Who Are The Winners With iPhone 5?

The iPhone 5 reviews are in. Millions of consumers have bought the device and have begun to reshape digital habits based on the iPhone 5 specifications. Developers are recalibrating their products and strategies.

With a week’s hindsight after the Sept. 21 launch, we can begin to tease out what the device will mean for mobile usage, app development, and mobile advertising. So what are the emerging opportunities? We see three clear winners:

  • Gaming: Larger display and better graphics will provide more engagement and revenue.
  • Mobile video: New aspect ratio, LTE, and improved stabilisation will boost usage.
  • Advertising generally: Larger screen will allow for less disruptive, richer ads.

Before we describe in detail how iPhone 5 will boost the above categories, however, it’s worth noting that this is not just about Apple. The fact is that the iPhone’s mystique and the iOS platform’s long-running position as a developer darling means everyone will be watching the knock-on effects of this device. Larger screens and speedier smartphones were not Apple’s innovations, but iPhone 5 puts them at the centre of the mobile industry zeitgeist.

Any new iPhone release is a potential game-changer. With iPhone 4 and 4S, for example, photo sharing exploded, driving the incredible growth of Instagram. It is possible that another usage wave and new app success stories will be launched by iPhone 5 (supported by the new iOS 6 operating system).

Ahead of the iPhone 5’s release, app developers certainly had a checklist of what improvements should be made. According to Appcelerator’s latest developer survey, conducted in August, 51 per cent of developers said they wanted the new iPhone to have a faster processor, 43 per cent a larger screen, and 39 per cent listed LTE connectivity. These desires were met. 

It’s The Screen, Stupid
Screen real estate matters a lot. And that’s the case whether the screen’s rendering game landscapes, serving up music videos, or displaying a mobile ad.

As much as consumers across the board say they do not like mobile ads (fewer than 20 per cent of respondents in a Nielsen poll said they found mobile ads acceptable), a substantial portion of them do seem to be willing to tolerate them if the ads are not disruptive and getting in the way of other activities. And a larger screen size can help in this sense by making in-app or mobile browser ads less obtrusive (see chart to the right). Also, the larger screen potentially adds more functionality to all apps, so marketers will be less driven to serve up ads that, when clicked, take users out of an app and to a mobile site. These are particularly abhorred by consumers. 

The iPhone 5 has a screen size of 1136×640 pixels. That’s 18 per cent more area than its predecessor.

Translated to handheld devices with touch screens, that’s a significant amount of potential functionality thrown wide open.

Game designers told The Verge that iPhone 5 will allow user interface elements to move toward unobtrusive spots so that more of the action is centre stage. In more concrete terms, the new screen allows a fifth row of game icons to be added.

It is also more in line with the aspect ratio typically used on other devices and platforms—16:9—which is the standard for HD TV. (Of course, developers will have to rewrite apps to take advantage of the taller screen.)

For advertisers, as Adweek reported, the larger screen means larger display ads, prettier full-screen ads, the potential for more interactivity and rich media, and less risk of misclicks. Accidental clicks due to the so-called fat finger syndrome are a major headache for mobile advertisers. 

Berlin-based Trademob analysed over 6 million clicks across the top 10 ad networks for a report released this month and found that 40 per cent of mobile ad clicks are essentially worthless, and over half of these were due to misclicks. (See the chart below.)

In fact, a 2011 Pontiflex study  found that 47 per cent of all mobile app users said they had clicked on an ad by mistake, and among 18–34-year-olds 61 per cent said they clicked on mobile ads accidentally more often than they did on purpose. These numbers sound horrible, but they actually represented an improvement over results in similar earlier surveys, and the reduction of fat finger misclicks is in part attributable to larger smartphone screen sizes. 

It’s worth noting that both Pontiflex and Trademob have a vested interest in highlighting the misclick problem, since Pontiflex sells ads monetized by sign ups and not clicks and Trademob sells sophisticated ad tracking tools. But their points remain valid.If a larger iPhone screen delivers on its promise of reducing misclicks, advertisers will see a lift in the return on their iOS-served mobile ad dollars. This is especially true since iPhones account for the lion’s share of global mobile ad revenues. For example, iPhones took 44 per cent compared to Android’s 27 per cent, according to Opera’s last report, “The State of Mobile Advertising, Q2 2012.” (Numbers vary across ad networks but iOS and iPhone generally come out on top.)

“Devices with better usability … have better monetization potential,” says the report. 

For video, the new aspect ratio, the larger screen (and retina display) also mean that videos viewed horizontally, as on video apps YouTube and Tout, will offer a notably better user experience.

It’s no surprise that those promoting live broadcast TV on smartphones also have embraced larger screens. Dyle.tv, a consortium of major U.S. broadcasters (including Fox and NBC), streams local network TV in 35 markets live to your phone.

It does so without using your wireless connection (it uses a different standard reserved for mobile TV).

For now, the only compatible device is a Samsung Galaxy S Lightray from Metro PCS with a 4.3-inch (diagonal) screen. But a planned attachable dongle-like antenna will also make the service work on iOS devices, including iPhone 5 and its 4-inch screen. 

Speed Matters
But speed is also part of the story. The iPhone’s compatibility with LTE networks such as Verizon’s in the United States means it will offer wireless data speeds that compare with fixed broadband.

The phone’s new A6 chip means all the interactivity, whether it’s on games or adverts, will offer a faster and graphically more sophisticated experience.

Professional video producers are already praising the iPhone 5 and its capacity to shoot gorgeous video (video stabilisation has been improved for iPhone 5). In terms of playback, a video streamed via LTE on an iPhone 5 will load quickly and play without hiccups. 

The better viewing experience also means that more people will begin to use their phones to watch longer videos like, say, a 20-minute situation comedy, which they now tend to do on tablets. (The chart to the right shows how consumers overwhelmingly prefer tablets to smartphones for video viewing— particularly movies and TV shows.)There will be enhanced opportunities for mobile video in advertising too. The Opera report cited above found that 66 per cent of users clicking through a video-enhanced rich media ad will complete the interaction. And video ad executions on the Opera network doubled between January and June of this year, and now account for 13 per cent of all ad executions. 

For games, an emerging feature helped along by the A6 is time-shifting. That refers to multiple users being able to play one another even though the players may be in the game at different times. It’s made possible by a software-generated “double” that mimics a player’s ability and behaviour.

Remember, that any increased engagement in gaming is sure to translate to added revenue, since mobile gaming is the one area that has certainly cracked the code to monetization (see chart below, in which “paid revenue” refers to in-app purchases and paid app downloads). 

Developer Costs

All this enhanced functionality doesn’t come hassle-free. Mobile advertising agency Velti polled developers and found that building for the new iPhone 5 display will probably involve 15 per cent more hours invested because of the larger screen, and 12 per cent more time due to the higher resolution of the retina display.Meanwhile game developer Brainium told Velti that the real cost comes from testing games on both retina and non-retina displays.

The increase in hours needed for testing is 100 per cent because “every button and texture” needs to be tried out on both screen types.

Added development costs for iPhone 5 are not likely to frighten off developers, though. As a comparison, Android apps already carry a 25 per cent cost premium over iOS because of the proliferation of screen sizes and platform iterations, as Poynt’s sales chief told Velti.

BOTTOM LINE

  • Video apps, video streaming, and gaming are likely poised for a new wave of developer interest and will engage more users for longer periods. 
  • These increases in time spent on video and gaming may be additive, in the sense that they will not necessarily come at a cost to other more well-established smartphone uses. 
  • Advertising will get a lift from the opportunity to place less obtrusive yet nice-looking and richly-featured ads.

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