Author: Erica Ogg

Nearly six years into its life, the iPhone is still Apple’s most important product, but it is no longer a rocket engine propelling Apple to spectacular growth. The company sold 37.4 million iPhones between January and March, which is just 6.5 percent more than the same quarter a year ago. It seems pretty clear the days of more than doubling unit sales nearly every quarter are over.

This was bound to happen eventually: Apple is facing stiffer competition than it ever has in smartphones, especially overseas with lower-priced devices that run Android. The competition is getting better at the high end as well, and is also releasing new smartphones seemingly every few months. And at the same time, Apple’s been selling the iPhone in more established markets for almost six years.

This doesn’t mean the iPhone is doomed or dead. We’ve just entered a new era of the iPhone — one where the company relies more than ever on older, cheaper devices to continue to expand the ranks of iPhone customers. On Tuesday, CEO Tim Cook gave the example of how this is working in the Greater China region, where the nearly three-year-old iPhone 4 is popular:

China has an unusually large number of potential first-time smartphone buyers and that’s not lost on us. We’ve seen a significant interest in iPhone 4 there and have recently made it even more affordable to make it even more attractive to those first-time buyers. We’re hopeful that helps iPhone sales in the future.

And, he added later, that’s not limited to China: “We’re continuing to do that in other markets. We believe the [iPhone 4] for the price point we’re offering is an incredible value for people that allows people to get into the ecosystem with a really, really phenomenal product.”

Cook didn’t reveal exactly how many iPhone 4 devices Apple sold in the China region (or anywhere for that matter), but recent data from Consumer Intelligence Research Partners shows that preference for cheaper iPhones is a broad theme among recent purchasers in the U.S. too. According to its survey data, the iPhone 4 and iPhone 4S accounted for 47 percent of all the iPhones sold between January and March. The latest model iPhone 5, while still the top seller, represented the lowest ratio of late-model iPhone to older model iPhones Apple has seen. By comparison, the iPhone 4S was still accounting for 73 percent of iPhone sales two quarters after its debut.

If interest in the brand-new iPhone is declining that quickly, barely two quarters into its life, then Apple has two choices if it wants to keep the iPhone growing. It can roll out new devices more often or try to drive volumes with cheaper models.

Since Apple is a bit of a perfectionist when it comes to details and doesn’t seem the type to pump out products that could lead to brand dilution, the most practical move seems to be the one Cook is pursuing now: relying on the status and cachet attached to the iPhone name and offer older model devices to people who can for the first time afford an Apple product.

This is not unlike the company’s iPod strategy: the original iPod in 2001 cost $399, and over the years the company expanded the lineup with more models and storage size choices and brought down the price all the way to the current $49 impulse-buy level price of the iPod nano. It famously provided a much-needed halo-effect for Apple, where first-time customers bought into the iTunes ecosystem, and then the Mac, and in later years the iPhone and possibly iPad. Apple wants the same thing from brand-new customers who pick up an iPhone 4 for free on contract or at a very low price: that those new buyers sign up for iTunes, download some apps, music and TV shows, and store their documents in iCloud — as Cook puts it in the quote above, “get into the ecosystem.”

The iPod eventually gave way to the iPhone as the growth driver for Apple. So with the iPhone maturing, the billion-dollar question is what comes next for Apple after the iPhone? That’s what’s not clear yet. Cook telegraphed new products coming “this fall” and “throughout 2014″ but of course didn’t explain whether those were mobile computing products or TVs or whatever.

In the meantime, while it may not be a completely parallel replacement for the iPhone, the iPad is just three years old and still growing; not to mention the iPad mini which is also just two quarters old. At this point, the countdown is on for when it replaces the iPhone as Apple’s most important product.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• U.S. Wireless Data Market: Q4 and Year-End 2008
• Analyzing the wearable computing market
• Confused about the wireless markets? Here’s a breakdown

Apple’s profits took a dip for the first time in a very long time on Tuesday when it reported second fiscal quarter earnings results of $43.9 billion in revenue, profits of $9.5 billion and earnings per share of $10.09. Revenue was up slightly from the $39.2 billion earned a year ago, but profits were down from the $11.6 billion and earnings of $12.30 per share in its 2012 second quarter. The results did ever-so-slightly beat Wall Street’s expectations: on average, Wall Street analysts were looking for earnings per share of $10.07 and revenue of $42.59 billion.

In terms of device sales, the numbers are:

• 37.4 million iPhones, up from the 35.1 million sold a year ago.
• 19.5 million iPads, up from 11.8 million a year go.
• 4 million Macs, the exact same number as the same quarter a year ago.
• For the first time, Apple did not break out iPod unit sales.

Another big number that Apple watchers are focused on is the company’s gross margins. Last quarter, Apple forecast its gross margin would fall somewhere between 37.5 percent and 38.5 percent. In actuality it was 37.5 percent, compared to 47.4 percent in the year-ago quarter.

CEO Tim Cook said in a statement, “We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad. Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline.”

Between January and March, Apple added $12.5 billion to its cash pile, bringing to total to $145 billion. The company also elected to return more of that to shareholders.

