00:01welcome to the a 16z podcast I'm Michael
00:04Copeland and here with Benedict Evans
00:06Benedict welcome hello so it's been a
00:09busy week in the mobile world it's
00:10always a busy week in the mobile world
00:11but there's plenty to cover on both a
00:14micro and a macro level so I want to I
00:16want you to suss it out for us and maybe
00:18let's start with Apple and its App Store
00:22revenue yes so there's two things that I
00:26thought were interesting in Apple's
00:28Hoadley results one is the tablets which
00:30we'll come on to in a bit the other
00:32walls that as they've done quite often
00:35before they gave a number for money paid
00:37out to developers on the App Store and
00:40at Google i/o Google for the first time
00:42also gave a number which was what couple
00:44of weeks ago right and so you can do a
00:46sort of like for like comparison which
00:48we've never been able to which we've not
00:50been able to do because there are that
00:51was the first time people had ever given
00:53numbers through revenue on the App Store
00:54and so Google said they'd paid out five
00:56billion dollars to developers in I think
00:58the 13 months since the previous Google
01:00i/o and they said that they have a
01:03billion monthly active users of Android
01:04both of those are kind of slowly they're
01:07round numbers that schedule event so
01:08they're putting all these very precise
01:10and Apple said that they paid out well
01:13they said they paid out 20 billion to
01:15developers in total and a year ago they
01:18said they paid out 10 minute 10 billion
01:21um so the arithmetic is quite simple
01:24even for a history class and so you have
01:28doubles of revenue in the meanwhile
01:30Apple had not given a number for active
01:32users of iOS but if you take trading 24
01:35month sales you get to about 500 million
01:37if you stretch it out a bit longer you
01:38might get to 600 million maybe even a
01:40little bit more but essentially you have
01:44double the revenue on iOS for half the
01:46users and so very roughly four times the
01:50spend and is as you look at those two
01:54graphs or those two lines between
01:57well then whether they be or do say that
01:59both growing and you don't really have
02:02enough data in particular have you want
02:04to kind of want to have more than two
02:05data points on Android because they give
02:07number last year for the one the number
02:09wasn't they told us what the number was
02:10last year and so you don't really know
02:13if the Android line is curving up
02:15sharply but we're now at you know a
02:19billion Android devices they'll be sorry
02:21a billion Google Android devices five or
02:23six hundred million iOS devices for 500
02:26million further non Google Android
02:29devices in China one way or another yeah
02:31I mean I'd hate to say fork because
02:34they're basically vanilla androids they
02:35just don't have Google services on them
02:37and all like Kindles um so you've got
02:40two billion devices or you will have at
02:41some point over the summer hours off
02:43maybe four billion perhaps total mobile
02:47phone users on earth there's more
02:48similar a lot more connections but
02:50that's maybe how many actual humans are
02:52so the point is you know if Google is at
02:55half of iOS now the user said it's going
02:58to get you know it's going to go from 1
03:00billion users to 2 or 3 billion users in
03:02the next couple of years but those are
03:04not gonna be people who go to raise the
03:05average so you what you're saying is
03:07that even if it doubles or triples the
03:09number of users it doesn't necessarily
03:12the revenue it's not going to do might
03:13double it might triple the users and
03:15double the revenue for the sake of
03:15argument for saying all the other
03:17dynamics don't change which of course
03:18they will so the point is yes you've got
03:21twice as many users on Google Android
03:22but as a developer it's more complicated
03:24than that as we keep saying you know
03:26where are your users what are you trying
03:27to achieve what kind of proposition
03:28rarely even work on a fragmented
03:30platform will it even work on a
03:32lock-down platform etc etc etc so
03:34there's no one markets yeah there's lots
03:36of markets yes so so that's the App
03:38Store and it's it's just kind of it
03:40confirms what everybody kind of knows
03:41which is that if people who buy six
03:43hundred dollar devices behave
03:44differently from people you buy 250
03:46dollar devices and the average price of
03:47an Android phone is about $250 right um
03:50so go figure as Americans say they wanna
03:53lysing localizing for the ACC their
03:55podcast I think the next thing that of
03:58course that got a lot of attention is
04:00iPad sales right and I posted a bunch of
04:04Charles to this to my Twitter feed and
04:05also on my blog been - Evans comm and I
04:09think the useful metric where you've got
04:10this really spiky numbers for things for
04:12iPad and iPhone sales is to take
04:14trailing 12-month revenues which kind of
04:15smoothes out the product launches and
04:17the iPhone is growing quite strongly and
