argus insights smart phone consumer demand forecast 20130708

8/22/2019 Argus Insights Smart Phone Consumer Demand Forecast 20130708

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An Argus Insights White Paper

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Jul 8th, 2013

Peek Report for Smartphones

North American Demand Analysis

iPhone 5 passes Samsung while BlackBerry Z10 delights

TM
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2011-2013 Argus Insights, Inc. | www.argusinsights.com | [email protected] | May 2013

Table of Contents

Peek Report for Smartphones ......................................................................................................................................................... 1

Executive Summary ........................................................................................................................................................................ 2

Defining Delight and Other Metrics (a brief tutorial) ................................................................................................................................ 3

Delight Landscapes..................................................................................................................................................................... 3

Attribute Funnels ....................................................................................................................................................................... 4

Threat Quadrants ....................................................................................................................................................................... 4

Which Smartphone Brand is Delighting the Market the Most? ..................................................................................................................... 5

Which Handsets are Driving Consumer Demand? .................................................................................................................................... 6

How Does OEM Perception Differ By Carrier? ......................................................................................................................................... 7

Visions of Purchase Intent within Social ............................................................................................................................................... 8

What are the most shared and interesting links in Social Media? ....................................................................................... 8
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Innovation Intelligence

2011-2013 Argus Insights, Inc. | www.argusinsights.com | [email protected] | 17 June 2013 2

TM

Executive Summary

The Smartphone market is beginning to look like the Cold War where two superpowers, Apple and Samsung duke it out

while the minor players nip at the heels of the market. This week Apple scored gains on Samsung as buzz and delight

around the iPhone 5 increased to levels not seen in months while everything but the Galaxy S4 suffered declines in the

eyes consumers. Motorola continues their decline in the face of the marketing seemingly waiting for the first Googrola

phones to launch. BlackBerry continues to hemorrhage mindshare as consumers stop buying classic handsets and are

slow to buy the new BB10 handsets. The Z10 continues to be a product loved by a niche market while the Q10 is seen

as a pariah in the minds of customers. Nokias recent handsets are doing better but continue to mimic Apples PC

market share of the 1990s, making a small segment deliriously happy.

Key Takeaways for Retailers:

Galaxy S4 is finally taking hold but unclear whether demand is due to promotions or improvements to theexperience. Promotions may help to clear inventory but balance against iPhone promotions

Classic BlackBerry handsets are finally fading enough from the landscape to clear out inventories. Nokia and BlackBerry have handsets that consumers love but need help expanding beyond the niche.

Key Takeaways for Manufacturers and their Supply Chain While the Stylus and Big Screen work for the Galaxy Note II, every handset should not just blindly become pen

enabled and huge.

Slow growth of the iPhone 5 and the poor launch of the Galaxy SIV show an increase in feature fatigue andprice sensitivity where increases in performance are no longer what is driving adoption.

Failure of Facebook phone signals end of consumer interest in stove piped experiences. Consumers want totailor their handset experience not just drink from a preordained hose.

Key Takeaways for the Investment Community

Blackberrys comeback has faltered even though a mix of prior BB owners and former iPhone/Android ownerscontinue to sing the praise of BB10 on the Z10. Q10 is not doing as well.

Samsung S4 is doing better but unlikely to drive new demand given how stuffed the channel is. Slow down inother Samsung handsets points to a week summer fo sales Nokia continues to fight to move beyond the niche and may pass LG and Motorola for mindshare this summer Motorola mindshare mirrors the decline of BlackBerry. They will have a weak summer ahead of the Google X

Phone Launch

Overall Smartphone market is starting to look a bit saturated for the summer as the overall demand seems to becontracting as consumers are either waiting for the fall or happy with the handset they already own

Any growth in demand, such as recently seen in iPhone 5, will be driven more by retail promotion but withlimited success outside Apple handsets as consumers will prefer a cheaper iPhone over a free anything else

Key Takeaways for Accessories Manufacturers

Demand for Z10 seems to be slowing, along with Galaxy Note II and Galaxy S III. Galaxy S IV is probably not worth investing more resources in supporting, existing inventory should be sufficient

as consumers slowly work through the inventory Samsung stuffed in the channel

iPhone 4 continues to be one of the most discussed handsets, especially given low price and now universalavailability. Market for older cases and pre-Thunderbolt accessories is not completely dead yet

Lumia 928 is a surprising bright spot and may bear supporting in the near term with more accessories


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Defining Delight and Other Metrics (a brief tutorial)

In the quest to answer the question of What about the user experience is driving demand? Argus Insights has developed

the Delight Metric based on the star ratings of consumer reviews. This Delight metric, developed initially as part of

research at Stanford University, has been shown to be a proven predictor of consumer adoption, along with the volume of

consumer conversation around a product, the Buzz. The graph belows shows the actual Monthly Tablet Sales for 2011

and 2012, along with the predictive model created using just the Delight and Buzz Metrics. For those interested in

statistics, the model had an Adjusted R Squared of 72.4% and a p-value of 0.0017, meaning that 99.83% of the variation

in Tablet sales can be explained using the Argus Insights model.