Apple said it will be increasing its dividend payment to 15 percent; each shareholder will now received a dividend of $3.05 per share each quarter, starting May 16. In addition, it plans to spend $60 billion on stock buybacks before the end of 2015. That’s a significant increase from the $10 billion buyback program announced a year ago. In total, Apple plans to spend $100 billion of its cash.

Looking ahead to next quarter, the company is projecting more revenue between $33.5 billion and $35.5 billion, which is on the lower end of its revenue reported for that same quarter in 2012, $35 billion.

The news didn’t do much to the company’s stock either way: it was down just 0.03 percent in after-hours trading to $406 Tuesday afternoon.

This post was updated several times, the last at 1:48 p.m. PT.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Forecast: Tablet App Sales To Hit $8B by 2015
• GigaOM Research highs and lows from CES 2013
• How HR can make the case for workforce analytics

Stop me if you’ve heard this before: Apple’s cloud-based services are experiencing some issues. On Tuesday morning, some users woke up to find they couldn’t access GameCenter, iTunes, iCloud or create a new Apple ID account. As of this writing, only GameCenter and Apple ID are continuing to experience issues; the rest appear to have been fixed, according to Apple’s systems status dashboard:

The outage began just after 4 a.m. PT on Tuesday. Apple is only saying that “some users” were affected, but it’s not clear how many people that actually means. I live in the northeast and I didn’t experience a total outage of services, but downloading apps from the iTunes Store this morning took about four minutes longer than usual — which is to say, they usually take about 15 seconds to download. 9to5Mac gathered tweets from users in various countries who seem to have experienced some problems.

This particular outage is the second multi-hour problem Apple’s online services have experienced in the last two weeks. Earlier this month iMessage, a far more regularly used and popular service than GameCenter, suffered a five-hour outage.

Update: Apple’s system status dashboard shows that as of 10:28 a.m. PT all services are back online.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• CES 2012: a recap and analysis
• Siri: Say hello to the coming “invisible interface”
• The future of mobile: a segment analysis by GigaOM Pro

The big number everyone’s going to be watching for during Apple’s earnings announcement on Tuesday is how many iPhones it sold during its second fiscal quarter. We don’t know the total yet, but a study published by Consumer Intelligence Research Partners estimates how many of those were the latest model iPhone 5: about 53 percent of all iPhones sold worldwide.

It also found that the rest were iPhone 4 and iPhone 4S models, which sell for free with a contract or for $99 with a contract, respectively. That breakdown is slightly improved from December, when a CIRP survey shows that just half of all iPhones sold were the newest model iPhone 5.

This is a very different sales pattern than what we saw in the second quarter of the iPhone 4S’s availability. When that device was the latest model, it accounted for 73 percent of all iPhone sales in April 2012, a significantly larger share than the iPhone 5 had as of March, according to CIRP, whose data comes from a survey of 500 customers who’d recently bought an Apple device.

The iPhone 4S sold 33% of all iPhones in the survey period, while the iPhone 4 represented 14% of all iPhones. In contrast, in the similar period following the launch of the iPhone 4S, the lower-priced iPhone 4 represented 22% of sales, and the free iPhone 3GS represented 5% of sales.

As a share of iPhones sold, 33 percent is the highest share a legacy model iPhone has carried in at least the last two years, according to CIRP’s data. Apple wants to sell iPhones no matter what, but ideally it wants to sell more of the most expensive iPhones, not the severely discounted and free-on-contract devices; that way its average selling price stays high.

Something similar is taking place with iPads, CIRP found: Between January and March, the iPad 2 — which originally debuted in early 2011 — grabbed a larger share of iPad sales, up from 27 percent to 32 percent. The newest model, the iPad with Retina display, dropped from 43 percent of sales in the holiday quarter to 36 percent of sales during the January quarter. Meanwhile, the smaller and cheaper iPad mini grew slightly, from 30 percent to 32 percent of sales.

It’s not really a mystery that cheaper Apple devices, even when the devices are not the latest model, are attractive to buyers when viewed against the competition. What is a mystery (until tomorrow anyway) is how this affects Apple’s balance sheet.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• Defining the mobile wallet: what it is, why it matters
• Confused about the wireless markets? Here’s a breakdown

Early signs indicate that Apple’s second fiscal quarter earnings results, set to be announced on Tuesday, are not going to be a blowout.

Why do Apple watchers have muted expectations? Foxconn parent company Hon Hai Precision Co. — whose fortunes are understood to be tied to Apple’s since the iPhone maker is its biggest client – saw its quarterly sales drop nearly 20 percent. Cirrus Logic’s results were also down: many investors read into its weak sales for the quarter as a clue that Apple’s ordering of audio chips for iPhones and iPads was lower than expected. LG, which makes displays for Apple, also saw its profits shrink and its orders slow down.

There are some rather obvious reasons for this slowness. For one thing, it’s the wrong season: the sales period it will report is for January through March, during which consumer electronics makers always see slower sales compared to the October through December holiday buying period. (Still, Apple is anticipating revenues between $41 billion and $43 billion, which is just slightly ahead of the $39.2 billion in revenues it recorded in the same quarter last year.) But there’s another big reason, which we saw coming back in October: all of its major products — iPhone, iPad, iPad mini, Macs — were refreshed in the fall, leaving Apple with no major new device release during the January quarter. That means no huge sales bump and no one big sales statistic to brag about.

