By Artem Fokin, VP of International Business, Yandex

Smartphones have all but replaced PCs and are being relied upon to fulfil everyday activities both within and beyond the workplace.

It is perhaps surprising then to discover that a recent report from Strategy Analytics suggests global smartphone shipments fell three percent in the first quarter of 2016.

The trend is set to continue, with Gartner forecasting that global smartphone sales will continue to slow.

The reason for the decline in sales is simple. The market is completely saturated.

But it doesn’t stop there – all handsets have reached a stage where the hardware looks very similar. 

The challenges of competing hardware on the shelves mean the industry as a whole needs to think differently about what’s on the inside.

So, how is the OEM market expected to transform into a profitable one?

The solution lies within software and artificial intelligence (AI) in particular.

Now more than ever consumers are switching focus to what their smartphone can do and not what it looks like. 

Browsing on mobile devices has overtaken the desktop and accounts for 51.3 percent versus the desktop’s 48.7 percent, according to web analytics firm StatCounter. 

It is these users who are really driving the migration from a mobile-first to an AI- or software-first world.

And as the focus on mobile increases, so does the attention of mobile-targeted advertising – a booming industry with huge revenue potential.

Using software as a differentiator means OEMs can overcome competition and handset lifecycle challenges, reduce customer churn, and ultimately lead to increased profit margins. 

AI and machine learning can also be used as an extension of data analytics – an area that mobile operators have already been exploiting for a number of years for churn reduction, marketing ROI and improved customer experience.

AI not only helps operators and OEMs to analyse data, it can also predict, recommend and make automated decisions.

User experience  

Demand for usability and immediacy of service are top of the agenda in this digital generation.

But having to choose between developing in-house software at a huge overhead cost or sacrificing product differentiation and additional revenue is a dilemma many OEMs are facing. 

Knowing action needs to be taken, some pre-install as many apps as possible for a short-term revenue fix.

Unfortunately, this clutters devices and more often than not has a negative effect on the user experience as well as being counterproductive to the brand in the long term.

To combat this, OEMs need to take an AI-first approach, and quickly.

OEMs can do this by working with partners to install software that enables the user interface to be personalised to the individual. 

Incorporating AI within this process changes the look and experience of their brand from other Android devices.

As part of this, AI and recommendation technology can highlight apps and content based on the user’s preferences, through machine learning, neural networks and artificial intelligence with a vast global web index.

It is this experience of relevant content, personalised to individual interests that is key to the users’ perception of the software and hardware.

The more relevant the content, the more chance of customer satisfaction with the brand.

This also gives published targeted traffic whilst setting the device apart from others in the market.

Mobile advertising advantages

Users are only just starting to see the true benefits of AI’s application to everyday devices.

Internet experiences and the way we interact with technology have completely changed.

AI and machine learning can provide users with the content and information they like and want on their device without having to ask for it.

When it comes to generating revenue from this through advertising, mobile is certainly the most profitable.

In the UK, mobile ad spend in the fourth quarter of 2016 is projected to be up 36 percent to £1.1 billion compared to the TV ad market, which is expected to grow by just one percent year-on-year to £1.3 billion, according to the Advertising Association/Warc.

With AI and machine learning working to present the most relevant and targeted ads personalised to the user, higher engagement will be achieved.

And with profitability crucial for the declining smartphone market, taking a share of this revenue will help to transform a competitive OEM market.

We are still at the beginning of this AI journey, and this is where the transformation for the OEM industry starts.

Knowing the audience and providing user-centric products and services which are powered by AI, means OEMs can achieve device differentiation and enhance user experience with tailored ads and apps.

This in turn helps to retain and attain customers, increasing profit in a saturated market.

Considering the AI-first approach is crucial in such a progressive, competitive industry.

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