You're probably reading this on a smartphone. That smartphone probably cost hundreds of dollars, if not well over a thousand. (Looking at you, iPhone Pro Max owners.) For billions of people around the world, those devices are simply not affordable.
Feature phones are alive and well, and KaiOS CEO Sebastien Codeville knows the landscape as well as anyone. KaiOS was created in 2015 out of Mozilla's failed Firefox OS project, and has become a hugely popular operating system on super-cheap phones. KaiOS devices cost as little as $17; they typically have smaller screens and lots of physical buttons; they prize durability and days-long battery life over fancy features. And yet the people who use them, use them in entirely familiar ways. They text, they watch videos, they pay for stuff. For people all over the world, KaiOS-powered "smart feature phones" are a first introduction to the internet, and in many cases their users' primary screen experience.
Codeville joined the Source Code podcast to discuss KaiOS, the challenges of building an app store and hardware for cheap devices, and why smartphones won't kill feature phones anytime soon. Or maybe ever.
You can hear our full conversation on this episode of
the Source Code podcast,
in the embedded player above. The below excerpts have been edited for length and clarity.
I think if you asked most people in the tech industry about feature phones, they would say feature phones died a decade ago, and they have not been interesting in a very long time. At least in the rest of the world, that's clearly not the case. So who's buying feature phones now?
You're right, actually. Even today, when we talk with investors or content providers, we have to explain who our users are. Our users actually are very diverse: We have people in mature markets, or developed markets, and we have users in emerging markets, and they are completely different.
So in mature markets, typical users will be senior citizens who don't want to use a smartphone because it's too complicated, and they want to stick with a feature phone that has long battery life, simple usage, [and is] accessible with a keyboard. And the second category of users in the developed market would be more like professional people, working outdoors, who need to have a phone which is more robust and does not break if it falls.
Then in emerging markets, it's a totally different type of user: usually a first-time internet user, who does not have a smartphone for sure, but also does not have another screen. So it's their main screen. And we see it in the usage: People use their phone to watch TV, to watch video streaming, to get access to information, and so on.
What we talked about when we talked about feature phones 10 years ago was phone calls and text messages. And that was all it did. And now, it's clear that that's not enough, really, for anybody. Even people who make phone calls and send text messages do it over things like WhatsApp instead of doing it over cellular networks. So you've had to find this really interesting line, trying to figure out the minimum you can give people that still feels viable for modern life. How do you figure that out?
What is a little bit paradoxical is, when you look at this type of product, you would not expect the consumption associated with it. Just to give you a couple of numbers: a Jio Phone user in India is using somewhere around 10 gigabytes of data per month.
Which means they're watching a lot of video on their phones.
Yes, exactly. But remember, it's their only screen. So it's where they consume the video that we might consume on a tablet or computer or TV, they consume all on that phone. Jio is an extreme case, because of course, the data is so cheap and the bundles are so large. But even in other countries, like Pakistan, where the bundle and the data are a bit more expensive, people consume around 5.5 gigabytes of data per month. In Africa, in Tanzania for example, we have close to 2 gigabytes of data per month as well.
Most of the products have 2.4-inch or 2.8-inch displays. Very small displays. But I've seen some usage where people would be on the train and put the device on the seat in front of them, and watch TV on that. It's a small screen, but it's good enough to watch videos, it's good enough to watch the news.
So the balance is not easy to find. Because you need a phone that is able to run this type of application. So you need enough CPU, you need enough memory to do that. And at the same time, you don't want to go into competition with a smartphone, because then [it] will not be affordable anymore. So yeah, it's always a challenge to balance.
One case I would guess investors and others have made to push back on your way of thinking is, won't smartphones eventually close the gap that you're talking about? Five years from now, presumably my smartphone will last longer and be more durable and be cheaper to make, and thus render the idea of a feature phone unnecessary. Eventually, for the $17 I'm spending on a KaiOS device, I might be able to get a full-fledged Android device. Do you buy that theory?
Well, we've heard that for the past five years. [Laughs.] The way I look at the market today, 4G smartphones, you're talking about $40, $45 devices today on 4G. If you look at a 4G smart feature phone, you're talking about $18 now, and this is going down to $15. Our challenge is not really the price gap with the smartphone going smaller. I think the real challenge for mass adoption of the smart feature phone is to go low enough to replace the 2G phone. 2G phones are $7. So we still have $10 to find between the hardware cost, but also through some innovative business models to really completely replace the 2G market. Today it's 300 [million] to 500 million unit shipments per year. So we have a lot of space to play. The idea is not to look at the smartphone and try to be another smartphone. The idea is really to replace the 2G feature phone and provide basic internet to these users.
And in terms of the feature set, video seems like an obvious one. And I assume, based on all the work you've done, that you've identified WhatsApp as another non-negotiable. Everybody with internet access is going to want WhatsApp access. What else goes on that list of things that are core experiences for anyone getting an internet phone?
Streaming and messaging are the two key features. It's a must-have feature on the device. Beside that, we have a lot of people looking for information. Access to current news, education content. People are also looking for entertainment and gaming. And payment capability as well.
What's amazing to me is, that list is not that different from what I think you'd say for people using any phone, at any price. And I'd think that's part of what makes your job difficult. What I want out of my $1,000 iPhone is … roughly those things! And you have to do it for $17.
You're right. And it's always complex in some ways, because very often the content provider, the the app developer, they want to have the same user experience on the $1,000 iPhone and the $15 KaiOS phone. So it's a challenge. We want to provide this type of application to our users for sure. We can't sacrifice the cost and end up with a very expensive device, because we won't achieve our mission. But at the same time, we need to sometimes work with the partner and manage expectations.