That said, Apple is still Apple: people are still buying its products, as Verizon’s recent results showed us. But there are a few things to watch out for during earnings tomorrow:

• Did Apple meet its own expectations? Apple has had a few earnings “misses” in recent months, but it was Wall Street’s expectations that it failed to meet. For the first quarter, look for how close Apple’s results come to its own admittedly less ambitious forecast of gross margins between 37.5 percent and 38.5 percent and revenues between $41 billion and $43 billion.
• iPad mini versus iPad. Have customers been choosing the smaller, cheaper iPad mini over its larger, pricier tablet brother? If so, that’s going to hit Apple’s profit margins. The company makes more profit on the pricier iPad that starts at $499 than the one that starts at $329.
• Did they catch up in Mac production? This is a huge question. Mac unit sales were down 22 percent last quarter and the company repeatedly blamed it on supply constraints with the new iMac. CEO Tim Cook promised next quarter would see improved efficiency in production — but has Apple met that goal?
• Mac sales. More importantly, if Apple did catch up, what kind of demand for them was there? The first three months of this year saw the worst PC shipment results in two decades, according to IDC and Gartner. But it’s hard to get a good idea of how Apple did during the quarter: IDC had Mac shipments down 7.5 percent from a year ago, while Gartner saw the opposite, that Mac sales were up 7.4 percent. We’ll find how who was closer on Tuesday.
• Dividend talk. Bernstein Research analyst Toni Sacconaghi told his clients that Apple will wait until after earnings to introduce a larger dividend payment for investors. But as we saw with last week’s stock slide, Wall Street is pretty negative about Apple right now. Discussion of a dividend or share buyback on Tuesday (as Morgan Stanley’s Katy Huberty is expecting) would raise analysts’ spirits — and the stock.
• China. The country is bound to come up tomorrow — sales of devices in the region are massively important to Apple. But listen to hear if Cook or anyone else addresses the recent tensions between Apple and the government and media there.

Earnings results are expected around 1:30 p.m. PT on Tuesday, with a call with investors and analysts scheduled for 2 p.m.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• Confused about the wireless markets? Here’s a breakdown
• Carrier IQ and the continued erosion of operator trust

I love the idea of making email suck less.

As a reporter, email is one of the most important tools of my job: for communicating with sources, my editors and colleagues, companies I cover, receiving news tips, and more. Admittedly, my current email work flow is pretty awful. And I know I should get better about managing my email, especially on my phone, where I check it roughly 500 times a day. Still, I can’t get myself to let go of my bad habits.

It’s weird too: when it comes to mobile mail, today is one of the best times in recent memory to find a better solution. My Twitter feed has been filled with glowing reviews from many people who’ve tried Mailbox. And I love Taskbox’s motto: “make [email] something people don’t dread and people feel in control of.” So I gave Mailbox a go. The experiment lasted less than a week (it still tells me I have 22,200 unread emails). I also gave Taskbox a try for at least two weeks for my work email only (current unread email count a slightly less intimidating 722). Both seem like great products, but I realized I don’t have the patience to get into either of them. I don’t think it’s anything to do with those apps themselves — which plenty of people seem to love — but about the idea of change to a routine that is so critical to modern work — and life.

My inability to stomach change is even more ridiculous because of how awful my current email work flow is both on my desktop and my iPhone. I use Gmail’s color-coded labels, which is plenty useful. But if I get an important email that I know requires my response but not immediately, I “star” it and mark it as unread.

It was Andrew Eye, CEO of Taskbox, who jokingly pointed out to me how broken email is: if “the only way to stay organized in email is to lie to yourself” that you haven’t read something when you actually have.

He’s right! But still — the idea of learning a new system of email, whether it’s by prioritizing items or “snoozing” them kind of freaks me out. I can’t miss an important email or misplace one even temporarily put it in a folder where I’m not immediately sure how to find it.

And, no, I’m not completely averse to change when it comes to my digital life. I don’t participate in the massive freakout when Facebook makes one of its inevitable design changes. I was plenty adventurous about trying out several new calendaring apps; getting deadlines right is also critical to my job, but I was able to successfully switch over to Sunrise from my iPhone’s basic calendar app.

But totally altering my mobile email routine seems like rebuilding the plane in mid-flight: there is never a good time for change.

I don’t think I’m alone either. Email is something people are super sensitive to altering. Even Google had a rough time rolling out too many changes at once: at one point even the labels feature was too much for non-power users to adopt.

Labels are standard now for a lot of email users, including me. And that gives me hope that some day I’ll find a service that’s able to drag me along to better email habits. But for the foreseeable future, I’ll be at inbox 22,000.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The 2013 task management tools market
• Podcast: Mobile winners and losers in 2012 and what to expect in 2013
• Analyzing the wearable computing market

Whether you’re asking Siri about the weather, the score of last night’s ballgame or something a little more personal, you’re probably at least a little curious about how Apple handles all those voice-activated search requests. Well, you can thank the ACLU and Wired for getting to the bottom of things: it turns out that Apple, using anonymized user ID numbers, holds on to your Siri data for up to two years.

