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For the longest time, the only two entities that made money from a mobile phone were the carrier and the handset manufacturer. Open and shut [1].

No longer. Not only are more mobile phones being sold now than ever before, there are more types of folks making money off it. For smartphones with an ecosystem such as iPhone, there is

- Apple, the iPhone manufacturer

- AT&T (in the U.S.) that provides cell phone connectivity

- tens of thousands of developers who sell their iPhone applications through the App Store (with Apple getting a cut). And this is not just indie developers. Amazon stands to make a huge bundle through book sales via its Kindle Reader app for iPhone [2]

- businesses that create free iPhone applications but make money off ads within their applications [3]

- record labels that offer their music for sales on the iTunes Music Store

- television networks and Hollywood studios that offer their TV shows and movies (respectively) for sale/rent, also on the iTunes Music Store

Of course, this runaway success has inspired every smartphone label to scramble to bake its own pie. Witness the plethora of application stores (Palm, Nokia, Blackberry, Windows Mobile, Android) [4], and Nokia’s attempts to sell music.

 

Open or closed?

The more mature a product category gets, the more players there are that stand to make money off it. That’s because the pioneer quickly realizes that for true scale, it must “open up”  the product to entities other than itself. And that’s where it seems we have from history, a clear lesson: IBM opened up the specs of its original PC, and hordes of beige box manufacturers crowded Big Blue out of its own market. Apple itself nearly destroyed all that the Macintosh stood for when it licensed the Mac to other manufacturers.

“Opening up” a successful product and creating an open ecosystem divides the pie into so many slices that the pioneer is left picking up only crumbs. Apple’s iPhone ecosystem has been “opened up” to all those players above through the iPhone OS developer API, the iTunes Music Store and the iPhone App Store, but the ecosystem itself remains tightly closed.

 

[1] OK, so there were (are) electronic component manufacturers on the source side and advertising agencies on the sell side. But let’s limit ourselves to those that gained directly from the mobile phone. 

[2] Also with iPhone OS 3.0, developers can now charge for features within the application (unlocking extra weapons and purchasing weaponry within games being the most commonly cited examples), so you could have a free basic application with paid features if you like. Before OS 3.0, the best that developers could do was offer separate “free” basic and “paid” full-featured apps.

[3] Take Twitterific, for instance. The free version of the application inserts ads into your tweetstream.

[4] With comical attempts to make them sound different (Palm Software Store, Nokia Ovi Store, Blackberry App World, Windows Mobile Marketplace, Android Market). 

Microsoft will lay off 5000 staff over the next 18 months. This is partly due to an 8% decline in client revenue attributed to “continued shift to lower priced netbooks”. Netbook sales have been robust. Buyers prefer Windows XP over Vista on netbooks because of performance issues, but Microsoft makes lower margins on XP. This is essentially the problem. Industry analysts are awaiting Windows 7, its Windows release.

But it won’t help.

Microsoft says Windows 7 is netbook-friendly (and it might well be), but that’s irrelevant. The issue is higher margins. If Microsoft prices Windows 7 like Vista, it’s going to raise the total price of netbooks. That is unacceptable. After all, the USP of the netbook is Cheap.

Now, I think the company’s realized the underlying problem: Mobile and Desktop are moving towards each other.

The company is more likely to make higher margins on its Mobile Operating System than on its Desktop Operating System. High-priced smartphones are becoming increasingly popular and also more sophisticated. On the other hand, PCs are getting smaller and lighter – and cheaper.

Most commentators have already identified Mobile and the Cloud as the defining markets for the immediate future and they’re probably right. Microsoft has plays (albeit relatively weak ones) in both these in the form of Windows Mobile and Windows Live.

I think we’re going to see a shift in investment toward these two markets, and away from the PC market. At the minimum, expect a quick rollout of Office Live soon (either free or monetized) and Windows Mobile 6.5.

At the outset, I’d like to clarify I’m no iPhone or Apple zealot. My interest in mobile touchscreen interfaces has been piqued by my recent purchase of an iPod Touch.

I was playing around with a colleague’s HTC Touch Cruise the other day. The Touch runs Windows Mobile 6.1, and, in summary, is a full-featured smartphone with decent multimedia capabilities. That’s not what this post about though.

It’s about two clear observations I made – that we’re stuck in the late 90s when it comes to mobile touch-based input devices, and that UI designers still use the desktop paradigm when designing for mobile touch screens. While Windows Mobile is what triggered this post, with PalmOS, and UIQ too.

Poke, poke

Turns out that it’s a huge pain navigating the WinMobile interface on the 2.8″ touchscreen with your fingers. The buttons are tiny, the menu options are awkward, and it’s next to impossible to grab and drag a scrollbar. I gave up.  It’s clear – the best way to navigate a Windows Mobile is using the accompanying stylus. 

But a stylus is a hopelessly outdated tool. Along with the physical QWERTY keyboard for desktops/laptops, the stylus is a tool for mobiles that stubbornly refuses to die. Perhaps it’s easier – and commercially attractive – for touchscreen phone manufacturers to add applications and features than to rework a familiar, though suboptimal interface.

iPhone/iPod Touch have changed that. iPhone may not pack the sheer number of applications the HTC Touch Cruise does, but its interface is revolutionary. It lost the stylus. In fact, with multitouch – flicking, pinching, dragging with multiple fingertips – your hand is more effective than a stylus. You may not agree with iPhone the device (I don’t) – but you have to admit iPhone’s set the benchmark for all touchscreen interfaces.

Honey, I shrunk the desktop

Windows Mobile 6.1 has a task bar, a system tray, a Start button and a drop-down Start Menu. With nested menus. On that tiny 240×320 pixel screen.  

After spending a while with the device, I realized that Windows Mobile is essentially a shrunk-down version of the desktop Windows interface. The widgets are smaller, but the paradigm is the same. The result is a cluttered interface and a frustrating navigation experience.

Someone’s psyched the WinMobile team into believing that their biggest strength is that their mobile interface looks just like their desktop interface. That may have been true when mobile applications were very simple, but it doesn’t hold true any longer. It’s hurting usability and innovation.

There have been several calls for this, and I’m going to say it here again – the WinMobile team will do themselves and their legions of developers and enterprise customers a world of good if they rethink their interface. 
 

Note: I think Samsung and LG also have very good touchscreen interfaces. But this is merely an observation from Google Image Search results. Haven’t tried them out first-hand, so no comparisons.