The only one making real money on smartphones is...Apple.

And Samsung.

Apple just announced its prior quarter earnings. The company posted a profit of just over $13 billion. iPhone accounted for approximately $8 billion of that.

Though Apple had an absolutely blowout quarter, driven by the uber-popular iPhone 4S, for all of 2011, however, Samsung just eclipsed Apple in total smartphone sales. From Philip Elmer-DeWitt:

"Apple's introduction of the 4S in the fourth quarter unleashed tremendous pent-up demand for the iPhone as consumers awaited the arrival of the latest model," said IHS senior analyst Wayne Lam. "This caused the company's smartphone shipments to surge, allowing it to retake market leadership by a slight margin. However, Apple and Samsung continue to run neck and neck in global smartphone shipments, setting up a tight battle for leadership that will continue throughout 2012."

However, whereas Apple had a profit from iPhone of about $8 billion, Samsung's was $2.3 billion. For all of "mobile". Not just its Android line. 

Let's assume, though, that nearly all was from Android -- $2 billion, as I'm feeling generous. 

Apple had a 4X profit improvement over Samsung. Plus, Apple can profit from iTunes and App Store. Sales of iPhone support incremental sales of iPad and Apple TV, no doubt. And Macs. The Apple golden halo still remains supreme.

Will Samsung be content with this massive differential?

They are crushing it on sales. They have the most popular Android device and Android product line-up in the world. Unlike nearly *every single other* Android handset maker, they are actually making money. Is this $2 billion enough?

It's obvious how Samsung copy from Apple. No one can deny this. Yet they are only making $2 billion in profit from their extremely popular Android Galaxy line. How much better can they do with Android? They are the #1 Android vendor, the #1 smartphone vendor, have the best and most popular Android devices in the world and are sucking Apple's fumes profit-wise.

Have they peaked?

Google will soon be overseeing all phone development at Motorola, which admittedly makes quality Android devices but can't make a dollar off them. How much love will Google give their biggest ever acquisition? The acquisition that is bigger than all others combined? Should Samsung be concerned? Of course! 

Will Sony finally get their act together in 2012? Will LG? Will the flood of Chinese knock-offs of Samsung Android devices undermine Samsung sales?

Samsung knows this so what will they do? Creating an alternate ecosystem is possible but unlikely to succeed. What deal will Microsoft -- or Amazon -- offer Samsung to jump ship? Or at the least join their rebel alliance?

The Android fanboys will insist that Android -- open source! -- will ultimately destroy iPhone. Perhaps. But not in 2012. Instead, 2012 is the year where I suspect that Android makers willl start devouring one another.

For what it's worth, I've used this phrase enough in public that I now consider it "free" and "open". 

Have at it.

MediaPost tells us of this surprising news that really is not so surprising:

As a pioneer in the mobile media space, ESPN has long seen the value of reaching fans on-the-go with sports scores, video highlights and specialized apps to feed their passion. But rather than view mobile as the oft-described “third screen,” the sports media powerhouse refers to it as the “first screen,” according to Michael Bayle, VP and general manager of ESPN Mobile.

In a keynote talk Thursday at MediaPost’s Mobile Insider Summit, Bayle explained that instead of determining how to shoehorn its programming from traditional media to mobile platforms, the process is now reversed, with mobile becoming the starting point.

“What’s taking preference now is to try get as ubiquitous as possible. Program and design from the mobile standpoint first, then extrapolate what could be applied for the PC, television and print experience,” he said.

Driving that heightened emphasis on mobile is that it represents ESPN’s fastest-growing audience.

Bayle pointed out that its mobile audience across its mobile properties has surpassed 20 million, with users spending 45% more time with ESPN mobile content in 2011 than the prior year. ESPN Mobile now ranks as the company’s fourth largest network and has 150,000 people plugged into its mobile offerings at any given time.

“Particularly from an international standpoint, [mobile] is the primary way we reach an audience.”

Last week I wrote of my displeasure with the iBooks Author solution. Partly because it's needlessly cumbersome, partly because the product is, in my view, not ready for prime time -- but mostly for what I considered a very restrictive, anti-Apple-like licensing agreement.