Here’s Wired‘s explanation on what happens when you ask Siri to do something for you and the information goes off to an Apple data center:

Apple generates a random numbers to represent the user and it associates the voice files with that number. This number — not your Apple user ID or email address — represents you as far as Siri’s back-end voice analysis system is concerned.

Once the voice recording is six months old, Apple “disassociates” your user number from the clip, deleting the number from the voice file. But it keeps these disassociated files for up to 18 more months for testing and product improvement purposes.

The report includes a statement from Apple, which confirms the anonymized information may be kept “for up to two years.” But, according to the Apple spokeswoman, “If a user turns Siri off, both identifiers are deleted immediately along with any associated data.”

The two-year mark is six months longer than Yahoo, Microsoft and Google, all of which retain search data for 18 months.

Apple clarified what it does with this information because a lawyer for the ACLU started asking questions. The concern stemmed from Apple’s privacy policy for Siri users, which states in part, “Older voice input data that has been disassociated from you may be retained for a period of time to generally improve Siri and other Apple products and services.”

Machine learning technology and natural language processing, which is what Siri is based on, needs a lot of information to identify patterns in data and therefore be more helpful both in understanding your speech and providing correct answers.

Being connected to an anonymized set of digits may make some users uncomfortable, so the ACLU thinks Apple should make that more clear before they start using the service.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Controversy, courtrooms and the cloud in Q1
• NewNet Q4: Platform mania and social commerce shakeout
• NewNet Q4: Platform mania and social commerce shakeout

Android may be the most used mobile operating system, but to get their ads in front of their preferred customers, advertisers are continuing to rely heavily on iOS devices. According to the Mobile Advertising Marketplace report published by MoPub on Thursday, 75 percent of spending on mobile advertising during the first quarter of 2013 was on devices running iOS.

MoPub, which is an ad-serving platform for mobile app publishers, found the iPhone was the strongest performer during the quarter; the report says the share of ad buying on Apple phones increased 12 percent between January and March. The iPad experienced a drop-off in spending in February but rebounded a bit in March.

The share of Android tablet spending was negligible at less than 1 percent, according to MoPub. Android phones, which took about a quarter of all mobile ad spending, saw the reverse pattern from the iPad: spending on the platform increased in February before dipping back down in March. MoPub explains that “In Q1 2013, many ad buyers discovered the increase in user value on Android devices was offset by a poor conversion rate of users from these ads.”

As for the kinds of ads being placed, things swung more toward interactive ads, with the share of spending on them growing from 15.7 percent to 79.1 percent during the quarter.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• Hyperlocal: opportunities for publishers and developers
• Facebook’s IPO filing: ideas and implications

A restaurant that has four stars on Yelp might be a big hit with a lot of people, but there’s no guarantee that you in particular will like it. What if you can’t stand Cuban-Japanese fusion? For you, that restaurant should be ranked zero stars. That’s the premise of personalized dining recommendation app called Ness that’s debuting a new version of its app on Wednesday.

Ness first came out with its free iOS app in 2011, but has gone back and improved the ability to predict what users will like. The app is a slick, beautifully designed way of helping you determine where to eat by asking you a few questions to get an idea of what you like and don’t like. It then adapts and learns from how you continue to use the app. Think of it like Pandora or Zite, but for eating out.

The subject happens to be dining , but what Ness is up to is really about maximizing the accuracy of personalization. With its own algorithmic models that use machine learning technology, Ness takes the user’s location, time of day, stated preferences and behaviors within the app (ignoring things, dismissing things) to basically build a dining guide for you. Its determination of how much you’ll enjoy the place or the cuisine is represented by a percentage grade out of 100.

Time of day is an example of a key indicator for the new Ness: if it’s mid-day the app will automatically search for good lunch places. If it’s nighttime, it looks for dinner spots.

It also detects your location to determine how far you’d have to go for food. If you’re in a densely packed metro area during the work week, you’re probably just looking to grab something close by, so Ness will search within a few-block radius for food options. If you’re in an office park in a suburb, Ness knows you’re going to have to drive a couple miles to find lunch, and will recommend places accordingly.

Ideally, this is supposed to happen automatically, without the user having to constantly remind the app of these search constraints.

What you don’t do is also important for Ness’s algorithm: if you search for coffee but never click on Starbucks when the option surfaces always opting instead for a local coffee bar, Ness will start to assume you don’t like chain coffeeshops in general and stop showing you them.

Using that approach to personalization, said Ness Computing founder and CEO Corey Reese, “takes longer to pick up that signal, but the benefit is you [the user] don’t have to do any thinking to make it work.”

Like recommendation services in other genres, like music or news content, the idea of Ness’s more personalized approach is not to keep you in a bubble of your established tastes only. It wants to understand what you like and point you toward places that you’ll enjoy, but not the same places all the time.

“We’re focused more on the moment of delight: ‘Oh, here is a place I had not known about,’” said Reese. “It’s less about making sure you don’t have a crappy meal.” In his mind, that’s more of what Yelp is for — ensuring a minimum level of quality.

“We’re really trying to find those hidden gems that you may not know about.”

