We finally did it! We were able to fit a dictionary, a calculator, a phone, a computer, several hundred CDs and several thousand books in the pockets of our pants. We even have some room left for other stuff we might find useful later on. All got achieved within budget, all reachable within few seconds.
It is becoming more obvious that our once communications-only tool is now smarter with full capabilities of the Internet. The smart phones continue taking a bigger pie in the mobile phones market. According to Gartner, smart phones accounted for 17.3 per cent of all mobile handset sales in the first quarter of 2010, up from 13.6 per cent in the same period in 2009 [1] The smart phone sales are estimated to be 30% of all mobile phones on annual basis by 2014.
Many investors wonder who will dominate this fast-growing market where competition is fiercer than ever and change accelerates every year. The landscape is especially interesting for high end smart phones as technology leaders are aware that today’s high end phones are tomorrow’s regular phones. If you dominate this high profit-margin market, you increase not only your chances of survival but also chances of dominating feature phone markets.
Nokia’s Symbian, RIM’s Blackberry, Apple’s iPhone and hordes of Android phones make up the biggest competitors in the global smart phone market. With its almost 45% market share, Nokia’s Symbian OS dwarfs the momentum building Android and iOS (iPhone’s OS).
Worldwide Smartphone Sales to End Users by Operating System in 1Q10 (Thousands of Units)[1]
| Company | 1Q10 Units | 1Q10 Market Share (%) | 1Q09 Units | 1Q09 Market Share (%) |
| Symbian | 24,069.8 | 44.3 | 17,825.3 | 48.8 |
| RIM | 10,552.6 | 19.4 | 7,533.6 | 20.6 |
| iPhone OS | 8,359.7 | 15.4 | 3,848.1 | 10.5 |
| Android | 5,214.7 | 9.6 | 575.3 | 1.6 |
| Windows Mobile | 3,706.0 | 6.8 | 3,738.7 | 10.2 |
| Linux | 1,993.9 | 3.7 | 2,540.5 | 7.0 |
| Other OSs | 404.8 | 0.7 | 445.9 | 1.2 |
| Total | 54,301.4 | 100.0 | 36,507.4 | 100.0 |
As I narrow my focus to high end smart phone market, the landscape changes a lot. Nokia the leader is almost nowhere to be seen while Blackberry OS and Windows Mobile are losing their ground to iPhone OS and Android. In fact, in the U.S. even iPhone OS has seen usage fall 8.1% in the year to May 2010, while Android usage has climbed 12.2% [2].
As seen in the chart above, Android’s huge momentum is worth a close look. According to Google CEO Eric Schmidt’s report in June, 160,000 Android phones were being activated each day. That makes 4.8 million phones a month. iPhone’s activation rate within the same period was 4 million phones a month. In August, the activation rate for Android went up to 200,000 phones a day [3]. Numerous bloggers discussed about the “Android vs. Apple war” this year. Although the numbers have tilted towards Android’s side so far, the war is far from conclusive; therefore we still need to elaborate who will come out of this war stronger.
ANDROID’S ADVANCE:
There are various reasons why Android has advanced at the expense of others sharply. Some of these reasons are technical, while others are distribution related.
On the technical front, Android has features like Cloud2Device integration: One click and send a webpage to your phone’s browser. One click and send an address from Google Maps on the desktop to Google Navigation on your phone. Unfortunately, Apple’s talent pool missed out on features like that. Mobile phones are getting smarter. ‘Smartness’ comes from the device’s ability to benefit from Internet features. In this sense, Android, having Google as its birth-giver, is closer to development of Internet-based services than Apple.
On the distribution side, my comments are restricted to the U.S. In the U.S. there are various carriers such as Verizon, T-Mobile, and Sprint that sell Android phones. Meanwhile the only major carrier selling iPhones in the States is AT&T, with which Apple is said to have an exclusive agreement until 2012. With multiple carriers, potential Android buyers have multiple choices in terms of area coverage, cost, and service terms.