The license was so ill conceived that I asked if it was even legal:

http://brianshall.com/search/node/ibooks%20legal

It may not be. This legal site examines the iBooks Author EULA:

The iBooks Author EULA plainly tries to create an exclusive license: Apple claims, in essence, the copyright holder [that's the author] permits the licensee [that's Apple] to use the protected material for a specific use [the iBooks store] and further promises that the same permission will not be given to others [that's the 'you may only distribute the Work through Apple' part].

Here’s the problem: under the Copyright Act, an exclusive license is defined by 17 U.S.C. § 101 as a “transfer of copyright ownership,” and under 17 U.S.C. § 204 such a transfer “is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed.”

Of course, Apple doesn’t ask anyone to sign anything before using iBooks Author. There’s a lot of debate over whether a “shrink-wrap” or “click-wrap” license is enforceable (here’s an older post of mine, too), with most courts evaluating them on a case-by-case basis, but there’s no doubt that ‘using a program’ isn’t the same thing as ‘signing a written document granting an exclusive license in a copyrighted work.’

Which means that, in the end, the iBooks Author EULA leaves both Apple and the author in a strange stand-off: Apple doesn’t actually have the right to tell the author not to take their work somewhere else, but the author can’t do that without breaching the EULA — even though they retain full rights in their copyright.

There's lots more. It's as exacatly painful as any other legal work you might read. So don't bother.

Conclusion:

Probably you can sell your iBooks Author product elsewehere, assuming you would want to and assuming you could make it work but if you can do both those you probably won't bother so it probably won't matter. And who knows, Apple just might sue you.

As I've said from the beginning, this EULA does *nothing* good for Apple Inc but causes potential ill will. Expect them to revise it.

The Onion would like to know.

In The Know: Should The Nation's Unemployed Be Buying New Apple Computers?

As I've been writing here for well over a year, even if *Android* is winning, and really, it's not, that does not mean that Google is winning. 

http://brianshall.com/search/node/google%20android%20search

As I have stated repeatedly, ignore the fact that Facebook is on every smartphone. Forget that *most* mobile searches come from iPhone. Pay no attention to Kindle Fire and other versions of Android that have been Google-strip-mined.

If most of the ecommerce via mobile is coming from iPhone, put it out of your head.

When you read that Sony, LG, Motorola and HTC can't make a profit from Android, assume that's a temporary blip.

All the complaining about fragmentation is not your concern.

The *fundamental* threat to Android is not from Apple or Facebook or Microsoft. That threat comes from Google, itself. From Google's past.

The smartphone is the computer! The smartphone will this year eclipse the PC install base. The mobile web is the web. Mobile searches annd activity will dominate our online activity.

Mobile is not a *supplement* to the PC, it is a replacement.

All of Google's money comes from the PC and the stationary web. 

They make billions upon billions of dollars, every quarter, from ads on PC web pages and on Youtube videos.

But there is *zero* guarantee that these ads and this business model will provide more or even the same revenues. 

Android could generate ten times more traffic, 100x more data and provide far more real-time, localized, personalized information to Google. Which ought to make Google more valuable.

But Google is not valuable because of all the personal information it has on each of us. Google is valuable because it's business model, of selling all that personal information to advertisers happy to pay it because enough users will click on the ads which provide value to the advertisers is optimized for a world that is dying: PCs and the stationary web.

Who says Google can simply port its business model to the smartphone?

Facebook makes almost nothing off the smartphone. Twitter makes nothing off the smartphone. Apple makes all its smartphone money off the hardware itself, not the software and services.

Google has the greatest business model ever. But it was born for a world that is quickly coming to an end. 

Even TechCrunch finally clues in:

Google’s reliance on search revenues derived from web searches in a browser, its former strength, is now not sufficient to guarantee growth.

Google’s focus on Android is a necessary but not sufficient part of confronting these trends. It gives the company a platform into mobile, but it does not do enough to offset the impact of the relative shift in traffic. 