The release of the 2.0 version of the app on Wednesday is just one step, he tells me. After the service understands what you like, the next step is for Ness to understand what it is about a place that makes you like it — the ambience, the food, the location, the staff, etc. But you’ll have to wait for improvements in that area in future updates.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• How social discovery is transforming entertainment
• Connected world: the consumer technology revolution
• Podcast: Mobile winners and losers in 2012 and what to expect in 2013

A company you’ve never heard of is being blamed for dragging Apple’s stock down to its lowest point since late 2011, $401.68. Cirrus Logic, which makes audio chips, reported revenues of $170 million for first quarter, missing analysts’ expectations by nearly $30 million. The reason Apple investors reacted the way they did is because Apple is believed to be Cirrus Logic’s biggest client: if its sales are down, it signals Apple’s mobile device sales could be down too.

According to Bloomberg:

Cirrus will record a net inventory reserve of $23.3 million for the fiscal fourth quarter, which ended in March, the Austin, Texas-based company said in a statement yesterday. Most of that — $20.7 million — is from a high-volume product from one customer, Cirrus said, without naming the client.

Bloomberg reports that the unnamed client is Apple, and that 90 percent of Cirrus Logic’s revenues come from selling audio chips that Apple puts inside of iPhones and iPads. If Cirrus Logic has huge amounts of unsold inventory, the thinking is that it’s because Apple had no need for them — that it possibly overestimated the number of iPhones and iPads it was able to sell during the first three months of 2013.

Even if that’s true, there’s more than one possible explanation for Cirrus Logic’s excess supply of chips. Apple could have switched providers of those chips, for instance. Apple CEO Tim Cook warned when similar negative supplier reports caused a massive freakout among investors a week before earnings last quarter: “I’d stress that even if a particular data point were factual, it would be impossible to interpret [the meaning] for our overall business. Yields can vary, supplier performance can vary … there’s an inordinately long list of things that would make any single data point not a great proxy for what’s going on.”

And here we are again, a week from Apple reporting its fiscal second quarter earnings, which will take place April 23. The signs that this isn’t going to be a blowout quarter are there: Apple had no major new product introductions between January and March, and it might also be drawing down production on some models of iPhones and iPads as it may be preparing for new devices this summer.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• The connected planet: Smartphones aren’t the only player
• Mobile Q2: Smartphone growth surges; iPad’s rule continues

Apple is under scrutiny again by the Chinese government, but not for poor customer service: it’s for pornography.

The Wall Street Journal reported Wednesday that an ongoing investigation is underway, which has caught up with Apple and other other small companies for providing ways to access pornographic content. According to the report:

A government regulator named Apple Inc.’s app store as a source of “obscene pornographic” content late last month and ordered it to remove the content, submit a report about the violation, and take measures to prevent future violations.

Apple did not immediately respond to a request for comment on the matter.

The accusation is somewhat ironic considering Apple’s attitude toward porn. Steve Jobs is well-known for his stated belief that Apple has “moral responsibility to keep porn off the iPhone” and other devices with access to the App Store. It’s true that Apple has a difficult time being super consistent about policing its enormous App Store for that kind of content, but it certainly tries.

While it’s the Chinese government that’s undertaking a campaign against “obscene” content, the WSJ notes that the Chinese press — which is basically an extension of the government — is taking a more subdued tone with the case so far. That lies in contrast with China Central TV and several newspapers’ attempts to steamroll Apple over iPhone warranty and customer service issues last month.

It’s hard to tell where this is headed. If Apple moves to improve the filters on App Store content in China, will the government be satisfied? Or will it require another dutiful apology from the CEO?

As many will note, these pair of incidents seems awfully similar to the road China went down with Google. The same accusation of helping to distribute pornographic content was made against the company in 2009, and it was ordered to remove certain search results. Following hacking attacks from within China and continual disagreement with the government, Google just took its search business out of China and over to Hong Kong.

It’s hard to see Apple taking its business out of China; the country is massively important to Apple’s future. But Apple isn’t used to being pushed around by governments, so the big question will be how far Apple is willing to go to comply with China’s rules in order to do business there.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Forecast: Tablet App Sales To Hit $8B by 2015
• U.S. Wireless Data Market: Q4 and Year-End 2008
• The fourth quarter of 2012 in cleantech

Two companies who are leading the way on personalized digital magazines agree that we haven’t yet come close to unlocking the power of true personalized content yet.

At paidContent Live 2013 Wednesday, Prismatic co-founder and CTO Aria Haghighi said those in the business of helping readers discover new content can’t even agree on a definition yet. “We don’t all agree on what personalization means. I agree (that it means pointing you to) stuff you care about … some people think it’s only getting signal from noise,” he said. “I think we’re really early. I don’t think we’ve matured to point where we (the industry) have philosophical differences yet.”

Mark Johnson, who is CEO of competing product Zite, agreed that there’s so much more to do. “We’re good at finding stuff, but we can be so much better. We haven’t had that Google moment yet that’s, ‘Aha! That’s what personalization is.’” He compared it to when AltaVista users turned to early Google search and said, “So that’s what search is!”