On the global scale though, Android brings variety of phones to buyers. For instance, Sprint’s 4G Evo, HTC’s Incredible and Motorola’s Droids have different features; some have keyboard, some have touch-screen, some are flip phones and some have better cameras than the others. With these choices, it is easier for a buyer to find what satisfies his needs with an Android phone than an iPhone.
I believe Android’s strongest feature and major difference from iPhone OS is its open source development environment. Open source development can make Google a sole winner if it can preserve cohesiveness of its platform and continue supporting it with new features and enhancements. There are some historical evidence of open source developers dominating their markets such as Wikipedia (the World’s largest dictionary), OsCommerce (the most popular e-commerce solutions program), Apache (the most popular web server software), and mySQL (the most widely used database server) [4].
Since Android is open, OEMs can manipulate it to suit their requirements. As a result, they can deliver multiple devices for multiple niches at multiple price points to the market. Apple delivers a limited number of devices, hoping the quality of its software will make a difference. It has successfully attracted customers that way. However, it seems the consumer market is ruled by fashion and individuality. People do not dress the same and they do not want their smart phones to look the same. By the same token, given the common, iPhone wanna-be looks of the current Android phones, Android OEMs should do better job at differentiating their hardware.
Besides, the open source environment enables thousands developers from different companies and countries to add and improve features and fix bugs in Android code. The code can become more robust and versatile than a closed-platform OS like Apple’s.
APPLE’S DEFENCE:
Although Android has many current and potential advantages over its competitors, it is still dubious for it to take over iPhone iOS in mobile sales, as iOS has also its own technical and non-technical advantages.
In my opinion, the biggest advantage Apple currently has is its worldwide brand recognition and customer loyalty. Apple brand means top-quality, unique, and innovative products for millions. This is a precious value none of the Android handset makers could build yet.
As for customer loyalty, the following numbers explain the current state the best: 80% of iPhone users want their next device to run iPhone OS while 70% of Android users want another Android device. This is in stark comparison to other major smart phone players: only 47% of Blackberry users want another Blackberry while only 34% of Windows Mobile users want another Windows Mobile device [5].
On the technical side, Apple hardware is top-notch. Well, it has been known top-notch until the “Antennagate” [6]. Other manufactures have emulated iPhone’s hardware features in one way or another meaning iPhone has still been the pioneer in this field. However, the quality gap will close or even reverse soon especially if Apple continues mishandling customer complaints.
With smart phones, another selling point is the user’s love for apps he can download to his phone. After all, being able to download variety of apps at reasonable prices makes the phone more useful and entertaining. On that front, Apple’s app store currently has a clear advantage: The store enables downloads of approximately 250,000 apps [7] The Android Market hosts 100,000 apps with higher rate of growth [8].
Another advantage of being a pioneer is that Apple has an older OS than Android meaning the operating system is more mature, experiencing less reboots, and less applications crashing or slowing down your phone. However, just like the app store, this is another factor where Android seems to be catching up quickly.
THE SIDELINES RETREAT:
If we assume that the Apple vs. Android war will eradicate what seem to be the current sideliners of the high end smart phone market, we might be too quick to conclude. RIM, Nokia, and Microsoft are making new products to take leadership in this market. However, it is interesting to see that even executives of these companies admit their companies are not forerunners (maybe except Steve Ballmer of Microsoft!)
For instance, at Nokia World 2010, Nokia is expected to officially unveil the smart phone that will, in the words of embattled (as of September 10th 2010, ex-)CEO Olli-Pekka Kallasvuo, “kick-start Nokia’s fight back” against Android and the iPhone [9]. Although Symbian is still market-share loosing champion of the global smart phone market, it never took off in the U.S. and failed to be standardized platform for various manufacturers that support it. For Symbian, there is no App Store per se, although Nokia opened its own app store called Ovi, which is not comparable to Apple’s App Store or Android’s Market. So Nokia has re-entered the high end market with a new OS, MeeGo [10]. The upcoming N8 is Nokia’s only hope at this time to introduce a jaw dropping product like iPhone, however the leaked product has not been getting good reviews from experts so far [11].
