Putting Android’s growth in perspective

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    Posted: 03 August 2010 04:35 AM

    In my posting here: http://www.asymco.com/2010/08/02/android-global-share-rises-to-16-of-smartphones-in-q1/ I uncover the global (not just US) share for Android and how it has evolved. 

    In response to rattyuk’s comment on what will happen with Android vs. iPhone I offered this:

    “The Android [market share] story is not surprising since we?ve known that every phone manufacturer rushed to build Android phones last year in response to the iPhone and the availability of a reasonably similar Android version. They did the same thing a few years ago when the Blackberry was first successful. They all came out with monoblock keyboard phones within a year (Motorola Q, Samsung Blackjack, Nokia E series, HTC Dash etc.) In fact, they all did this [at the same time] because operators called them and asked them to build Blackberry look-alike phones (I know this from experience).

    The difference this year is that all the Android devices are running more or less the same software [not just the same form factor.]

    Operators are inviting (or commissioning) these devices and promoting them for the same reason they did so for the RIM clones: they don?t want a single supplier to dominate. [Again, from personal experience]. (Ask yourself why AT&T, which has a hugely valuable exclusive franchise [in fact one which is directly responsible for their survival], is commissioning and ranging Android *and* DOA Windows Phone 7 devices, [diluting their brand and complicating their operations]. You might also guess that Microsoft itself is still in the game because operators already assured them a portfolio slot(!))

    Long term I expect four to five platforms to equalize in share over time. This is simply a consequence of the distribution model in phones today. I suspect Apple knows this which is why they are implementing a profit skimming strategy rather than a deep penetration strategy with the iPhone.”

    I might develop this further into an article.  I’ve commented before that the monopoly model will not play out in mobile. The reason is simply that it’s not an open market.  No user in the world can decide to buy any phone like they buy any laptop and use it.  Phones are “ranged” by operators who act as those famous orifices through which vendors (and platforms) need to compete.  This will not change as long as mobile data is still evolving and penetrating.  At some point when mobile data becomes good enough and commoditized and ubiquitous, the operator role in the value chain will diminish and something of a free market will emerge for devices (with no exclusive, price distortions and limited availability).  Until then expect fragmentation and market share shenanigans.

    (as I allude above Apple are already playing the right game. A skimming strategy makes a lot more sense when you can’t control distribution.  Classic marketing 101).

    [ Edited: 03 August 2010 04:38 AM by asymco ]

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    Posted: 03 August 2010 04:52 AM #1

    asymco - 03 August 2010 07:35 AM

    ... At some point when mobile data becomes good enough and commoditized and ubiquitous, the operator role in the value chain will diminish and something of a free market will emerge for devices (with no exclusive, price distortions and limited availability) ...

    Is this possible?  Cellular network, unlike Internet, has been regulated from day one.  Telecom service providers have to pay big monies for the right to use those bandwidth.

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    Posted: 03 August 2010 05:09 AM #2

    Mace - 03 August 2010 07:52 AM
    asymco - 03 August 2010 07:35 AM

    ... At some point when mobile data becomes good enough and commoditized and ubiquitous, the operator role in the value chain will diminish and something of a free market will emerge for devices (with no exclusive, price distortions and limited availability) ...

    Is this possible?  Cellular network, unlike Internet, has been regulated from day one.  Telecom service providers have to pay big monies for the right to use those bandwidth.

    Yes it is possible. Regulators are watching this closely and will act if/when there are abuses.  Having the right to use bandwidth does not give one the automatic right to restrict access to software platforms and devices. In practice there is a lot of politics, but give it time.  I’m only pointing out that in the near term, operators have a role in the great platform game and as a result there will be fragmentation.  That role will not last forever.

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  • Posted: 03 August 2010 05:58 AM #3

    Mace - 03 August 2010 07:52 AM
    asymco - 03 August 2010 07:35 AM

    ... At some point when mobile data becomes good enough and commoditized and ubiquitous, the operator role in the value chain will diminish and something of a free market will emerge for devices (with no exclusive, price distortions and limited availability) ...

    Is this possible?  Cellular network, unlike Internet, has been regulated from day one.  Telecom service providers have to pay big monies for the right to use those bandwidth.

