Platform Stickiness

No, I’m not talking about devices gummed up by the Coke you spilled on it yesterday (you know who you are!). It’s about how “sticky” a platform is in terms of user retention, specifically in terms of its long-term viability. AppleInsider has an interesting piece about user retention for smartphones, and the iPhone leads in the manufacturer-specific category with a whopping 89% of iPhone users indicating they’ll stick with it for their next phone. When asked about upgrade intentions for operating systems, and not device manufacturers, then 55% of people expected to stick with Android. Apple has apparently (but not surprisingly) been able to maintain this high rate for a while now. The biggest loser in this category: RIM, which saw an anticipated retention rate of 62% from last year drop to 33% for this year.

Why does this matter? Because it affects the future shape of the smartphone landscape. These numbers are somewhat important now, but will become more important as the market matures. It is easy for people to criticize these types of numbers, asking “well, if retention is so bad for XYZ, why do they continue to see increased unit sales?”. Simple: a rising tide lifts all boats. The smartphone market has long ago moved through the early adopters, and is currently working its way through and into the mainstream consumer market. However, smartphones still represent the minority in terms of devices sold or installed. At some point, though, everyone who really wants a smartphone will have one, and the number of feature phones will start to decline. At that point in its maturity, the market will have stabilized, and now it’s a question of gaining marketshare by taking it away from someone else. That’s were user retention comes in.

Marketshare that wants to stay with your platform is marketshare that isn’t going to go to your competitors. You would think retaining your current customers should be fairly straightforward: don’t give them a reason to leave (or make it hard and inconvenient, such that they won’t bother because of the pain in the butt factor). For most product manufacturers this is the case. But, if your device or product is truly a commodity, and replacing it really isn’t a big deal, then you can have a challenge on your hands. In Apple’s case, what they’ve done is built an ecosystem that many people find hard to leave behind. Let’s face it, if you’ve paid hundreds (or thousands) of dollars on apps and content that you have to abandon to change phone platforms, you will think twice about whether it is worth it. For example, do you want to walk away from $300 or $400 in apps to save maybe $100/year in data costs or to get some small change or improvement that you might not really care about in a month? Inertia is a powerful force in some kinds of consumer electronics, simply because switching doesn’t bring enough benefits to offset the costs.

This is an issue that platforms that aren’t Android or iOS are facing. RIM doesn’t have enough for consumers to keep them in the fold: their customers buy almost no apps, and what content they have is easily moved to Android or iOS. Even Android is facing a challenge (as the numbers in the most recent retention survey show), and part of that is that Android users don’t buy as many apps. It’s the same challenge Apple faces in trying to get people to move from PC to Mac: for people or companies with hundreds or thousands of dollars invested in software, moving to a Mac simply isn’t “better enough” to justify the cost to re-purchase the software. Then there’s the issue of internal IT support for companies, who may only have Windows-trained staff, and now have to either train their current staff (which takes time and money) or hire to fill in the gaps.

This isn’t like replacing your stove, TV or even your car. Smartphones may sometimes act like readily interchangeable commodities, but really that isn’t the case. Consider replacing my car: I get a different set of keys, and I have to spend some time learning some new controls for the stereo and climate control. But the basic operations (steering, brakes, gas) are pretty much the same. Even a TV isn’t a big deal: at worst, I have to reconfigure a universal remote. But a smartphone, like a personal computer, means possibly walking away from an investment in the “other bits”, mainly apps and some content. Imagine if, when replacing your Pontiac with a Toyota, you also had to tear down and build a brand new garage? Or if, in replacing your Toshiba TV with a Sony, you had no choice but to also replace the rest of the home theatre along with it, as well as some of the furniture? Now, you start to think twice about whether you want to switch brands. The switch has to result in other measurable and meaningful benefits to undertake it.

Take a couple of real-world examples: the switch from VHS to DVD, and then to Blu-ray. The switch to DVD wasn’t hard for most people: with bigger and better TVs, the image quality of a DVD was noticeably better than a VHS tape. Even on “normal” TV’s, you could see a marked difference, so moving to DVD didn’t meet with any significant resistance. Try finding a pre-recorded VHS movie at Walmart now. Even blank tapes are hard to come by. But Blu-ray? The difference for the average person wasn’t enough to justify re-buying the movie again. Is the picture better? Certainly. It is most noticeable on larger TV’s (for me, it is truly better on 50″+ sets), but for most people, the Blu-ray image just isn’t “better enough” to bother making the switch. People readily abandoned VHS libraries, but that have been reluctant to abandon their DVD libraries.

What does all this mean today? For smartphones, not much, again because the market is still growing enough that retention isn’t as critical as simply selling more to new users. However, in another couple of years, as overall sales slow down, retention and being able to get people to switch becomes more important. The green fields have been occupied and now its about shifting users from competing platforms rather than capturing net new users to the game. Does that mean iOS and Android will eventually split the market, or will iOS even pass Android? Both are possible. The problem with predicting the market that far out is that both platforms are constantly in motion, and changes can come along to either encourage people to prefer one over the other in the long term, or cause them to abandon one platform for another. Circumstances may change where Android users become less likely to switch and more likely to stay with their current platform, although maybe with a different device. Android is “stickier” than platforms like Blackberry, but for the moment, iOS is far-and-away “stickier” than the other mobile platforms and devices. That could change if Android users start to invest more in apps and content, making it harder to switch. But platforms like Blackberry and Windows Phone, with modest (and apparently shrinking) user retention will be in trouble without major changes in how customers use (and invest in) their devices.