Last week, UK-based analyst firm Canalys, released its findings on smartphone market share based on Q2 2009 unit shipments (see “Smart phones defy slowdown“). Before sharing Canalys’ findings, there are two important points to understand:

• How market share is defined is based on the numnber of units shipped during a particular period of time, not the number of active users of a specific smartphone platform, which is the installed base. These are commonly misunderstood terms. To determine the share that any particular smartphone platform has of worldwide active smartphone users would require aggregation of data from all of the mobile network operators. Good luck with that.
• The results of these reports are not reflective of how well a company is actually doing in terms of profit (see “A Visualized Look At The Estimated Revenues Of The Top Cell Phone Manufacturers” as an example).

Canalys covers a number of topics in their latest smartphone research, but the one topic are I want to focus on is “Global smart phone market by OS”. Which companies are shipping the largest number of plastic phones into the world is less interesting to most of us than which mobile operating systems are winning. Dell vs. HP is not as compelling as Microsoft vs. Apple, in the personal computer market. LG, Fujitsu, and Samsung, three successful handset manufacturers, generally are not fully part of the smartphone conversation as they have historically licensed smartphone operating systems from companies such as Microsoft (this trend is changing to include more diverse licensing partners and increased in-house OS development).

Symbian (Nokia) accounts for half of the smartphones shipped in Q2 2009, followed by RIM, Apple, and Microsoft. Compared to the same quarter in 2008, Symbian and Microsoft are losing smartphone market share, and RIM and Apple are gaining significantly. Apple’s growth percentage over the prior year is artifically inflated due to contraints in availability of the original iPhone just prior to the release of the iPhone 3G in Q3 2008. Minus that event, it would have been closer to RIM’s annual growth percentage.

Even though Nokia has a 50% smartphone market share right now with Symbian, I think they are the most vulnerable of all the major players covered by Canalys. Symbian is a mobile operating system struggling to be modern with a developer ecosystem that seems to be far more fractured and unmotivated when compared to the excitement I see regularly from Android, iPhone, and BlackBerry developers. Microsoft’s Windows CE and its variants have been in the market since 1996, and on smartphones for nearly a decade, yet has not been able to effectively remain competitive recently. And while Android has shipped on just over a million smartphones during the quarter, that’s still impressive considering the small number of devices that it’s currently available on, especially due to the number of pre-announced devices that wil be coming over the next few quarters.

Surprisingly absent in this data are other Linux-based mobile operating systems, which must fall into the ambiguous “Others” category, along with mobile operating systems, such as Palm Pre. The fragmentation of the various Linux mobile operating system efforts, including handset manufacturer specific implementations, is doing more harm than good right now in terms of market share growth.

The iPhone OS 3.0 Software Update provides a significant number of enhancements to the operating system including spotlight search, cut, copy, & paste, voice memos, support for landscape keyboard usage in Mail, Messages, Notes, and Safari, MMS and tethering for carriers that support these features (AT&T late summer for MMS, tethering TBD), and dozens of other improvements. The update is free for iPhone, and $9.95 for iPod touch. Just plug your device into iTunes and you will be prompted to upgrade. If you’re upgrading a second generation iPod touch, iPhone OS 3.0 will activate the Bluetooth chip that has been dormant since last September.

The new iPhone 3GS includes a faster processor, longer battery life, video support, an improved camera (3-megapixel), voice control, a digital compass, and conveniently in the same form factor as the iPhone 3G so that you won’t have to buy a new case. Models will be available at $199 (16GB) and $299 (32GB) if you qualify for the discounted hardware upgrade pricing. AT&T announced on Wednesday that the hardware discount will be extended to iPhone 3G buyers from last July, August, and September. If you stood in line for an iPhone 3G last summer, you won’t have to wait a full year to buy the iPhone 3GS at the lower price.

In addition to the iPhone OS 3.0 Software Update and the new iPhone 3GS, there is a third and equally exciting aspect to this week – the rollout of the next wave of iPhone apps, based on the new iPhone SDK provided to developers in March for iPhone OS 3.0. This SDK provides iPhone developers with some major new features for use in apps including Push Notification Service (PNS), in app purchasing, peer to peer connectivity over Bluetooth, in app maps, turn by turn navigation, accessories support, iPod library access, audio recording, streaming video, in app email, support for cut, copy, & paste, undo, and much more.