That point of personalizing reading content for users is also the challenge: everyone’s feed will always be different because no one likes the same stuff. Improving that capability will depend on big factors that haven’t quite been figured out yet either: the social aspect and helping people understand why content is recommended to them.

Both Prismatic and Zite agree that helping users understand why you’re showing them content is key: “Even if you do world’s best job recommending an article or content to people, if they don’t have an explanation of why, people feel uneasy,” said Haghighi. “You have surface parts of the system to give information to people. That’s where user response intersects with AI.”

Part of recommendation is social — what your friends or people with your same interests liked — but no one has done a good job of that in their industry yet, Johnson thinks. Social “sharing is the tip of the iceberg,” he said. “There’s something deeper you can do in these applications that no one has nailed yet.”

Check out the rest of our paidContent Live 2013 coverage here, and a video embed of the session follows below:

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Major League Baseball’s At Bat app has had its success well documented this season: on Opening Day of the season, its apps were opened 6 million times alone. And just a few weeks later, usage hasn’t really dropped off that much. The MLB mobile apps are opened over 5 million times per day by over 1 million unique users, Major League Baseball Advanced Media President and CEO Bob Bowman said Tuesday.

At Bat is available on iOS, Android and for Blackberry 10 devices. There are different price points — from free to $19.99 to a full live TV package for mobile and desktop that costs $130 a season. Unless users are watching a live game — which can stretch to over 3 hours — he said users spend about 10 to 12 minutes per day in the app.

But for all that time spent, Bowman — who will be appearing at our paidContent Live event tomorrow – said he wasn’t sure about monopolizing his customers’ time while on mobile devices. When asked at the Dive into Mobile conference Tuesday whether he could foresee an MLB-branded homescreen play like what Facebook is doing with Home, he sounded skeptical.

“I don’t know the answer to that. We’re always one for trying to experiment,” he said. “And we don’t mind failing.” But baseball needs to balance being available and not overwhelming its fans and users of its apps.

“Ours is valuable content and we know people love baseball,” Bowman said. “But you’ve got to respect people’s time. To say we want to own every piece of every day, we’re hardpressed to say that. We like to be the hotel after a long trip.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Podcast: Mobile winners and losers in 2012 and what to expect in 2013
• Analyzing the wearable computing market
• How do developers ride the Siri wave?

How do we get more women interested in programming? We can start by exposing them to more accessible learning tools earlier in life. That’s the idea behind iPad visual programming app Hopscotch, which will be released in beta on Tuesday.

Hopscotch is an object-oriented programming language that is purposely bright, colorful and welcoming to kids between ages 8 and 12. Rather than making young people wade through incomprehensible strings of words and numbers, writing code in Hopscotch consists of dragging and dropping different objects and running scripts on them. The objects are cutesy animal characters, and scripts can be selected from drop-down menus. The result is that kids can make short animations and games.

iPads are looked at by a lot of educators as ideal tools because they’re easy for kids to use and they’re so much less expensive than full-fledged computers. Hopscotch is in good company when it comes to teaching programming on Apple’s tablet: Codea, which is an iPad programming app that uses the Lua programming language, is an iPad-based coding app for anyone, not just kids. Tynker is another visual programming language that’s similar to Hopscotch; it too relies on kid-friendly objects that can be stacked together like Legos to build programs.

The language powering Hopscotch (like Tynker) is inspired by Scratch, a visual programming language for children developed at MIT. Scratch has been around for several years, although it doesn’t really work on mobile devices. But as Hopscotch co-founder and CEO Jocelyn Leavitt said, “it’s really popular and we really like it.”

Leavitt is a former history teacher, with a special interest in experiential learning methods. She doesn’t code, and that gets to the point of Hopscotch: she and her co-founder, Samantha John, both “wish this existed when we were growing up,” she told me. John taught herself to code after college, and she’s the one who led the engineering effort on Hopscotch.

But both founders want young people — especially girls — to be exposed to these kinds of tools as early in life as possible. The app is absolutely for boys too, but girls are the bigger challenge. Boys may get into programming because they like video games, but that’s not what drives young girls, she thinks. “Girls like creating things.” So they invested a lot of time in the artwork in the app designing characters that are cute, colorful and fun: “It’s something girls will like without being too girly,” Leavitt said.

Hopscotch is iPad only for now and it’s free. Though they haven’t decided on a business model yet, it will probably monetize the app through in-app purchases, like premium art, virtual goods or premium programming tutorials.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• Tablets wars: Apple is from Venus, Amazon is from Mars
• What Amazon’s new Kindle line means for Apple, Netflix and online media

See update at the end of this post.

One of the core features of Facebook Home for Android, Chat Heads, is coming to iOS. Facebook CTO Mike Schroepfer said Tuesday that Facebook’s iOS app is being updated with the messaging feature and pushed to the iOS App Store “this week.”

Chat Heads is a feature that allows persistent pop-up messaging so users can chat with Facebook friends even when they’re not in the Messenger part of the app. Chat Heads is just one feature of Facebook Home, a launcher introduced on a few flagship Android phones earlier this month by Facebook as part of its larger mobile ambitions.

Facebook CEO Mark Zuckerberg made it clear at the introduction of the Android service that he wants to see Facebook Home on other platforms. However, the way the service takes over a smartphone’s home screen makes it almost 100 percent unlikely Apple would allow such an app to come to the iPhone, which it strictly controls the user experience on.