Figure 1: Comparing actual Tablet Sales to Argus Insights predictive model using proprietary Delight and Buzz metrics.

Delight Landscapes

Delight is normalized from multiple consumer review sources to be -1 to 1, roughly equivalent to one to five stars. As it ismeasured from the launch of a product, it can be used to track the market falling in and out of love with a given

experience. The graph below shows the Delight and Buzz results for the iPhone 4s and iPhone over time. The y-axis is

the Delight level and the size of

the area of the bubble represents

the Buzz levels. This allows

comparisons between one product

and another or even between

brands, using the same

normalized metrics of Delight and

Buzz.

When looking at the entire

landscape you can rapidly identify

which products and brands are

winning the battle for hearts and

minds. The next question is

always what are they doing

different from the competition?

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WorldWide

MonthlySales

Millions

Comparing NPD Actual Sales to Argus Insights Predictions

$ NPD Sold Actual

Predicted Using Argus Insights Metrics

Copyright 2013 Argus Insights, Inc.

Figure 2: Buzz and Delight for Recent iPhones. Notice rough start for iPhone 5.


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Attribute Funnels

The next visualization helps to unpack what is

driving the user experience by extracting the topics

that are top of mind and their associated sentiment.

These Funnel Diagrams are ranked by the volume

of overall topic mentions with the spread of mentionsshowing how wide spread the positive and negative

mentions of these topics are. The example Funnel

Diagram in the figure below is an example of the

usage scenarios discussed by consumers in the

iPhone 5 reviews. You can see for the iPhone 5,

consumers still discuss using it as a phone the most

where as, discussion of the iPhone as a Laptop

Substitute barely registers in the minds of users.

Funnels like this help to understand what is driving

adoption of a particular product and can offer

powerful comparisons between products and

brands. If you wonder why Blackberry Z10customers are delighted or why Galaxy S4

customers are not, check out their Funnels.

Threat Quadrants

Another visualization used throughout the report is

the Threat Quadrant that illustrates the relative

performance by playing Delight and Buzz against

each other in a two by two matrix that represents

four possible classifications of a product or service:Winner, Loser, Slow Burner and Why Bother. Those

products with high Delight and high Buzz relative to

the market are clear Winners. Those who drive

lots of conversation about the bad experience are

Losers. Products delighting a niche slice of the

market are called Slow Burners and have a chance

to broaden their appeal to a larger segment of the

market. Why Bother are products where the few

people that even care enough to comment publically

say negative things, calling into question why the

company bothered to launch the product or service

in the first place. The Threat Quadrant on the leftdetails the relative perceptions of Smartphone

manufacturers. Since the Threat Quadrant is a

snapshot in time, occasionally we will include trend

lines to show the change over the previous

snapshot. We will use this snapshot to show the relative brand performance by carrier and the handset rankings at each

carrier as well. Notice that for this particular quadrant, the market perception for all brands but BlackBerry.

-5% -3% 0% 3% 5%

Phone

Web Surfing

MusicEmail

Movies

Gaming

Friends

Social Media

Significant Other

Family

Skype/Video Chat/Phone

Books

News/Weather/Sports

Messaging

Work

CoworkerLaptop Substitute

iPhone 5 Usage Scenarios

Figure 3:Attribute Funnel for iPhone 5 Usage Scenarios

Figure 4: Threat Quadrant for Smartphone Brands showing relativeConsumer perception along with month-to-month changes.

Samsung

Apple

HTC

LG

Motorola

Nokia

BlackBerry

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Smartphone Threat Quadrant

Slow Burners Winners

LosersWhy Bother?


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Which Smartphone Brand is Delighting the Market the Most?

Argus Insights tracks the consumer response

to products using customer authored reviews

leveraged by shoppers to support their own

purchase decisions. Our metrics based on

these reviews have been proven to be

leading indicators of future consumer

demand. The diagram to the left shows the

latest results for major handset brands in

North America.

