Founder LabsNYC EditionThe Mobile Ecosystem

May 21, 2011

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Lars Kamp

www.sfmobile.org

San Francisco, CA415.894.5423lars@sfmobile.org

Lars Kamp

Suite 1200560 Mission StreetSan Francisco, CA 94105415.894.5423lars.kamp@accenture.com

Work Network

Management Consulting

@l1rs

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Companies.

4

Today’s topics.

Mobile Economics

Silicon

Cloud

What’s Next?

History

5

A note on people’s ability to predict the future.

J. C. R. Licklider“Grandfather of the Internet”

”People tend to overestimate

what can be done in one year

and to underestimate what can

be done in five to ten years.”

J. C. R. Licklider, 1965

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History

7

We’re in NYC, but here’s a bit of Silicon Valley History:General Magic, Apple spin-off, 1990.

“We have a dream of improving the lives of many millions of people by means of small, intimate life support systems that people carry with them everywhere.

These systems will help people to organize their lives, to communicate with other people, and to access information of all kinds.

They will be simple to use, and come in a wide range of models to fit every budget, need, and taste. They will change the way people live and communicate.”

General Magic Mission Statement, May 1990

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General Magic’s “Magic Cap”.

“Magic Cap” User Interface, 1994

9

Three people from the team that architected Magic Cap.

Andy Rubin Tony Faddel Kevin Lynch

10

General Magic’s lasting influence on Android…

“Magic Cap” UI, 1994 G1 “HTC Dream” UI, 2008

Source: Wired, Accenture analysis.

11

Google is iterating Android at a breathtaking pace…

Oct 2008Android Market

announced.First device.

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

2005 2007 2008 2009 20112010

Sept 2003Android incorporated.

Android uses Google as default search engine.

Nov 2007OHA founded.

“Android” platform unveiled.

Apr 2009Android

SDK released

History of Android

D E FC GSept 2009Donutv1.6

Oct 2009Éclair v2.0

May 2010 FroYo v2.2

April 2009

Cupcakev1.5

Dec2010GiBrv2.3

… HMar2011HoCov3.0

…IH2

2011IC

v3.1

2012

Source: Google, Accenture analysis.

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… including one OEM and SemiCo at a time.

D

Sept 2009Donutv1.6

E

Oct 2009Éclair v2.0

F

May 2010 FroYo v2.2

C

April 2009

Cupcakev1.5

G

Dec2010GiBrv2.3

H

Mar2011HoCov3.0

HTCDream

SamsungBehold II

MotorolaDroid

HTCNexus One

SamsungNexus S

MotorolaXoom

Android Release

“Hero” Device

Chip

Qualcomm MSM7201A 528MHz

QualcommQSD8250998MHz

IntrinsityS5PC1101,000MHz

NVIDIATegra 2 2501,000MHz

TI OMAP3430600 MHz

Qualcomm MSM7201A 528MHz

Nov2011

IceCrmv3.1

I

?

Nexus3

?

Source: Accenture analysis.

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Economics

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Software-driven innovation.

” The problem is, in hardware you

can't build a computer that's twice as

good as anyone else's anymore. […]

But you can do it in software.”

Steve Jobs, 1994

Steve JobsApple Founder & CEO (on leave), in 1994 Rolling Stone interview

Source: Rolling Stone Magazine.

15

Mobile is the single biggest global distribution platform.

BroadbandSubscribers

PC Installed Base TV Households

Pay TVSubscribers

Mobile Subscribers

PC TV Mobile

20091.2 Billion

20131.6 Billion

2009420 Million

2013648 Million

20091.3 Billion

20131.33 Billion

2009600 Million

2013739 Million

20094.0 Billion

20135.5 Billion

Source: Gartner, PWC, ITU, IDC, Accenture analysis.

16

Evolution of “the stack”: Shift from hardware to software.

Chipsets,Processors, Basebands

Core Operating System

PhoneMiddleware

ApplicationMiddleware

Hardware

Platform / OS

Middleware

Shell & UIUser Interfaces, App Stores &

User Software

External Interfaces,

e.g. US

B, S

peaker, Flash C

ard

Hardware

CommsSoftware

Early days Today

Mobile Device Stack

1-2 MB of closed software

>1 GB of open software

Hardware Software

Source: Accenture analysis.

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Value in mobile has moved up the stack…

Services and Content

Chipsets, Processors, Radio Basebands

Core Operating System

DeviceMiddleware

ApplicationMiddleware

Screen, User Interfaces,User Software

Exte

rnal In

terfa

ces,

e.g

. US

B, S

peaker, F

lash

Card

Cost to build ($M)

Per-unit Revenue ($)

Break-even # of units

$0.1M $1.00 0.1M

$10M $0.10 100M

$2,000M $10.00 200M

Valu

e F

low

Hardware Software

Mobile Handset Stack & Elements

Source: Estimates based on industry interviews; see David Wheeler “Linux Kernel 2.6: It's Worth More!” for estimating the cost of the Linux Kernel.