If you have an iPhone OS 3.0 upgraded device and you’re interested in trying out this next wave of iPhone apps, I have included a representative list of iPhone OS 3.0 apps below. If you know of any others, please post them as comments with associated links. I expect the list will grow rapidly over the next few weeks. NOTE: All of the app links below will launch iTunes, or if you’re viewing this blog entry from your iPhone OS device, the links will launch the App Store app.

iPhone OS 3.0 Applications:

• AP Mobile by The Associated Press: Push Notification Service (PNS)

• Tap Tap Revenge by Tapulous: Push Notification Service (PNS)
• Star Defense by ngmoco: Push Notification Service (PNS)
  
• MLB.com At Bat 2009 by MLB.com: Live video streaming

• Sonifi by Sonik Architects: Peer to peer connectivity over Bluetooth
• Leaf Trombone: World Stage by Smule: Peer to peer connectivity over Bluetooth
• Bomberman Touch 2 – Volcano Party by Hudson: Peer to peer connectivity over Bluetooth
• Flick Fishing by Freeverse: Peer to peer connectivity over Bluetooth, in app purchase
• Enigmo by Pangea Software: In app purchase
• Light Riders by DS Media Labs: iPod library access
• My Brute by Bulkypix: iPod library access
• Things by Cultured Code: In-app email, cuy, copy, & paste, undo support
• Gokivo + Yahoo! Local Search by Networks In Motion: Turn-by-turn navigation, in app purchase
• Recipes by Whole Foods Market: In app maps and email, support for copying text. [Disclosure: My company, Small Society, developed this app in partnership with Whole Foods Market.]
• AroundMe by Tweakersoft: In app maps

If anyone knows of any accessories-based iPhone 3.0 apps that have already launched on the App Store, please leave a comment. This was the one major iPhone SDK 3.0 addition I could not find on the App Store.

The last major announcement from Palm was the Foleo in May 2007, a device that was cancelled only a few months later. While the device itself was a failure, the concept was not. Netbooks are quickly becoming a sizeable market with universal appeal. Palm’s experience with the Foleo has left much of the tech press skeptical of Palm’s coming announcement. Personally, I think this is going to be one of Palm’s most important announcements in its history, following its two prior acts – the rise of the Palm PDA in the mid to late 1990s and the company’s transition to smartphones after the acquisition of Handspring in 2003. A hit will resurrect the company. A flop will likely lead to its demise.

This is an interesting time for Palm. On December 22, the company announced that it had secured $100 million in an equity investment from Elevation Partners, just four days after a disappointing Q2 FY09 earnings announcement with a substantial net loss for the quater. Palm’s CEO Ed Colligan called this an “undeniably difficult period.” Indeed. With so much of the smartphone narrative and consumer excitement focused on iPhone, BlackBerry, and Android, Palm has largely been left out.

The far more intriguing Colligan quote from the Q2 FY09 earnings release concerns Palm’s upcoming announcement – “We are on track to deliver a breakthrough new platform and products that will bring a truly differentiated smartphone experience to our customers and reestablish Palm as a leading innovator in the mobile industry.”

Breakthough new platform…
Truly differentiated smartphone experience…
Reastablish Palm as a leading innovator in the mobile industry…

Sure, press releases are full of language like that, but if you’re Palm, you can’t make these statements with the smartphone market conditions the way they are and expect to be taken seriously ever again unless there is some shred of truth in these words.

I think Palm has a chance. Not a very good chance, but a chance here and I think it’s unfair to be dismissive until we know exactly what Palm has to show us. For Palm to change the smartphone market dynamics at such a critical time, the company needs a hit on January 8th. Anything less than that will turn its third act into its final act.

Quick stats highlights from the first 10,000 iPhone applications:

• Games are the leading category, accounting for one in four of total applications. This reinforces Apple’s recent marketing campaign around games.
• $0.99 is the most common price point, although one in four applications are free.
• The most expensive application currently for sale is iRa by Lextech Labs for $899.99. This is video surveillance application that integrates with a number of CCTV systems.
• The entire iPhone App Store catalog could be purchased for just over $30,000, although there’s only room to fit 129 of them on your iPhone or iPod touch at any given time (148 apps in total, but that includes the default applications from Apple).