I'm never surprised when I call it first. Or when I get it completely right.  I must say, though, that it always surprises me how long it takes the kool-aid drinkers to catch up.

These numbers from SmartMoney may be suspect but for now, let's assume they are at least in the ballpark:

New research finds people fork over $5,000 worth of personal information a year to Google in exchange for access to its “free services” such as Gmail and search. While many view this as a fair trade, privacy experts say the Internet giant’s latest plan to pool user data from its various sites make it less so.

Personal information can be worth between $50 and $5,000 per person per year to advertisers and market researchers – depending on how much they spend and how useful the information is to third parties. 

From this, two core issues reveal themselves:

First, go long $GOOG. I mean, if Google is already making this much money off it's users personal information, than think of how much more they can make as they egin to aggregate all your personal information across all Google services?

Think of how they are doing their aggressive best to get you to provide them with more of your personal information, friendships, contacts, your phone numbers, "true identity", not to mention how all those Android users are sending a constant stream of real-tine information on their purchases, searches, and location.

The second issue, obviously, is why are you so cheap?

I mean, even if you don't mind one giant for-profit serial duplicitous corporation knowing everywhere you go on the web, your wherebouts -- always, thanks to Android -- your searches, purchases, how much money is in your (Google) wallet, your contacts, the text of every email you ever send out and more, well, shouldn't you at least demand fair value for it?

$5,000 already and that's without the new "user privacy" policy!

You could get a MacBook Air and an iPhone 4S, on contract, and iWorks and iLife, and use Bing and other mapping services -- and buy new ones each and every year -- for less!

Stop giving it away, people. You're better than that.

There are many reasons why Samsung is the leading Android handset maker in the world. Many of them, of course, are due to it's mimicking the look and feel of the iPhone, but also to mimicking the marketing and distribution of iPhone.

A focus on the brand name. A single 'lead' device, only. This enables Apple to optimize its supply chain, minimize costs of packaging, distribution and marketing. Users know exactly which is the top-of-the-line device and the company can focus its full marketing resources on promoting that brand and device.

Apple is making nearly all the profits in the smartphone world. What's left for Team Android is flowing primarily to Samsung. Now, HTC is following suit:

With falling sales and declining revenues, HTC says it will slash the number of smartphones it releases in 2012, concentrating on giving its customers “something special”, reports Mobile Today.

HTC’s quarterly net income dropped 26% to $364 million in the fourth quarter, its first profit drop in two years, leading the company to rethink its strategy for the coming year, as it looks to compete with rivals Apple and Samsung.

HTC UK chief Phil Roberson has indicated that instead of “trying to do too much,” it will return to a strategy of launching a small number of high-spec devices.

Not that it will help Nokia much, but the more Android vendors that fail to make an actual profit from using Android, and remember that LG, Sony, Motorola and HTC *all* find it difficult to eke out any profit from Android, the more likeliy they are to give serious love to the Windows Phone platform.

Firstly, let me say that I wish Steve Jobs were still alive and it was he that led this week's Apple earnings call. Tragic that he died in his 50s. What might he have achieved over the next 30 years, say?

Not to be...

Doubtless you all know about Apple's super exciting (!) blockbuster earnings. If you don't, go here -- and, OMG I'm so embarrassed for you!

Having digested Apple's numbers, let's not turn our sites to what Apple CEO Tim Cook said during the call. If for no other reason than it will proivde the fuel for my suppositions.

Ready? And begin...

"We're thrilled with our outstanding results and record-breaking sales of iPhones, iPads and Macs. Apple's momentum is incredibly strong, and we have some amazing new products in the pipeline."

Translation: Suck it, Google! Fuck you, Samsung!

Also, by "momentum" Cook means stellar growth in Asia, South America, the US and probably elsewhere. At minimum, 2012 will be the year Apple prints money.

Amazing new products in the pipeline means at least one new iPad and a new iPhone. I am now expecting the iPhone 5, and I realize it's silly to have expectations, to have the same height and width, though possibly more screen real estate, and be noticeably thinner but with a longer lasting battery.