As for RIM, the market is tougher to please these days. The latest RIM smart phone, Blackberry Torch 9800, has failed to receive good responses. The general consensus from the tech press was that the BlackBerry Torch 9800 might be enough to satisfy loyal BlackBerry users so that they do not jump to another platform, but it might not be enough to win over consumers and business professionals who are buying a new smart phones and are comparing the Torch to the iPhone or the top of the line Android devices [12]. On the corporate side, the BlackBerry’s core customer base, things aren’t looking so rosy for RIM either. While Android 2.0 and iPhone OS do not use the same “Push” messaging model or have nearly the same level of security controls and policy support the BlackBerry OS has (due to its use of a private communications network rather than the public Internet cloud) both iOS and Android now support Microsoft Exchange, which runs on the majority of corporate email systems.
With its market share dropping from over 20% to 9% over one year, Windows Mobile seems to be a less attractive choice for mobile OEMs. For instance, Dell and HP, Microsoft’s mobile device partners, are looking into using Android instead [13]. There is currently no Windows Mobile phone on the market that can compete in terms of technology and capability with either iPhone or Android phones.
CONCLUSION:
Besides the numbers and experts reviews, I believe these three companies will have trouble competing with Apple and Google within the next few years. The sideliners do not have the marketing momentum iPhones and Androids have. The consumer does not see their products cool, new or interesting the way they used to see Blackberry two years ago. They are in the game little too late. In the mobile market, few months of delay can make an innovative product just a regular device. They seem to be in the same situation where Motorola was in 2007 when the company noticed that they had no new products to offer after their star product Razr became just plain old. Maybe what they need to do is to start a completely new effort like Motorola did or merge with a company that has done it already or reduce focus to only certain niche markets.
Going back to Android vs. Apple war! Polls and estimates point at Android’s leading the competition in smart phone market in the next few years. For example, an instant poll at Fortune’s tech conference in July 2010 asked: “Who would have the dominant smart phone in five years?” The verdict was clear: 57% picked Android; 37% picked iPhone [14]. The investment bank Piper Jeffrey’s outlook for the next five years is very positive for Android, as well. They believe Android will hold over half of the smart phone market by 2015 [15].
With open source development environment bringing thousands of independent developers as well as major companies like Motorola, HTC, LG and Samsung to its enhancement, Android is maturing fast. Android’s spread to non-phone mobile devices is occurring as of today, as Android tablets are coming to the market in the second half of 2010 to join iPad’s party. The support of many OEMs with different target markets for mobile devices can make Android predominant OS of the mobile devices as Microsoft made Windows the main OS of PCs. Hopefully this time the code will be more democratic and less binding.
References:
[1] Gartner statistics, 05/2010
[2] Android star is rising, can Apple respond? Computer World
[3] CEO Schmidt says Android activations now 200K/day, Barrons Blog
[4] The eight most successful open source products ever, Pingdom.com
[5] iPhone vs. Android, Nielsen Wire
[6] Learning the lessons of “Antennagate”, CBS News
[7] Has the iPhone App Market already crashed? Tuaw, the unofficial Apple weblog
[8] Android Market now has 100,000 apps, passes 1 billion download mark, Engadget.com
[9] Nokia to kick-start the iPhone “Fightback” with E7, All Things Digital
[10] Can Nokia compete in high-end smart phone market? Intomobile.com
[11] Nokia N8, first Symbian 3 handset, gets previewed and is deemed an embarrassment to Nokia, Intomobile.com
[12] BlackBerry Torch 9800: 'Best BlackBerry ever' fails to create buzz, Jason Hines, Tech Republic
[13] Microsoft faces an uncertain future in search, mobile OS and cloud computing, Investor Guide
[14] Letter from Silicon Valley: doing the math on Android vs. Apple, Wired.com
[15] Piper Jaffray: Android army’s victory over iPhone inevitable, All Things Digital.
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