While most brands received an uptick in

perceived consumer delight this past week,

Apple also saw an increase in buzz, probably

due to the success of iPhone 5 promotions by

Best Buy and other Retailers. Even though

BlackBerrys quarterly performance did not

meet expectations, consumers still see their

handsets in higher esteem than many brands.

LG continues a downward slide in the face of

the resurgence of HTC with the One handset

and others. Both Nokia and Motorola are

experience significant volatility in how

consumers view handsets from these

manufacturers. Notice that buzz is

decreasing for Moto as the market waits for

the new Google/Moto handsets. Nokia is

another matter. While new handsets are

delighting consumers (Lumia 928 is in the top

10 this week), Nokia is failing to move outside

a niche group of consumers with their

offerings.

The biggest news is a significant drop in the

consumer buzz around Samsung. Typically

this drop in buzz precedes a drop in demand

for a given brand. Given how Samsung

stuffed the channel with Galaxy S IV

handsets, retailers are working hard to churn

through their inventory helped by a global

advertising blitz by Samsung.

As consumer stop buying older BlackBerry

handsets, the overall demand is sliding given

that excitement over the Z10 and Q10 has not

been enough to ignite broad renewed

interest. As we will see later, the Z10 is what

is carrying BlackBerry now as those keyboard

holdouts spent Q1 buying old handsets rather

than waiting for the Q10.

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pple

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Axis Title

0.50

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0 5 10 15 20 25 30Motorola


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Which Handsets are Driving Consumer Demand?

To the left you will find the ten highest rated

phones based on a mix of Delight and Buzz.

Demand across the board is slowing this summer

expect for a few flagship products.The top handset in the minds of consumers is now

the BlackBerry Z10, followed closely by the

Lumia 928 at Verizon. The Galaxy Note II

remains a favorite, portending a potentially grand

market reception for the soon to be released

Galaxy Note III, as long as Samsung learns from

the failed S4 launch. The Galaxy S4 is finally

recovering from the initially slow launch and is

competing effectively with other leading handsets.

This shift and the recent decline in buzz around

the Galaxy S III and the Galaxy Note II, may

signal the demand is finally rising, thanks largely

to huge campaigns deployed by Samsung.

The iPhone 5 has slipped to fifth place but has

recently stolen mindshare from the other

handsets. Only the Galaxy S4 is motivating

consumers to share their experiences as much.

Though the Z10 is the highest rated handset,

there are very few consumers discussing

BlackBerrys flagship handset, signally a

significant slowdown in the demand for BlackBerry

products, especially given the lackluster market

response to the Q10. Simply stated BlackBerry isin deep trouble. Even Nokia is doing better overal

when it comes to demand though both have been

relegated to shrinking niches in the marketplace.

The experience of BB10 is delighting consumers

showing that BlackBerry finally got it right but

maybe too late. If demand continues to fall,

BlackBerry becomes ripe for acquisition. Nokias

continued in ability to even rise above LG in the

marketplace is heavily influenced by their

relationship with Microsoft which means Nokia

handsets will always have a niche with Windows

users but the current state of the market makes it

difficult for Nokia to move beyond that niche.

Noticeably absent are any Motorola RAZR

handsets or the Google Nexus 4. The market is

waiting for any innovation dividends from the

Motorola purchase and their patience is running

out. Even the iPhone 4 continues to outperform

any of the Motorola flagship handsets in the

marketplace.

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Apple iPhone 4

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Apple iPhone 5

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HTC One

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LG Optimus G

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Nokia Lumia 928

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Samsung Galaxy Note II

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BlackBerry Z10

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Samsung Galaxy S III

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Samsung Galaxy S IV


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How Does OEM Perception Differ By Carrier?

The Carrier Brand Quadrants illustrate the brand performance by major US carriers over the past month. The x axis

shows the volume of reviews from that carrier for that brand over the past month. The y-axis illustrates how well that

brand met user expectations based on the review ratings for the past month. The trend arrow shows the change over the

prior month. This allows the visualization of the shift in user expectations by carrier.

Figure 5: Brand Quadrants for AT&T and Verizon Highlighting Which Brands Are Delighting OR Disappointing SmartphoneConsumers. Trend Arrow shows direction of change over prior month.

Interest in the HTC One is dropping at AT&T along with the Galaxy S IV while Apple and LG customers are finding new

reasons to buy. Most striking are the drops in Nokia and Motorola in the minds of AT&T customers. Verizon also saw

Motorola, Nokia, and HTC customers express increased frustration with their experiences while Apple, BlackBerry

customers all were happy with their new phones. The Lumia 928 drove the most buzz at Verizon.