Apple Television? I'm not so sure. Right now, that would just muck up a great thing. Maybe 2013.

"There's a horse in Redmond that always suits up and always runs, and will keep running."

This is bullshit CEO-speak. Cook is right to not ignore Microsoft, which is, yes, very capable. But, he's letting investors know that here that Microsoft will battle Android, not iPhone/Apple.

"We'll ignore how many other horses there are — we just want to be the lead one." 

Blow me, bitches!

“I think there will come a day that the tablet market is larger than the PC market."  “It’s not just a product, it's a strategy for the next decade.”  

Apple believes in the iPad. I'm not 100% on board. Many analysts are not either. Apple believes. They are also in this for the long haul and for *market share*. Fact is, I do believe the tablet market will be larger than the PC market -- if much later than Apple -- because tablets are far more personal. A home can be expected to have multiple tablets even if it has only one PC. Every field worker can have a tablet, for example. Apple intends to accelerate its efforts and push its lead further. Expect at least an awesome iPad 3 this year, probably extra special tools for content owners and app developers, and perhaps a completely new iPad -- that mythical dual-screen one, for instance.

"I think there's a huge opportunity for us there, and we've more than begun to go deeper into Brazil.  But I don't want to signal that that means that Apple retail will be (in Brazil), because I don't envision that occurring in the near term."

When I began this site in early 2009, I said look to Brazil to know your future. So it is now with Apple. Brazil will slowly become the next major base of manufacturing and distribution for Apple. For 2020 and beyond. Apple intends to lead well into the next decade.

“Our Apple TV product is doing quite well… but in the scheme of things, we still classify Apple TV as a hobby. We continue to add things to it. If you’re using the latest one — I don’t know about you, but I can’t live without it. Other than that, no comment."

No Apple Television/iTV this year. It's not ready.

"Just breathtaking customer reception" (to iPhone 4S.)

More screen real estate, a bigger/longer lasting battery/more power...but do not expect a new form factor for iPhone 5. Apple has the #1 selling smartphone on the planet, by far. You don't mess with that.

Haven't found a way to get crisp, transparant Android numbers. 

Er, I think Mr Cook reads my blog.

iCloud is not just a product, it's a strategy for the decade."

A strategy, no doubt, but as any Apple user can tell you, Apple still hasn't gotten "cloud" figured out as well as they should. That said, iCloud plus all these integrate devices plus a "next decade" strategy plus $100 billion in cash tells us that Apple intends to have a product, service, application, content or presence -- everywhere. We are a few years away from the death of Windows Everywhere and the birth of Apple Everywhere.

PandoDaily is the newest addition to BigBlog, funded by 0.1%'ers in Silicon Valley to cover...Silicon Valley. And it's 0.1%'ers and wannabes. Which isn't a crime, even if it is egregiously redundant, given...TechCrunch, Verge, GigaOm, Business Insider, Forbes, Fortune, the New York Times, the papers in San Jose and San Francisco, a legion of bloggers, VentureBeat, ReadWriteWeb...

Well, you get the idea.

There is likely no incremental value, knowledge or information we should expect from this newest blogsite.

Except, pehaps there is. 

I realize that when you cover the beautiful people and the beautiful people are funding that coverage, that we are not going to be privvy to any real, timely news. Unfortunately, it seems we are going to be pummeled with what is either misinformation or a serious lack of "journalism".

In one single article, two Silicon Valley myths are lauded, without question. The first:

That leaves one option that makes most of the tech community a little ill: Pay more money to Congress to do our bidding. There are a few problems with this. The first is it assumes and rewards corrupt politics. (Something Chris Dodd seems to take for granted.)

And surely billions of dollars could be spent better elsewhere in the tech industry. On companies’ R&D, on higher salaries for employees, on job training for out of work Americans, on charity. On anything really. Even a private jet for executives would be more palatable than lining politicians’ pockets. At least those executives are creating jobs.