Ben Lorica and Roger Magoulas in the Market Research Group at O’Reilly Media have been doing an excellent job tracking the iPhone applications market. You can see some of this work on Ben’s Radar posts. I am looking forward to seeing an update from Roger and Ben now that we’re crossed the 10,000 mark.

• Casual games have simple rulesets and can be played in a short amount of time, such as Blackjack or Mindsweeper.
• Asynchronous games allow for people to participate without playing at the same time, such as turn-based games like Chess or Scrabble.
• Massively multiplayer online games have persistent, shared worlds, such as World of Warcraft or for you parents of youngsters out there, Club Penguin.

This combination of gaming elements is very appealing in the mobile market. It’s a perfect lifestyle fit. People want to play games in short increments of time. This may be during a commute on public transit or waiting in the doctor’s office. People want to play games on their own schedule. Not every player in a game can dedicate the same period of time to participate. People want to play games with real people, especially people they know. A shared game world provides this opportunity.

Aurora Feint II accomplishes this through the use of ‘ghosts’. A human player builds up a character in the game world that has the ability to act autonomously while the player is offline. The player’s ghost can be challenged in the game world at any time, and when the player returns to the game world, the ghost can be controlled directly. It’s a novel approach and solves a number of problems with people wanting to play with their friends on their own schedules.

Casual asynchronous massively multiplayer online gaming is going to be a hot market for game developers and it’s a natural fit for mobile devices. Expect to see more iPhone titles like this in the near future.

Market research firm The NPD Group further reinforced the significance of the prior quarter by announcing that iPhone 3G was the top selling consumer handset in the U.S. (press release). iPhone dethrones the Motorola RAZR, which has held this position for an impressive 12 consecutive quarters. According to Ross Rubin, director of industry analysis for NPD, “The displacement of the RAZR by the iPhone 3G represents a watershed shift in handset design from fashion to fashionable functionality.”

This is an impressive feat less than a year and a half after the debut of iPhone in June 2007. With 13 million iPhones already sold, Apple may exceed 20 million before the end of the year. Does anyone have an estimate for iPhone unit sales in the fourth calendar quarter?

I am pleased to announce the launch of a new O’Reilly Media conference focused on the emerging iPhone ecosystem – iPhoneLive. Apple’s iPhone is having a profound impact on the mobile telephony and computing industries, reshaping how we think about mobility and defining an entirely new class of devices. Whether you’re already building apps for the iPhone or are a developer who wants to make a move to the iPhone platform; if you’re an entrepreneur or simply an enthusiast of the iPhone, this is the event for you. I am the conference co-chair, along with Bill Dudney, an iPhone developer and author.

This one-day event scheduled for November 18, 2008, in San Jose, California, will explore the business and development issues surrounding the iPhone platform. There are two main iPhone themes at this year’s event – Build (core iPhone development) and Launch (launch readiness and business issues).

iPhoneLive will also feature Launch Pad, a showcase for the coolest, not-yet-public apps and startups. The iPhoneLive Launch Pad presents an opportunity for iPhone developers and entrepreneurs to unveil new applications and startups at a major event. There are a limited number of slots available for iPhoneLive Launch Pad, and there is no cost to participate. The deadline for submitting a proposal to participate is September 30th.

With only eleven weeks remaining before the event, we won’t be doing a call for papers this year, but there is still time for community input into the conference program. We’re finalizing our speakers and panelists now. We’d love to hear from you. Do you have any recommendations for speakers and panelists? What would make this conference a must-attend event for you? Please send an email to iphone-idea@oreilly.com with your ideas for iPhoneLive.

Some of the confirmed speakers include:

• Tim O’Reilly and his thoughts on the iPhone
• Steve Demeter, the creator of Trism, “Building an iPhone App in Your Spare Time”
• Ben Lorica and Roger Magoulas, O’Reilly Media, “App Store Trends and Patterns”
• Ryan Sarver, Skyhook Wireless, “Why Consumer-ready Location Matters”
• Neil Young, ng:moco:), “iPhone is greater than…”
• Di-Ann Eisnor, Platial, “From Web to Mobile: Placing Your Online Company into Your Users’ Hands”
• Shane Vitarana, the creator of Drum Kit, “Building Great Apps with Core Audio”

You can stay informed of the progress of iPhoneLive through the conference website, by joining our Facebook group, following user iphonelive on Twitter, and reading blog entries posted by Bill and me on our blogs – dudney.net and raven.me.

We hope to see you there!