DIRECTIONAL

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

Catalog Size – Apple App Store vs. Android Market2008-2011, by Number of Available Apps at End of Quarter

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

740 4,400 13,20025,300

52,61074,500

97,000

149,000

225,000

250,000

300,000

350,000

600 2,900 5,200 11,500 20,100 35,200

56,200

130,000

200,000

310,000

Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11

ESTIMATES

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

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10

App & Mobile Web Usage Growth over 2 Years, USAds Requested, April 2008 – March 2010

Ads

Req

uest

ed (

Mill

ions

) 55% of Growth

41% of Growth

RIM

Others incl. Palm & Windows

Source: AdMob, Accenture analysis.

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But: An app is not a business model.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 30 60 90 120 150 1800%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 30 60 90 120 150 1800%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 30 60 90 120 150 180Days After First Measurement

Ret

entio

n R

ate

News (9.1%)

Games (2.4%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 30 60 90 120 150 180

News (9.8%)Enter-tainment (2%)

Days After First Measurement

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

Retention Rates of Mobile Apps Over Time, 2010

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90% dead after 90 days.

52%

40%

34%

35%

33%

20%

9%

10%

9%

4%

58%

38%

34%

38%

42%

18%

5%

10%

7%

16%

iPhone App RetentionAs of January 2010, by Application Category

30 Days 90 Days

Android App RetentionAs of January 2010, by Application Category

News

Social Networking

Games

Lifestyle

Enter-tainment

30 Days 90 Days

39% 10% 42% 11%Average

Retention Rates

Source: Flurry, Accenture analysis.

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Enter analytics…

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… and push notifications.

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Emergence of solid mobile business models.

Location DiscountsInventory Transparency Reviews

Finds deals at local retailers of

national chains

Real time visibility into restaurant

“inventory”

Real-time discounts on local merchant offers

Compare local price with best

prices on the web

“Crowd-source” reviews before buying decision

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Groupon Merchants App – turning smartphones into a PoS.

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Opportunities of unparalled scale if you figure it out.

“Mobile is clearly becoming a new way people shop. [eBay has] nearly tripled mobile GMV (gross merchandise value) year-over-year to nearly $2B, with strong holiday shopping momentum in Q4. In 2011, we expect Mobile GMV to double to $4B.“

John Donahoe, CEO EbayQ4’10 Earnings Call

Source: Ebay.

27

And you ain’t seen nothin’ yet. (1 of 4)

Global Mobile Shipments2005-2015E, Millions

Total Devices

Mill

ions

777920

1,064 1,039 9541,085 1,105 1,135 1,147 1,151 1,150

57

82

124 151173

303453

582707 820 926

833

1,0021,188 1,190 1,128

1,389

1,5571,718

1,8541,971

2,076

0

500

1,000

1,500

2,000

2,500

2005 2006 2007 2008 2009 2010 2011 E 2012 E 2013 E 2014 E 2015 E

SP Share of Total

7% 8% 10% 13% 15% 22% 29% 34% 38% 42% 45%

‘10 –’15 CAGR

8.4%

SmartPhones 25.0%

NonSPs

1.2%

Source: IDC Accenture analysis.

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A quick note on hardware and distribution thereof.

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

Source: Apple.

New York Paris Tokyo

Sydney Munich Shanghai

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The Apple Store:$13B in sales, with more $/SqFt/Year than Tiffany & Co.

Source: SECfilings, Accenture analysis.

$4,793

$3,010

$866

$425

$391

Retail Revenue

($B)

Retail Stores

(#)

Retail Space

(M SqFt)

FTEs / part-time

employees(K)

13 323 2.5 30

3.1 233 1 9

50.3 4,172 58 180

419 8,970 985 2,100

9.3 204 23.8 52

$397

$337

$279

$200

$179

$102

$36

$33

$128

$125

$ / SqFt / Year ($)

$ / employee / Year ($K)

$ / Day / Store($K)

$ / Store / Year($M)

Scale of Retail Operations Retail Revenue Metrics

Q3 FY2010 –Q2 FY2011

$37

$13

$12

$47

$46

31

2 platforms you absolutely need to understand: Silicon & Cloud

”In addition to making raw computer

power available in a convenient

economical form, a computer utility

would be concerned with almost any

service or function which could in

some way be related to the

processing, storage, collection and

distribution of information.”

Douglas Parkhill, 1966

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Silicon

33

Moore’s Law – since ~1965 on the desktop.

Source: Intel.

34

Coming your way in mobile as well.

Baseband Processor (aka Modem)

“Fat Modems” Baseband & Application Processor

Low power silicon for voice/SMS and long

battery life.

OS-enablement of light apps running on top

of baseband.

High performance, low power application

processors.

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Massive on-deck computing power for smartphones...

