn't make any difference to them if you look at them in Chrome. Whereas on the smartphone,

the smartphone is not this neutral transparent platform you can have now and you've got native search and you've got widgets and all sorts of other things that change how you might buy things. And that's a problem, and change how you might share things. And that's obviously a problem for Facebook because the smartphone is a social platform in the way that the web browser wasn't. And so it's the thing that's emerged in the last sort of 18 months to two years with this explosion of messaging apps and WhatsApp in particular, the, you know, on the desktop, once you've added all your friends, you don't want to do that again on another site. You don't want to upload your photos again on another site. You don't want to keep checking multiple sites. On a smartphone, every app has your address book, it has your photos, it knows your location, it does push notifications. And so it's very easy to, use lots and lots of different apps and switch between them. And this is why Facebook has gone from being the only social network on desktop to being only

one of many social networks on mobile. And Amazon has a slightly less immediate problem. But again, if the mobile phone becomes his buying device and it's using the camera and location and everything else, it's much easier and, you know, most obviously something like Apple Pay. You know, one of the key reasons to buy something on Amazon, particularly on mobile, is it's already set up with your account. So you don't need to enter a credit card in. Well, if you've got Apple Pay, then you don't need that, all of that aggregation goes away.

You load the app, you push your finger on the fingerprint scanner, and the app gets your credit card, although it doesn't get a credit card, it just gets your payment details and your address anyway. And so for both Facebook and Amazon, they have the same problem that Google had that, you know, okay, where do we sit in this? Because we've been kind of,

we've been shunted off to one icon, which is the board browser icon, or if we're lucky, the Facebook icon, the Amazon icon. How do we move further down the stack? How do we move to that primary aggregation there? So that's my question. I mean, Google's response clearly was Android. Yeah, well, that was the first response, and then there's other responses afterwards.

Right, and Amazon's response have been the sort of, you know... Well, Amazon and Facebook have had these more or less completely unsuccessful responses at that level. That's to say, obviously, the Facebook app and Messenger and so on are all hugely successful, but those are all, and the Amazon app is very successful, but those are icons. Yes. What they haven't been able to do is move one level down the stack into the aggregation and the discovery layer of the phone itself. So, you know, if I... And so my question is that necessary kind of as we shift into this next phase?

It's a fundamental strategic requirement. So, you know, if I pull down on my iPhone screen and start typing, Apple decides what gets suggested to me. Apple decides that it will show me restaurants and iTunes albums and appointments and so on, as well as my appointments and my emails and so on. Right. It doesn't, there's no IPA. It doesn't decide whether it's going to let Amazon do that. Now, in the future, it may, of course. So all of this stuff is kind of changing.

But again, Google sticks a Google search bar on the home screen of an Android device. And so if you want to find out about something, you. you're, how can I put it? You open a web browser, and then you decide whether you're going to go to Google or Amazon. But on a phone, you're in Google to start with. Right. And then on an iPhone, again, you know, Apple has these sort of different kind of shifting motivations, obviously. But Apple is less of a competitor to both Facebook and Amazon than Google is.

So we've seen Amazon sort of bald-faced, you know, intention. Yeah. So we had, well, we have both. So we had, there was very briefly there was a Facebook phone in sort of pre-smartphone days, almost. We had Facebook home, which failed, obviously, and that was kind of an attempt for them to move up the stack, or rather move down the stack. And we've had the Kindle Fire phone, which has also been a failure for a bunch of reasons. But I'm not sure either of those are kind of definitive at all. And again, this kind of comes back to the conversation earlier about,

well, you know, what is the future for a forked Android? What is the future for open Android? Does open Android start working outside China and how can Amazon make its app store work? You know, And Facebook start making layers that can, what partnerships would Facebook do with a new handset vendor? What would that look like? What would the experience be on those devices? Would those be more appealing? Who might buy them?

What happens if somebody starts selling an Android phone that comes with Facebook home or some new kind of experience kind of combined? And I suppose the thing for all of these is one can have a half-hour conversation or an hour conversation or two-hour conversation about the barriers to changing Android and creating, getting open Android to work outside China.

One can have a one or two hour conversation about apps and web and notifications and messaging. The point is, these are the questions. The questions is, well, who are the Android vendors going to be? And why? And what's going to happen? Is open Android going to work or not? What is Google going to do with Android?