I've spent a lot of time talking to people about this big, galaxy-brain idea that eventually everything is just going to be streamed. Everything's going to be a screen and a processor and a network, and all of the hard work is going to be done elsewhere. Eventually, your Windows computer is in the cloud, and you'll just grab it from whatever screen you have handy.
And it occurred to me that that is a future that serves KaiOS really well. It lets you do more and more advanced things as networks get better, without having to sell people increasingly complicated hardware, because all the hard stuff happens on the network side. Am I thinking about that the right way? Is that a roadmap you see?
We have worked on a prototype where most of the OS is running actually in the cloud. And it's very, very convenient with KaiOS. You can run a very thin client on the device, and then run all your applications and most of the OS services to the cloud. We've done demonstrations to some of the operators. It works, technically it works.
Now you have to also keep in mind that the target market we have, which is a lot of the emerging markets, don't have the network and the latency and the bandwidth to actually support this kind of usage.
Do you have designs on having sort of a Google- or Apple-sized app store ecosystem for KaiOS? Is that even possible on a system like KaiOS?
Well, it's possible. Everything's possible. Today in the store, we have 1,000 applications. And the main challenge we have is the discoverability of the applications. You have a very small screen, you can show three apps at a time. You have categories, but you have categories with 200 apps. And if you want to scroll from the first one to the last one, it's not that easy.
So we're working more at this stage on discoverability, making sure that we have a good recommendation engine for people to make sure that we propose the right applications and so on. So we work more on the tools around the store, than on making this store 10,000 apps or 100,000 apps.
Also, remember, the users we target in emerging markets are people who have affordability issues. So they are looking for devices which are not too expensive. And on a monthly basis, they are not going to spend a lot of money on their plan. And so for an advertiser, when you want to advertise, this customer is not going to spend a lot of money. So the money available in the ecosystem is not comparable to what you have on Android or iOS. So we have to play with thinner margins for everybody. And so having too many apps too quick in the store, actually it's dividing the revenue between more people. So it's also a challenge from this perspective. We have to probably grow faster the number of users, and then when we have a much bigger user base around the world, we can walk again on making the ecosystem much richer.
Is there a chicken and egg problem with that? Part of the reason nobody has been able to compete with Apple and Google is that they don't have the apps: Microsoft couldn't get the apps for Windows Phone, so nobody bought a Windows Phone, so nobody wanted to build apps, so there were no apps, so nobody bought Windows phones. And it just becomes this sort of vicious cycle. Do you see that flywheel either helping or hurting you over time the same way?
We don't have this problem. A new customer comes from a 2G phone without apps, when you get them to KaiOS, they're getting a lot of apps, a lot of value from the store. Of course, we look at what people are searching on this store, so we know what applications are missing.
We know, for example, in Asia, that TikTok is the most popular. Many people are looking for it. It's not available in the store at this stage. The challenge is always as I said, we need to be much bigger to attract the big names. And yes, you're right, there's a chicken and egg situation, we would love to have TikTok in Asia. Also, we would love to have WeChat in China, so people will buy the phones for the WeChat application. But we're too small to get it. So there's always this challenge. We are trying to find some way around it, but it's not always possible.
Do you feel competitive with Google and Apple? The easy narrative is that people will eventually graduate from a KaiOS phone to an Android phone or an iPhone, when they want something more sophisticated. Then on the other hand, you run lots of Google services, and Google invested in the company. But then on the other hand, the new Jio Phone runs a version of Android. There's a frenemies dynamic I get the sense is going on. Do you feel competitive with them?
I don't think we're in the same market. To me, the competition is the 2G phone. OK, I want to replace the 2G phone, I want people who use 2G phones to move to a KaiOS device. And again, there's 2 billion people using feature phones today, and there are 300 million new 2G feature phones shipping every year.
This affordability issue is not going to be solvable overnight. Today, to consider a smartphone affordable, you need to live on $15 per day of income. And if you look at most of the countries where we operate, you have hundreds of millions of people who are living on less than $8 per day. So this is the reality, and the smartphone will not be half the price or a third of the price they are today, in the next 20 years. So there's a need for something in between.
How do you beat the 2G phone, outside of making yours cost $6, which is presumably not just something you can snap your fingers and do?
It's twofold. The first part is, we have to continue to work on the device cost. We are engaged with chipset manufacturers, with mobile manufacturers, with distributors, to bring down the cost to find some way to save a couple of dollars. We're talking about $10 to save! But still, it's 50% of the product price. So we can save a couple of dollars now with better cooperation with chipset and mobile manufacturers.
But then the rest of the savings have to come from internet connection capability, meaning that we work on some device financing mechanism that basically brings down the price by $6 or $7, but recoup this upfront subsidy through the data usage over time. So we are working on this model, I believe it's the way to access and to address the open market.
What is happening is, the 3G-only devices are going to be phased out faster than we thought. And the 2G is also. There are so many people who would like 2G to go away, that I believe it's going away also faster than we thought. It's because of the supply: It's a supply-side market, where manufacturers are the ones who decide what is going to happen on the market. And their interest is quite aligned today that 5G is the top priority because of revenue and profit.
So many of the chipset manufacturers put all their effort onto 5G, but the migration to 4G is necessary. If you want 5G to develop in countries, you need 4G to be very widely deployed. So we see a lot of push from the infrastructure providers, from the chipset manufacturers, from the operator to phase out of 2G faster, and to deploy and to make 4G the solution for the entry. So there's a lot of people focused on that, and are working together to make this change happen.
Does that feel like an inflection point for you? If you're ever going to just eradicate the 2G phones once and for all, this is the moment, right?
We're working on that. It's not that simple, because you have a $10 gap, and $10 means something for our customer. But it's our time now. This year and next year are critical for the migration. But we have to crack the open market, and we have to make these devices available below $10.