The wealthy in Silicon Valley have been foisting this myth upon America -- and themselves -- for a generation now. The myth that they *just want to be left alone*. Get government out of the way and let the innovators innovate! Don't mess with our success!

Which is all bullshit.

Apple has lobbyists and a two-story stack of lawyers on the payroll. Google, the same. Oracle, Cisco, HP.

These companies *aggressively* lobby local, state and federal governments to *buy* their goods and services -- you know, because it makes us more productive! And our children learn better!

They lobby for more green cards, and for help in opening up markets outside the US. They pay well-dressed lobbyists and funnel money to well-connected PR firms to "open" airwaves -- or not get involved in their efforts to crush (innovative) upstarts by using their monopoly profits from another line of business.

They seek freedom to capture, archive, analyze and sell our private data, including our location.

They hire insiders to help them win massive government contracts.

They fly private jets and speak at Davos, where they offer non-scientific numbers on their economic power and warn leaders of democratic governments that "regulation" and "privacy rules" could kill that economic golden goose.

They spread FUD that "piracy" doesn't (really) cause economic harm (to its victims) within the hallowed halls of Congress.

As they hire former lobbyists and elected officials to explain why the work can't be done in the United States.

So let's stop this silly fucking nonsense that Hollywood or agriculture, say, are the bad guys lobbying the government and that Silicon Valley are a sort of collective Lone Ranger.

At the very least, we should expect "journalists" not to deliberately perpetuate such a false myth. But that's what happens when the beneficiaries of the myth are paying the writers of their story. The myth is protected, without question.

The problem, unfortunately, is not that the beneficiaries of the myth are paying the talent to lionize them. The real problem is that the very core of the myth -- that Silicon Valley generates jobs and wealth -- may not be fully accurate.

Understand: I want that myth to be the truth. America has the best research universities, the most capital, the best workforce, a culture of innovation and is open to new ideas and new peoples and new money and new products.

But we should at least ask if the wealth generated by Silicon Valley is truly lifting up (all of) America, or just a select few. And is it killing more *good* jobs than it creates?

In the very same article, PandoDaily reveals it is unable to veer even the slightest from the myth:

This is rapidly becoming the only way Silicon Valley can get its way in Washington without completely selling its soul and buying votes: Playing the jobs card.

And the tech industry should be able to play it all it wants, because technology is creating way more jobs than any other sector.

It helps if you actually do create jobs. This is exactly why the Valley should be playing this card over and over again with politicians in this election year. Because it’s not just cheesy pandering to undecided voters, it’s a legitimate argument.

It should be obvious by now that the author believes that Silicon Valley must suddenly "sell its soul" to Washington and, therefore, it should be obvious that with such a reflexive belief, you will be offered no actual *evidence* that Slicon Valley is actually "creating way more jobs than any other sector."

It's up to us to do the heavy lifting thinking. 

Does Silicon Valley create "way more jobs"? More importantly, are these jobs good jobs? Jobs that people can raise a family on? Are these jobs actually within the United States?

That iPhone in your pocket, that Samsung Chromebook your child has at school; those are not made in the US.

Are the tools that make us so productive, such as the much touted Google instant search, allowing fewer of us to do more? Which may be a good thing except that's not helping my neighbor find a job.

The Kindle, for example, has been an amazing success. It is made overseas. It enables anyone to be a published writer, though places pressure on writers to offer their content at prices between $0 and $0.99. Will that feed the children?

The tools to start our very own business are within our grasp and reasonably cheap, thanks to innovation and technology. But does that help the millions thrown out of work because the goods we buy are made outside of America?

Forget laughably minor issues like SOPA. It's time journalists get off their knees, stop singing the praises of Silicon Valley, and start demanding that our best and brightest become *more* involved in government and governing and actively participate in making all of America prosperous. How will their latest platform create jobs?

How will the newest device enhance learning?

How can we build this here?

What can we do about our criminally wretched inner city schools?

Why do we continue to go deeper in debt? What is holding back our creativity? How do we disrupt overpriced colleges and universities? 

Easy money won't answer these questions. Nor will repeating tired old myths.