1966Apollo Guidance

Computer – Block I

4,100 Integrated Circuits

1 MHz Clock Speed

9 KB RAM

2011SamsungGalaxy S2

2016Era of

“Uberphones”

~1B ICs

1GHz+

~4 GB

~26M ICs

1 GHz

512 MB

Source: Computer History Museum, Accenture analysis.

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… driven by one company in the UK.

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Orders of magnitude jump in processing power since 2007.

ARM Family ARM11 Cortex

Shipment Date 2007 2009 2010 2012

Chip ARM1136 Cortex-A8 Cortex-A9 Cortex-A15

DMIPs/MHz 1.2 2.0 2.5 2.5

x x x x

Clock Speed 600MHz 1GHz 2GHz 2.5GHz

= = = =

DMIPs/Core 720 2,000 5,000 6,250

Cores/Cluster 1 1 2 4

x x x x

Clusters 1 1 1 4

= = = =

Total Cores 1 1 2 16

Total DMIPS 720 2000 10,000 100,000

~9xProcessing

Speed Increase

Processing Speed Increase

~138x

Doubles on average every ~21 months

“Typical” Moore’s Law behavior for single core processors

Theoretical max computing power increased through multi-core and clustering

HIGHLY SIMPLIFIED

Source: ARM, Accenture analysis.

38

And you ain’t seen nothin’ yet. (2 of 4)

Today, you are here

Nvidia Tegra roadmap: 2 orders of magnitude until 2014.

Source: NVIDIA.

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Early stage mobile development with chipset SDKs.

40

Cloud

41

Who is building a cloud?

Prineville, OR USA The Dalles, OR USA

Maiden, NC USA Dublin, Ireland

Lockport , NY USA

Morrow, OR USA

42

What is “The Cloud”?

Cluster computing Machine Stack Cloud Benefits

• Cost ReductionLower infra, energy, licen-sing, maintenance costs

• Speed to MarketReduces time requiredto pilot projects

• Elasticity / ScalabilityOn-demand capacity and high business agility

• High Performance Computing“Infinite” computingcapacity as needed

Workloadscoordinated

among many machines tied

together to form a supercomputer

Dis

trib

ute

d S

yste

ms P

latf

orm

Computation

RDBMS

Storage

File System

Cluster Mgmt

Basically the stuff that makes starting a start-up cheap, quick and agile.

43

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

~65 Million Users Gaming Daily

~ 7,000 Tweets per Second

~40,000 Searches Served Per Second

~1.2 Million Photos Viewed Per Second

44

Stuff you can do with the cloud and your phone.

45

Industrialization of the mobile cloud...

Today

Tomorrow

HTTP(custom libraries)

SDKs

Cloud Device

46

… will bring massive off-deck computing to mobile.

AndroidCloud to Device

Messaging Framework

Project Hawaii & Project Maui on

Windows Phone 7

Mobile Dev CenterAWS SDKs forAndroid & iOS

Source: Corporate websites.

47

And you ain’t seen nothin’ yet. (3 of 4)Google’s Spanner: 107 = 10M machines.

Source: Google.

48

What’s Next

49

Jevon’s Paradox

William S. JevonsFrom the Book “The Coal Question”

” It is a confusion of ideas to suppose

that the economical use of fuel is

equivalent to diminished consumption.

The very contrary is the truth."

William S. Jevons, 1865

50

1950 1960 1970 1980 1990 2000

105

104

103

102

10

U.S. Asset Prices, 1945 - 2008Normalized, 1995 = 100

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

As computing gets cheaper…

Industrial Equipment

Nor

mal

ized

Pric

e: 1

995

= 1

00(lo

g)

Other Equipment

Transportation Equipment

Computers and Peripheral Equipment

51

… companies consume more of it.

U.S. IT Investment, 1970 - 2008Investment per Employee & Nominal Annual Investment

1970 1975 1980 2000 2005 2010199519901985

3,500 350B

250B

200B

150B

100B

50B

3,000

2,500

2,000

1,500

1,000

500

0

300B

0

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

IT Investment / Employee

Annual InvestmentA

nuua

lInv

estm

ent p

er E

mpl

oyee

($)

Nom

inal

Anu

ualI

nves

tmen

t ($B

)

52

Plenty of cash.

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

44

39

35

27

29

22

11

10

7

6

Total of 226B

Source: SEC filings.

53

Think again…

J. C. R. Licklider“Grandfather of the Internet”

”People tend to overestimate

what can be done in one year

and to underestimate what can

be done in five to ten years.”

J. C. R. Licklider, 1965

54

Lessons learned. A few thoughts on:

Your Team: Who’s in charge?

Platform: iOS vs. Android

Pitching: Killer exec summary

Funding (Angels): Ocean’s 11

Funding (VC): Lots vs. little

55

And you ain’t seen nothin’ yet. (4/4)

Your Start-up!

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