“The goal from the beginning was to get this experience in everyone’s hands no matter what device you choose to use,” said Schroepfer. Bringing just Chat Heads is just one piece of Facebook Home to those iOS users.

Update 9:35 a.m. PT: Facebook just sent a press release saying the iOS update is now available. In addition to adding Chat Heads, the update also includes Stickers for messaging, small News Feed adjustments and a slightly tweaked look for the iPad version of the app.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• The future of mobile: a segment analysis by GigaOM Pro
• Mobile Q2: Smartphone growth surges; iPad’s rule continues

Global smartphone messaging service WhatsApp confirmed on Tuesday that it has more than 200 million active users of its service every month.  CEO Jan Koum refused to be more specific than that, but he did brag that his company has more monthly users than another prominent mobile company.

“We’re bigger than Twitter today,” he said at Dive into Mobile. “More than 200 million active users monthly.”

Those people are also sending a lot of messages: WhatsApp users get 8 billion inbound messages per day and receive over 12 billion per day.

The app, which is on iOS and Android, came to prominence because it allows cross-platform messaging; like if you could send an iMessage to anyone regardless of the mobile operating system they are using.

Koum said WhatsApp has a global focus and that the app is big everywhere, but he said that it is most popular in Germany, Spain, the Latin America region, Mexico, Singapore and Hong Kong.

 

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The future of mobile: a segment analysis by GigaOM Pro
• What to watch in mobile in 2013
• Podcast: Mobile winners and losers in 2012 and what to expect in 2013

As of today, there are now 1.5 million Android devices being activated every day, Google Chairman Eric Schmidt said Tuesday. That’s led to more than 750 million Android phones currently in use. But he said the current rate of signups and phones being sold means Android devices in use “will cross 1 billion in six to nine months,” Schmidt said at the Dive into Mobile conference.

“Android is by far the primary vehicle by which people are going to see smartphones,” he said. It’s clear that while Android is growing, its rate of growth is plateauing a bit: Android activations were at 1.3 million per day back in September 2012.

Schmidt didn’t share a lot more news about the current state of Android, but he did warn people to not assume too much about the future with Sundar Pichai’s promotion to lead the Android group in addition to the Chrome business. He suggested the Android OS and the Chrome OS won’t be merging: “Don’t confuse organization design and product design,” he said.

He’s also a big fan of creativity with Android. Regarding Facebook Home, which is a launcher that morphs the standard Android home screen, he said, “I think it’s fantastic. This is what open source is about.”

He tried to dispel the notion that Facebook is threatening Android on its own platform, but he maintained that Facebook is acting properly. “They read the manual, they read the rules and they adhered to them. Shocking.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• Carrier IQ and the continued erosion of operator trust
• Siri: Say hello to the coming “invisible interface”

Even after Facebook released a direct copycat of its service, Snapchat is continuing to grow at breakneck speed. Tuesday CEO and co-founder Evan Spiegel said Snapchat users are uploading 150 million images every day. That’s up from 20 million a day in October, and compared to Instagram’s 40 million a day.

The hallmark of Snapchat is, of course, the impermanence of its images: 10 seconds after an image is viewed by the recipient, it’s deleted from Snapchat’s servers, Spiegel said.

Facebook released Poke in December, a feature that mimics Snapchat’s disappearing images. It clearly didn’t have any kind of slowing effect on Snapchat becoming a major rival for image uploading. It was “the best Christmas present ever, I think,” Spiegel said Tuesday at the D: Dive into Mobile conference.

The uptake of Snapchat’s take-it-and-delete-it photo service has come in only about a year. Though the company existed before January 2012, the service didn’t really start to take off until then, Spiegel said. It was after the 2011 holiday season when “people bought a lof of iPhone 4s” with a front-facing camera, which he said is crucial to to the service.

The main demographic of the service is pretty much what you’d think: 13-year-olds to 25-year-olds, and not a lot of 30 to 40 year olds. The main thing most people are sending before they disappear? “Lotta selfies,” he said. And they’re not to random people, he said; they’re to people who are friends in real life. Most users are snapping with iOS devices, though Spiegel predicts Android growth will come. Eighty percent of users are in the U.S.

But the unifying characteristic of users is their belief in the importance of ephemerality in social media, something Spiegel shares: “I don’t use Facebook. I’m a big Snapchatter … I posted my first Tweet a couple days ago.” He said they’re not “totally ruling out” permanence, but it’s not something they’re focused on right now, he said. ”We’re not anti-permanence, but we believe ephemeral should be the default.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Analyzing the wearable computing market
• LTE changes everything; LTE changes nothing
• Confused about the wireless markets? Here’s a breakdown

Apple sells tens of millions of iPhones every quarter, but its biggest challenge is expanding the reach of the iPhone in markets where smartphones are incredibly expensive and new to a lot of potential customers. At the Dive into Mobile conference on Monday in New York City, two companies represented onstage offered stark examples of how Apple’s model, which it has nearly perfected in established markets, may require some adaptation: China’s high-end handset maker Xiaomi and Brazil-based wireless carrier Movile.