    It is possible, because governments do regulate for competition between carriers. That is precisely what Apple used, together with exclusive carrier deals, to take control of the end user experience away from the carriers. If Apple’s strategy worked, their carrier wins and their competitors lose. If it failed, it cost little.

         
  • Posted: 03 August 2010 06:39 PM #4

    Congratulations Asymco for this very answer to my question being linked to from John Gruber today. Also you got much kudos from him. Very well done. You are making a difference.

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  • Posted: 03 August 2010 07:24 PM #5

    rattyuk - 03 August 2010 09:39 PM

    Congratulations Asymco…

    I too wanted to congratulate Asymco. I recognized his words immediately when I read them on Daring Fireball. I wanted to put something about Gruber’s mention here, but I couldn’t figure out the proper forum. Glad someone beat me to the punch and showed me the way.

    Nice work Asymco. Keep up the good work.

         
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    Posted: 03 August 2010 08:03 PM #6

    Excellent discussion,  I think it will be an interesting 2011.  This will be the year that Andriod handsets have to compete on the same carrier at the same or lower price point in the US.  Android should capture the low end of the smart phone market if Apple choses not to compete, but many assume Apple is unwilling to compete in the segment which is moving from feature phone to smart-phone.  If we assume Apple will continue to provide last years model at the $500 price point the iPhone 4 will significantly outclass most other offerings.  Most manufactures will make incremental improvements and trickle down to the feature phone price point.  Apple now controls the SOC and should be able to continue manufacturing the A4 while implementing the next generation.  The incremental cost is pretty low so they can use the design appropriate for the target market.  Will they bring a 3rd device to market at the $ 400 price point to address the next tier.  Apple is able to deliver an iPod touch today at a $200 price point.  They could deliver an IPhone at 300-400 and accept lower margins but,  Apple is more concerned about damaging their brand then serving the bottom of the market because these lower margin devices carry the same support and manufacturing costs.  If you look at the Android manufacture like HTC, Motorola, Samsung, LG, it is not like they gain some huge pricing advantage by using Android, and they are now slave for the most part to Googles choice of innovation because they are not big enough to go it alone and they are using Android to improve their market position.  Apple has an advantage over all the Android handset manufactures because they have a clear understanding both hardware/software will be planned/ available for the next release.  If we look at the iPad competition the hardware manufactures are reacting to software & hardware shortfalls.  Windows 7 not suitable, Tegra 2 delayed, Android not suitable for tablet needs to be refactored.  All of these changes eat into the timeline.  I still think it is a bit early to crown Android champion, but they are now a worthy contender with Apple for the crown.

         
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    Posted: 04 August 2010 05:07 AM #7

    rattyuk - 03 August 2010 09:39 PM

    Congratulations Asymco for this very answer to my question being linked to from John Gruber today. Also you got much kudos from him. Very well done. You are making a difference.

    A mixed blessing.  The site was “fireballed” and could not handle the traffic.  I am a bit disappointed that I can’t serve a large audience.  Spending money on a better solution is a dilemma as I don’t like the idea of ad support.

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    Posted: 04 August 2010 05:24 AM #8

    pats - 03 August 2010 11:03 PM

    Excellent discussion,  I think it will be an interesting 2011.  This will be the year that Andriod handsets have to compete on the same carrier at the same or lower price point in the US.  Android should capture the low end of the smart phone market if Apple choses not to compete, but many assume Apple is unwilling to compete in the segment which is moving from feature phone to smart-phone.  If we assume Apple will continue to provide last years model at the $500 price point the iPhone 4 will significantly outclass most other offerings.  Most manufactures will make incremental improvements and trickle down to the feature phone price point.  Apple now controls the SOC and should be able to continue manufacturing the A4 while implementing the next generation.  The incremental cost is pretty low so they can use the design appropriate for the target market.  Will they bring a 3rd device to market at the $ 400 price point to address the next tier.  Apple is able to deliver an iPod touch today at a $200 price point.  They could deliver an IPhone at 300-400 and accept lower margins but,  Apple is more concerned about damaging their brand then serving the bottom of the market because these lower margin devices carry the same support and manufacturing costs.  If you look at the Android manufacture like HTC, Motorola, Samsung, LG, it is not like they gain some huge pricing advantage by using Android, and they are now slave for the most part to Googles choice of innovation because they are not big enough to go it alone and they are using Android to improve their market position.  ...

