Analyst Angle: Name that phone

Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.


Since the debut of the iPhone, a glut of touchscreen feature phones – often with QWERTY keyboards – have propelled Samsung and LG to jockey for the lead in U.S. market share, according to NPD’s Mobile Phone Track. And yet, smartphones continue to grow in influence. Smartphones like the iPhone, Blackberry Curve and Motorola Droid have combined to continue their assault on feature phones, and were responsible for 31% of the market in Q4, according to NPD’s Mobile Phone Track.

 

Part of the growth in the smartphone market has been fueled by declining prices. Average smartphone prices fell to $145 in the fourth quarter of 2009 down from $168 the year before. There is still a significant price gap between smartphones and feature phones. But with the gap narrowing (particularly after subsidization), more handset makers are looking at making a stronger commitment to one of the off-the-shelf operating systems such as Windows Phone 7 or Android, or developing their own, as Samsung is doing with Bada.

 

Microsoft’s forthcoming Kin One and Kin Two, launching in the U.S. on Verizon Wireless, straddle the line between smartphones and feature phones. Leveraging powerful hardware and focusing on social networking enthusiasts, Microsoft considers them Windows Phones, but they cannot tap into its Marketplace apps. Kin offers fodder for those contemplating the future of feature phones, which may be moving toward differentiating from smartphones more on the basis of task, demographic and psychographic optimization versus price.

 

Taking this route is not without risk. Potential Kin customers may note that, whereas Kin offers a unique user interface that places the focus on captured media and several levels of “friends,” it lacks the ability to share photos via Twitter (likely waiting for Twitter to roll out its own photo hosting service) and also ignores rising social networking stars such as FourSquare and Gowalla in favor of its own Bing Maps. Furthermore, while the industry has offered “music phones” and camera phones in the past outfitted with high-resolution cameras far more capable than the industry average, the need to compromise on components and software development have prevented the kind of optimization for music and photos that Kin provides for social networking.

 

Kin also exposes opportunities to offer advanced services via a Web portal. Kin Studio is a Silverlight-based Web site that backs up virtually everything that the media-voracious Kin users can capture, be they text messages, high-resolution photos, and even video. (While the Kin One will back up standard-definition videos shot with the Kin One’s camera, it will skip high-definition videos shot with the Kin Two’s camera.)

 

Other manufacturers or carriers could leverage a phone’s Web portal as a reflection and archive of the device’s contents, as they are with the Kin, or as a superset of features for lower-end products where supporting technologies such as video editing or Adobe Flash require prohibitively expensive hardware. Indeed, the most significant feature of Kin does not actually reside on the device itself. This idea also has precedent. Many handset makers were stumbling with (and mostly without) PC synchronization options when T-Mobile released the Sidekick, which backed up the contents of the device to a T-Mobile Web site. And AT&T recently released a suite of services for its feature phones that include backup of a phone’s address book and photos.

 

Moving more smartphone-like functionality to the Web may be done by the carrier or handset maker, for free or as a premium service. Regardless, doing so not only takes advantage of an online context that allows for easier manipulation, but nicely segments the market between those who have a pressing need to act now and those who may have some of the same needs, but not as urgently.  

 

Ross Rubin (@rossrubin <http://twitter.com/rossrubin> on Twitter) is executive director of industry analysis at The NPD Group. (@npdtech <http://twitter.com/npdtech> on Twitter). He blogs at The NPD Group Blog as well as his own blog, Out of the Box.