04:20has been effectively flat for you from
04:23one year for you yeah so what is that
04:26when this was the same that and we had
04:27this conversation last quarter we did a
04:29whole podcast talking about iPad sales
04:30both caught it to recap still flat is
04:33that yeah still flat flat Tim and it's
04:39not Android competition this is the
04:41thing it's not like Samsung's doing
04:43really well either I mean they came into
04:46the market and they taken a portion of
04:48it but Apple are not losing sales to
04:49wipeout they're losing sales to people
04:50not buying tablets and so the same is a
04:53case of Samsung and so no anyone else
04:54not buying tablets meaning not buying
04:57more tab oh well this is nothing to
04:59apples period so this is a thing it
05:01feels when the iPad would first came out
05:04you know one of the things that I earn
05:06every other analysts were saying is okay
05:08first of all how many people the
05:11question is how many people are going to
05:13buy this but what that actually is is is
05:16this a one per person device like a
05:18mobile phone it does it get bored every
05:21once every one or two years or is it a
05:23one per household device that gets
05:25bought once every four or five years
05:27more like a PC or somewhere in between
05:29and it feels like we're we're settling
05:32is it's a one per household or two per
05:35household device that gets bought every
05:37three or four or five years the paradox
05:39is because Apple of course have created
05:41this concept where you you could
05:43completely ignore the specification as
05:45well you didn't even need to think about
05:46what the specification right there for
05:49people don't care about the upgrades so
05:51you get every time I talk about this on
05:53Twitter I get loads of people say well
05:55there's absolutely no difference between
05:56the iPad air and the iPad 2 and I think
05:58actually this is an enormous difference
06:00it's got Retina screen it's half the
06:01weight but if you were kind of a
06:03non-technical person he's bought the
06:05thing and is keeping it on the sofa at
06:06home to read or watch videos or play
06:08games on then actually the the original
06:11one was so good or the second one
06:12certainly was so good that the
06:14additional upgrades don't and so does
06:16that also mean that those people who by
06:20wanted them have gone out and bought
06:22them well this is the thing I Sarah
06:24Apple said that 50% of all sales are to
06:26new owners so actually you're continuing
06:29is not that the sales are falling I mean
06:31this is the thing the sales are flat
06:32right I've reached a certain
06:34per quarter and they've just kind of
06:35stopped there and so it is growing if
06:38they use it and because the consequence
06:39of you not having replacement sales is
06:41that the user base keeps growing right
06:44so yeah it's not that the sales are flat
06:46they're not falling and the old ones are
06:49not being thrown away so the actual
06:51number of iPads being used keeps going
06:53up there's probably 180 to 200 million
06:55iPads in use now first it's about 88
06:57million Macs according to Apple okay
07:00yeah so more than double the number of
07:01iPads has Macs on earth so the number
07:04keeps growing but you don't have a group
07:06content so a growth in the number of
07:08these things being bought every year
07:11because it's not expanding on that
07:12dimension it's more like pcs I mean the
07:15number of PCs on earth is again has
07:16quadrupled in the last 15 or 20 years so
07:19the other bit of news related to this
07:21was you know a week or so ago about IBM
07:24and Apple striking a deal
07:25so do you think this explain what you
07:28think about that and then does that
07:29change the dynamic in terms of the curve
07:32potentially so Steve Sinofsky and I have
07:36done a couple of things talking about
07:38productivity and the basic thesis is
07:42this that a lot of there's a lot of
07:46people whose job involves using
07:48PowerPoint or Excel or perhaps word and
07:51who would feel quite right neither they
07:54couldn't do the tasks they need to do
07:55without it and therefore can't do those
07:58tasks on a tablet right but actually
07:59that's not what their job is my job
08:02actually is in art while making
08:04spreadsheets but if you are as it might
08:07be a senior salesperson and once a
08:10fortnight you produce a sales report and
08:12you pull a bunch of data out of sales
08:14force or an SI p and comScore and
08:16various other systems and you dump them
08:18into Excel and you make charts and then
08:20you don't let Excel charts into
08:21PowerPoint and you make 15 slides and
08:23you write bullets in your email that are
08:24out and that's your day once a week once
08:26a fortnight you couldn't do that on a
08:28tablet but actually you shouldn't be
08:29doing that there should be a web
08:31dashboard right that you do in half an
08:33right Rand that's really the point just
08:36as when we went from typewriters to PCs
08:39you've started out by printing out 10
08:40copies of your memo and putting it in
08:43but that's actually not what happens
08:45when you go to capisi if you have this