Xiaomi is selling high-end smartphones in China and is doing that in a way that essentially takes Apple’s own playbook and adapts it for a more price-conscious buyer. The company sold 7.2 million smartphones in China last year and plans to sell double that this year.

Taking cues from Apple

Its recipe for success will sound familiar: it designs all the major apps on the phone as well as the hardware, uses all the latest chipsets (from Nvidia) and memory tech (from Samsung) and Foxconn does all the assembly. It also relies on longer update cycles: about a year passes before new hardware is released — there are no rapid-fire updates every few months. And when it lets buyers know the new phone is ready for sale on its website, customers swarm. When its latest device, the Mi 2 went on sale last year, 200,000 handsets sold out in two minutes, according to Xiaomi Co-founder and President Bin Lin.

A huge obvious difference between what Xiaomi is trying to do with its Mi phones and what Apple is doing with the iPhone: Xiaomi is building this all on Android. It’s saving costs on a marketing budget (it has none, just advertises on Sina Weibo) but it saves itself a lot of money on production by getting the base OS for free. And it can then offer the phones for cheaper as well: Mi phones cost about the equivalent of $260. And, Lin noted, he’s competing with smartphones, including Apple’s, that “sell for twice that” in China.

Apple is desperate to crack the Chinese market, and it is gaining some momentum: CEO Tim Cook said sales in Greater China saw triple-digit growth in the final quarter of 2012. But Xiaomi is tapping into a need for something that Apple so far cannot: much less expensive phones that still have a similar vertically integrated approach that tends to create the best kind of user experience.

The handset maker has also figured out how to work in a market that relies heavily on unsubsidized phones — Lin said about 70 percent of the Chinese market is unlocked phones not subsidized by carriers. In developed markets Apple can get away with charging $600 for an unlocked phone, but in developing markets, it’s easy to see how the iPhone’s higher price may be a status symbol for some, but for those that can’t afford it, pretty much out of reach.

Cracking the Latin America market

In Latin America, Apple also faces an uphill battle in countries like Movile’s home of Brazil. Android phones and iPhones are still about 20 percent of the market, Fabricio Bloiso Rocha, Movile’s CEO, said on Monday. The rest is made up of basic feature phones. The reason: all electronics, especially smartphones, are incredibly expensive in Brazil.

“Expensive in Brazil is not $200, it’s $2,000,” Rocha said. An iPhone is about 30 times more expensive in his country than in the U.S. because of “taxes, taxes and the mystery of the Brazilian economy,” he said. As a result, carriers like his focus right now on providing service for inexpensive prepaid phones (often just feature phones) with a la carte services sold bundled with data: the services are things like mobile payments, video subscription services, food ordering services and more.

How does the iPhone fit into a picture like that? Big reform is coming to Brazilian taxes soon, Rocha says, so he believes there will be a place for smartphones to grow over the next 18 months in the country. But even then, he said, “I love the iOS experience. It’s the best UX, best product overall. But for Latin America, to invest there, you have to go Android because price is very important.”

Brazil is not directly representative of all of Latin America, but it’s the biggest and most populous country and represents a huge chunk of potential growth for the iPhone in the future. But user trends in Brazil are the kind of thing Apple has to consider when broadening the iPhone and whether a lower-priced device makes sense to crack these markets soon than later.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• U.S. Wireless Data Market: Q4 and Year-End 2008
• Analyzing the wearable computing market
• LTE changes everything; LTE changes nothing

Mozilla is just a few months away from releasing its first mobile operating system and it’s still facing lots of skepticism, considering Apple and Google’s domination of the devices out there. Gary Kovacs, Mozilla’s outgoing CEO, defended the company’s move to turn the web into a third mobile operating system, one where people won’t have to choose apps over web content.

He’s fighting public perception that native development for specific platforms isn’t working the way it was initially promised with HTML5 development. Facebook, which famously tried to embrace the open web with its HTML5-based apps, has said that was a mistake and  re-embraced native development for iOS and Android. At the Dive into Mobile conference in New York City on Monday, Kovacs said when Facebook tried it the web was different:

“The web is much different today than it was two years ago,” he said. Important things have changed that make it easier for developers to work with the open web, including “much better GPUs on the device, better javascript performance, better APIs,” and more.

Kovacs said offering a third option is in keeping with the company’s ethos of openness, giving more options to more device users (and by definition, carriers). That means going to countries where Apple and Google aren’t as strong: the first Firefox OS devices  countries will be where Mozilla and Firefox are known brands, and in the developing world where people are going to be buying their first mobile devices in the next few years. The first launch countries in June are Spain, Portugal, Brazil, Poland and Venezuela, Kovacs said.

The U.S. will eventually get Firefox mobile devices, and Sprint will be a partner — but not until 2014. “We have to get to version 2, version 3 first,” he said.

But whether it’s a developing country or ones with more established mobile consumer bases, Kovacs said he believes it can’t just be about two companies: “It’s impossible for me to beleive 5 billion people [coming online in the next few years] will get the same apps from one [app] store or one ecosystem.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Takeaways from mobile’s second quarter
• Virtual Worlds: Trends and Opportunities
• How to deliver the next-generation web experience