Where is this kind of shifting barrier between apps and the web and notifications and messaging and sort of interaction models and aggregation at different levels of the stack? Where is that going to settle? Because I don't know what's, the answer is yet. Whereas in 2000, you know, the answer was, well, it's the web for the next 10 years

or the next five years. We're not at that stage now where we know how any of that's going to work. And then there's one, sorry. At the same time, though, where we all began, this is, you know, both Google and Apple won. Does the next sort of phase mean that that sort of victory is not necessarily, you know, a foregone conclusion? Well, victory is always contingent in this, in this space. I mean, I think the, how can I put it? someone kind of complained at me that I was always talking about, you know, problems that Google face and I'm biased against Google. I'm writing anti-Google blog post, which is kind of, on one level it's kind of silly. But there's a point in here, which is that the sort of the existential question for Apple is, can you carry on selling $600 phones? How many more of them can you sell? Does the market for $600 phones kind of go away? Right. But questions of, you know, you can't argue about Apple's control of iOS. They control it. and kind of internal product questions like do extensions work well yes or no are not really kind of structurally important they're just kind of product questions

and the same when you then turn to android then the question is well okay what is android even going to be in five years time is google going to control it or not is going to is google is google going to turn it upside down and make it a chrome product yes or no is shami going to become significant is amazon going to succeed in breaking into making an open android a viable product in the USA those are important questions And they are not, the answers to those are not settled yet. And so another way of saying this is kind of, you know, the question of what Android is kind of matters to the future of mobile.

The question of what iOS is doesn't matter in quite the same way. It's more like that's kind of a vendor question. And so when you pull that sort of stuff together, as I said, you get this kind of chronic uncertainty. I think the deeper point there is, I mean, you can, then there's a sort of a longer term thing, which is, well, you know, how does Oculus changes, how do wearable, do wearables kind of pull the small smartphone business inside out

does something like magically which we're an investor in change its dynamic as well you could kind of apply a kind of an a priori observation that you know ecosystem dynamics and once say once people have won the next stage has to be some fundamental transition it has to be like a new interface technology or something and so for example people trying to do new smartphone operating systems now

remind me quite a lot of B or Next, that is to say, yeah, I've got a B CD somewhere. It was a great product. It was not actually going to work. And next, again, in hindsight, that was just not going to work. It was just the wrong time to try and do a new PC platform. And, you know, it was just sort of luck, obviously, that Apple ended up kind of needing next.

And so, but that, you know, that wasn't the game plan. The game plan was not yet bought by Apple. The game plan was create a new platform. And it was too late. And I think the same thing applies to Firefox OS or Jolla or. or I've even forgotten what the Samsung one is even called. Tyson. Tyson, exactly.

It's not going to work. That's not where the change comes from. The change may cut the change either comes from what does Android even mean. Or it may come from some fundamental shifting the interaction technology. Either new hardware, which is, you know, what multi-touch did for the iPhone, potentially some sort of fundamental long-term shift away from apps to web, which would change the way the operating system and dynamics works. I think that's a bit less likely.

but other than that we're kind of we're set it's just we don't know what the victory's going to look like I mean there's a sort of famous kind of historical quote historians quote that you know history teaches there's nothing except that something is going to happen and I'm kind of again I'm sort of exasperated by people who think that looking at Windows versus Mac tells you something about this because both the iPhone business is in a fundamentally different position in the industry to where the Mac court position was but also Android is in a fundamentally different position to wear Windows was as well and try to compare these things it just doesn't it really doesn't tell you anything very useful. Well, one thing that's going to happen, and this is one of the points that you've made in several different ways, is that scale is going to be an engine of this change. And describe that for us. Yeah. So back in 95, there were about 250 million PCs on Earth. And Apple had probably low double-digit number. I don't actually know what the number was, but they've got 80 million

max now. So they didn't have very many Macs back then. And But there were 250 million PCs on Earth in total. So this is basically before the internet took off. Now there are about 1.6 billion PCs and 80 million max and probably the same again number of Linux. So 1.6 billion includes max. And there's 2 billion smartphones, 2 billion iOS and Android phones, and of which about probably 400, 400 or iPhones.

And we'll go to 4 billion. There's about 3.5 to 4 billion people on Earth today who have a mobile phone. There's a lot more SIM cards. but there's three and a half to four billion people on us today who have a mobile phone and that will grow to about four and a half of which about four will get smartphones maybe a bit more bit less and the variable there is who has an affordable data plan rather than and who has a lot of kind of gray areas around the edges that you've got a smartphone but you don't

have a data connection or something so there'll be four billion smartphones and that encompasses everything from people in america buying an eight hundred dollar phone every year to um farmers in Burma, who built their house themselves out of reeds and mud, who have a third-hand $50 Android phone from China with no name on it that's running a three-year-old version of the operating system, and they never connect to cellular data, but they go to Wi-Fi once a week when they go into town. And, you know, those will all be smartphone customers, which is, among other things, points to the fallacy of looking at unit market share on a global basis and thinking this tells you something about, you know, what you should be

developing for. You have to think about, well, who are these people? But so, yes, so you get we get as it might be four billion smartphones on earth but then you have to multiply those because they are mobile they're not stuck in an office or in a room somewhere and they're personal they're not shared with your family or your colleagues or something and they have all of these sensors on them and they have built in payment and they have a camera and location and they're an order of magnitude easier to use and fundamentally they're in your pocket all the time and so the actual opportunity isn't just that there's two or three or four times more devices it's more like a kind of a 10 times increasing the opportunity set.