08:47email thing and you have network drives
08:48and in the same kind of way as the tools
08:52come in the tasks will change to fit the
08:54tools and the tools and we're still in
08:57the tablet phase at least at work we're
08:58still in that sort of let's make eight
08:59copies and put them in the interoffice
09:00mail right yeah we are exactly so we're
09:03at the stage where you know I can look
09:04at a document inbox and I can go and
09:08look at something on it but we don't
09:10have all of those tasks and processes
09:12haven't kind of reshaped themselves to
09:14fit the fact that you've got this
09:15entirely new and device with different
09:17capabilities and I think to the point of
09:21the Apple IBM deal you know this is a
09:25story of where there's there's a kind of
09:26there's a there's a wonky art narrative
09:28here which it says well you know it
09:30couldn't be HP because HP computers and
09:32devices and it couldn't be Oracle and so
09:34on and so forth this is red IBM and
09:35Wyatt IBM and Apple in particular with
09:38the business development bill made in
09:39heaven but I think the general point
09:42here is how do you take tablets into
09:45how do you do enterprise sales how do
09:47you hand hold because enterprise
09:49products do not get you know you've got
09:50you can't outfit General Electric with
09:53250,000 tablets and migrate all their
09:55apps on to tablets by saying well great
09:57go to your local app store yeah I'd like
10:02that yeah and say you need sales but you
10:04also need the processes and the
10:06consulting and the services around how
10:08you would might reshape that business
10:10you know if you have I mean you get that
10:14a little bit because it seems to me that
10:15the the world of Taba and mobile in
10:17general has by and large least from the
10:20consumer side been without somebody
10:23holding your hand and it won't happen
10:25that way in the enterprise well the
10:28issue is so let me give you a tangible
10:31example last time I went to the coop and
10:33I was on a trip you have you know the
10:36the experience when I was a child was
10:38that you would go to a booth and there
10:41would be a PC and there would be a
10:42tractor printer there and you know you'd
10:45queue up and he tipped half of the
10:46keyboard and or somebody would arrive
10:49yeah it's actually almost like everyone
10:50today if you go and rent I rented a car
10:52from Hertz they've got the guys are
10:54wandering around the the parking lot
10:56they've got a tablet in their hand they
10:58can tap tap tap on the tablet and they
11:00can press go now at the moment that's
11:03actually a Windows tablet and if you
11:04squint at it it's actually running an
11:06application that's kind of really
11:08designed for a mouse so it's a little
11:09bit cumbersome for that poor guy but
11:12that's kind of the point that you're you
11:15know that guy's job was not I'm going to
11:18sit in a chair in an office and type
11:20that's not his job his job is helping
11:22people rent cars right and what's the
11:25best way to help people rent cars I mean
11:27I sat in an airliner yesterday evening
11:30watching a guy loading baggage onto a
11:33conveyor belt to go into the hole of the
11:35plane and every plane that comes past
11:37he's got a handheld scanner and he scans
11:39a barcode on the label 20 years ago that
11:41would not have been being done 20 years
11:43ago somebody would be sitting with a PC
11:45typing those numbers in if they were
11:47doing it if they were tracking it at
11:48that level at all right and so that's
11:50the shift that has to happen it's that a
11:54lot of those workflows
11:56change because of this new tool and I
12:00think then that there's also another
12:02issue here and I think this is the kind
12:05of a kind of lead onto a kind of the
12:07other theme that we talk we're going to
12:08talk about is there's a sort of leverage
12:10effect that applies across all of these
12:14devices so at the kind of crude level as
12:17a thing I said earlier there's as it
12:19might be two billion
12:19iOS and Android devices on earth now
12:21give or take first this fully 1.6 1.7
12:25billion PCs and will go to 4 billion iOS
12:29and Android if Apple do a cheap phone
12:31there'll be more iOS if they don't it
12:32will be mostly Android but yeah that's
12:34not a kind of important at this scale so
12:36you have an the PC number is gonna steer
12:38so the PC number will stay more or less
12:40where it is for a while it will gently
12:42drift downwards over time but where five
12:44your placement cycle and you know the
12:46other issues that we've talked about
12:47it'll take a long time for that to
12:48shrink down right but so you've got
12:52double so you've got two or three times
12:53more devices your iOS and Android
12:55devices and PCs but then you say okay
12:58does that PC actually mean is that PC at
13:01that desk in hurts how should we think
13:04about that PC what should we think about
13:08the 500 pcs that we know are in a call
13:12center running one application that's
13:14kind of controlled and secured and
13:16locked down do those count is the same