Figure 6 Brand Quadrants for T-Mobile and Sprint Highlighting Which Brands Are Delighting OR Disappointing SmartphoneConsumers. Trend Arrow shows direction of change over prior month.

After the initial burst of Apple interest, Samsung is clearly the winning brand at T-Mobile. Nokia seems to be making a

small comeback at T-Mobile at the expense of LG and HTC. Sprint consumers seem to be coming out of their overall

funk based on delight with Samsung products. Apples lack of dominance across the carriers indicates a growing

saturation in the US market where growth comes from replacement over new iPhone users. The whole market is waiting

for fall to bring innovation to the market after the all hat and no cattle launch of the Galaxy S IV and the teaser of iOS 7.

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Visions of Purchase Intent within Social

Argus Insights tracks the smartphone brands in social media. Most of what we see are promotions, advertisements for

cases, gaming related tweets when someone achieves a new level, etc. Much of the twitter traffic regarding

smartphones does not come from humans but from software bots acting on their behalf. One of the sure ways Argus

has found to determine whether the tweet author was silicon based or carbon is by using tweets tagged with a geo-location. Today, while only a small percentage of tweets contain this data, only human users that have opted in to

share their location coordinates publish this data, something a bot cannot yet do. Below is a US map showing the

relative volume and distribution of mobile brand tweets over the past two weeks.

Figure 7: Brand mentions in Twitter by location. Though clustered in population centers, relative distribution does changeby handset brand. Regional affiliations such as more RIM in Canada and more LG mentions in the Midwest.

Notice that there is little dispute that Apple and Samsung receive the most call outs from Twitter users. Not only is this

an indication of the install base but also which brands have the most active engagement in the lives of handset users.

While the clustering of discussion around major metro areas is not a surprise, the detail of which handsets are

mentioned most in these areas is of interest as they tend to be the leading indicators of shifting trends in the mobile

landscape.

What are the most shared and interesting links in Social Media?

Much of the social media around Smartphones are spam campaigns or contests for free phones. Below are a selection

of the links most shared beyond the enticement adds of the continuous spam onslaught in social media.

TechCrunch Commentary on iOS 7 Depature of HTC COO Matthew Costello Top 5 Things To Know About BBM Video, BlackBerry's Video Messaging Service Crackberry Coverage of iOS7 Event

Oddly enough, BlackBerry related mentions topped the share charts during the week.
http://techcrunch.com/2013/06/10/ios-7-steals-mailboxs-gestures-sunrises-layout-bb10s-back-button-weboss-multitasking/http://techcrunch.com/2013/06/10/ios-7-steals-mailboxs-gestures-sunrises-layout-bb10s-back-button-weboss-multitasking/http://thenextweb.com/insider/2013/06/04/htc-coo-matthew-costello-joins-the-growing-number-of-high-level-execs-leaving-the-smartphone-maker/?utm_medium=Spreadus&awesm=tnw.to_r4vn&utm_source=Twitter&utm_campaign=social+mediahttp://thenextweb.com/insider/2013/06/04/htc-coo-matthew-costello-joins-the-growing-number-of-high-level-execs-leaving-the-smartphone-maker/?utm_medium=Spreadus&awesm=tnw.to_r4vn&utm_source=Twitter&utm_campaign=social+mediahttp://blogs.blackberry.com/2013/04/bbm-video-top-5-things-you-should-know/?CPID=SOC_TWI1000099http://blogs.blackberry.com/2013/04/bbm-video-top-5-things-you-should-know/?CPID=SOC_TWI1000099http://crackberry.com/apple-swipes-thing-or-two-blackberryhttp://crackberry.com/apple-swipes-thing-or-two-blackberryhttp://crackberry.com/apple-swipes-thing-or-two-blackberryhttp://blogs.blackberry.com/2013/04/bbm-video-top-5-things-you-should-know/?CPID=SOC_TWI1000099http://thenextweb.com/insider/2013/06/04/htc-coo-matthew-costello-joins-the-growing-number-of-high-level-execs-leaving-the-smartphone-maker/?utm_medium=Spreadus&awesm=tnw.to_r4vn&utm_source=Twitter&utm_campaign=social+mediahttp://techcrunch.com/2013/06/10/ios-7-steals-mailboxs-gestures-sunrises-layout-bb10s-back-button-weboss-multitasking/


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