And that's one of the reasons that everyone in Silicon Valley is so excited or over-excited about mobile sometimes because you think, well, hang on a second, we're going to a much, much bigger group of people. One of the things that I think is I always kind of, I keep kind of pushing away new analogies and new ways of explaining this is that we're connecting everybody for the first time and it's hard quite to express what you mean when you say everybody you know one of the charts in the presentation that i've been giving is shows a number of people who are not connected and so we all see these charts that go up and to the right but the problem with those charts is they

don't really show you what the top is um what's actually happening is that there are five billion adults on earth and four to four and a half billion of them will be online and basically the only people who are not online are the people who are not economic actively active or who are basically being shot at, you know, people who are really, really at the margins of society. But even, you know, even in Kenya or South Africa or Myanmar or, you know, impoverished parts of India or Indonesia and so on, huge numbers of people have mobile phones. Even sub-Saharan Africa, 70% of the population is under cellular coverage and most of that

will get 3G in the next five years and 40% of the population of sub-Saharan Africa has a cellular phone today. So there was this whole argument I mean I kind of Again people kind of criticise me For being a kind of Silicon Valley Utopian visionary which I know The GPs here would find hysterically funny

Because I'm generally the guy in the room He says this is all This is never going to work But outside the valley I count for kind of a utopian visionary Because I say things like Well everyone's going to have one of these things But what people almost don't realize

Is we actually the mobile industry Had that argument 10 years ago You know 10 years ago people were saying Well you know nobody in India is ever going to get a phone Or you know only like 1% of the population will get a phone. No one in Kenya is ever going to have a mobile phone. You know, there'll be five people in Nairobi have a mobile phone and that will be it.

And it turns out, no, no, no, no, everybody is going to have one of these things. And actually, the poorer you get, the more valuable they are. If you are a, you know, a man, if you're a brick player in a third-tier Indian city, your $10 Nokia has doubled your income because you find out where the jobs are. Right. You know where the work is. You know where the work is. Or if you're a fisherman, you're a farm or anything else.

And again, these sound like kind of silly utopian ideas. And, yeah, 10 years ago, people were claiming they were claiming they, They were. Well, we had that argument. They've all got phones now. And they all decided, actually, yeah, do you need to stop smoking cigarettes or, you know, buy less clothes or walk to work instead of taking the bus to get a phone? And that's now what's happening with smartphones and it's happening with the internet. And that, I think, is the sort of the scale driver that sits across all of this. We're just, the PC industry is so much smaller than the mobile industry ever was. And the PC internet is so much smaller than the mobile internet. What I'm fascinated by, and, you know, like you said, Apple and Google got what they want, but what we will start to see is all these things built on top of all that connectivity, all this scale, and things that, you know, may not be great businesses for Apple or Google or Amazon or Facebook, but they sure are going to be great businesses for somebody. I think that's right.

I mean, the other thing that strikes me when you look at that kind of global scale is that if you think back to the PC business, it was basically the USA and a couple of other developed markets. And so the PC market was the market. You made a piece of software and, yeah, maybe you had to open a sales office in London or Tokyo or something. But basically there was one market. And the dynamics were kind of the same and the market across all of them. And so the network effects and the ecosystem effects and sign were the same across everywhere. Today, if you ask Target or Chase Manhattan, are you going to stop doing an iPhone app because Apple has only 20% share of the smartphone market and Android has got 80%?

share, what you're actually saying is 45% of your users have got iPhones and probably two-thirds of the value of your users have got iPhones, but there's 500 million Android users in China. And they say, so what? And then turn that the other way around. If you're an entrepreneur in Jakarta or Mumbai, there's a very, very small number of very rich people in your country who have iPhones, but all the middle class have got backwards. And so you don't care at all what people are doing in San Francisco or Tokyo. And so you start

getting specific local ecosystems in much the same way that you get in any kind of mature global industry. It's almost like, what's the analogy I think? It's a little bit like retail. It's like a terrible analogy. But, you know, again, like if you're running a supermarket in Germany, you're not scared of Walmart. Right, right, right. You know, you don't care at all. Yeah. But what's about, I think Walmart actually have a business in Germany. If you're running a supermarket in, you know, in Brazil or in Indonesia or in whatever, you don't care very much about what Tesco is doing or what Best Buy is doing. You know, you might read about it and the economist, but, you know, other than that, you actually have your own market. And yes,

it's an imperfect analogy because an internet company can sort of theoretically can compete anywhere, but in practice, you actually can't really. Right. You've got to be local. And so part of the maturing of the tech industry is that you actually go from saying, well, you know, there's this many people using Facebook, there's this many people using iPhone. So that's what we go for. So no, no, no. What's your target market? Because your target market is not the global market share anymore. Your target market is people in Spain. Right. Right. It's going to be fascinating. And we will dig into these questions more at a future date. So Benedict, thank you so much. Thank you.