13:19as the mobile phone that every one of
13:20those employees has in their pocket and
13:22takes home with them with dozens of
13:24applications so if you were to go from
13:27and so the point is that you've got one
13:31on 1.5 1.6 million pcs after those
13:33roughly a corporate and the lockdown and
13:35even if they're locked down there's a
13:36limit on what you're allowed to do with
13:38them all it's appropriate for you to do
13:39with them or work and the consumer ones
13:41at home and they're mostly shared by and
13:43large and none of these are really
13:45mobile so they're at a desk or in a home
13:48they're not in the store while you're
13:49looking at a product and so there's kind
13:53of a multiplier effect here first
13:55there's a multiplier effect in sort of
13:56what is an actual what you might call so
13:58there's this concept in HR of a
14:01full-time equivalent if you've got two
14:03part-time guys in one full-time guy you
14:04say you've got two FTAs to plan and the
14:06PCs full-time appearance right and so
14:09what is a piece of personal computer
14:11equivalent uh-huh you know because we
14:13don't have 1.6 personal computer
14:15equivalents we've got maybe 800 million
14:17or 700 million or 900 million actual
14:19personal computer equivalents when you
14:21factor in okay to fight with the sharing
14:22and the locking down and they can't use
14:25so H they says so that's a only season
14:28that's the first multiply and that if
14:30you disk you have to discount the PC
14:32base for usage the second multiplier is
14:34the user interface that people talk
14:36about not being PC literate computer
14:38literate people don't talk about not
14:39being phone literate and yes there is a
14:41gap but you have this step change in
14:43usability with this new generation of
14:44operating systems and that changes the
14:46accessibility and then there's a third
14:48change which is the shift in
14:51sophistication and complexity of these
14:52devices so for 20 years we had web
14:54browser + Mouse + keyboard and then on
14:56the smartphone you have a camera there's
14:58probably 2 billion photos being shared
15:00every day on social networks for mobile
15:02phones so you have a camera as arguably
15:04one of the most important input methods
15:05and you have GPS and you have to tilt
15:07switches and you have microphone and you
15:10have all the other input method
15:11it's just his way more it's kind of a
15:12funny thing so kind of slightly
15:14counterintuitive things say the
15:15smartphone is a way more sophisticated
15:16thing than a PC right certainly from an
15:19internet point of view and a kind of
15:20clunking consumer point of view it's a
15:22much more powerful and sophisticated
15:23device than a PC that just had a web
15:25browser and and a keyboard a mouse for
15:27practical purposes so you've got this
15:29sophistication multiplier then you've
15:31got this location multiplier because
15:33it's not just theis fixed in one place
15:35you can be standing in a store looking
15:37at the Amazon app while you're holding a
15:38product in your head and so that changes
15:41the the potential and the scale of of
15:44what of what a mobile device is is this
15:47sort of an aside here that of course
15:48means you need new and different metrics
15:50but when you pull all of these strands
15:52together you know you've got two or
15:54three or four times more devices the PCs
15:57actually need to be discounted the
15:59usability changes the sophistication
16:01changes the location and the payment
16:02methods and everything else change and
16:03so the change in market opportunity that
16:08comes out of this when you come by and
16:10when you combine all of those together
16:12it's not that there's two or three times
16:14more devices it's that you've got five
16:16or 10x more opportunity and the IBM deal
16:20is part of that the AppStore deal the
16:22app store numbers speak part of that the
16:24question of precisely how many tablets
16:26and what mate they get replaced you know
16:28it's kind of an interesting part of that
16:29but I think the fundamental point is you
16:32know we are going through a generational
16:35change in the scale of consumer access
16:38to the Internet and you know how what
16:41does that mean for entrepreneurs and
16:43just give another analogy that I used in
16:46my podcast which is if you were to go
16:50Amba screen character-based mainframe
16:53terminals to 10,000 even Windows 3.1 pcs
16:59you could say well we've doubled the
17:02market here mm-hmm but you're kind of
17:04missing the point if you say that right
17:07just double them right you've increased
17:09the market by 10x right and I think
17:12exactly the same thing is kind of
17:13applying now in a very different way
17:15because it's not like pcs er we're
17:17capable but the same way in the sense of
17:19that more and more users more and more
17:21different types of users and use case
17:23if would use more users in more places
17:26able to do more things right
17:29interesting Benedict thank you so much
17:32and we'll we'll be back with you soon
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