    If I may suggest, index your thinking not to the device (price, positioning, etc.) but to the service.  The iPhone “business model” is to monetize high speed mobile data.  As long as that service (aka ARPU) is hefty, the device will be a premium product. Remember that this was also the case when voice ARPU was hefty. There was an era when voice-only phones cost hundreds. When the service associated with smartphones will commoditize (post-4G in my mind) then, and only then, will iPhone ASPs drop and Apple will flip a switch to move into a broad iPod-like portfolio model.

    Competitively, it’s not just Google, but the Android licensing OEMs who need to make the same decisions that Apple faces.  This is why Android is still not on cheap phones. It makes no sense as an OEM or an operator to do a cheap data hungry smartphone for mass markets which, incidentally, have low mobile data network penetration and capacity.  If you can afford a high speed data plan, you can afford a $600+ device (subsidized or not).

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  • Posted: 04 August 2010 06:15 AM #9

    Asymco - you may dislike an ad supported platform, but believe me, not many people care whether it is or isn’t (it is very admirable to try without ads though).  I for one would gladly click away on ads on your site given how extremely useful the information that you supply is on there.  And I am sure there are plenty of people out there that agree with me…

         
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    Posted: 04 August 2010 06:23 AM #10

    asymco and sleepygeek,

    Tomi T Ahonen doesn’t agree with you.  He thinks best phone and app store don’t matter.  Carrier relations and reach matter.  Android would likely win the big platform race.

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    Posted: 04 August 2010 07:42 AM #11

    Mace - 04 August 2010 09:23 AM

    asymco and sleepygeek,

    Tomi T Ahonen doesn’t agree with you.  He thinks best phone and app store don’t matter.  Carrier relations and reach matter.  Android would likely win the big platform race.

    Tomi and I worked at Nokia at the same time.  Tomi’s site is a verbose version of mid-2000’s Nokia ideology. However, I’ve been reassured that nobody inside Nokia believes that crap anymore.

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  • Posted: 04 August 2010 08:50 AM #12

    Looks like your time has come… Big PED article on you today too.

    http://tech.fortune.cnn.com/2010/08/04/five-smart-apple-charts/

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    Posted: 04 August 2010 09:13 AM #13

    rattyuk - 04 August 2010 11:50 AM

    Looks like your time has come… Big PED article on you today too.

    http://tech.fortune.cnn.com/2010/08/04/five-smart-apple-charts/

    One thing I should mention here given the praise of my charts.  My entire analytical infrastructure is based on iWork.  I use Numbers exclusively for spreadsheets and charting and I think the results are not only beautiful, they are also quite flexible in how I can visualize the data.  Not to mention that they are also much faster to generate and publish.  I spent over a decade using Excel but made the break once I began using a Mac as my primary desktop.  I figured I should eat the dogfood…

    Numbers has its limitations and it does create some frustrations, but the quality of the output is what keeps me a fan.

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  • Posted: 04 August 2010 09:22 AM #14

    asymco - 04 August 2010 12:13 PM

    One thing I should mention here given the praise of my charts.  My entire analytical infrastructure is based on iWork.  I use Numbers exclusively for spreadsheets and charting and I think the results are not only beautiful, they are also quite flexible in how I can visualize the data.

    It also produces far more interesting images than the cookie cutter Excel charts. When PED shows them on one page like that they do pop out.

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    Posted: 04 August 2010 10:47 AM #15

    asymco - 03 August 2010 08:09 AM
    Mace - 03 August 2010 07:52 AM
    asymco - 03 August 2010 07:35 AM

    ... At some point when mobile data becomes good enough and commoditized and ubiquitous, the operator role in the value chain will diminish and something of a free market will emerge for devices (with no exclusive, price distortions and limited availability) ...

    Is this possible?  Cellular network, unlike Internet, has been regulated from day one.  Telecom service providers have to pay big monies for the right to use those bandwidth.

    Yes it is possible. Regulators are watching this closely and will act if/when there are abuses.  Having the right to use bandwidth does not give one the automatic right to restrict access to software platforms and devices. In practice there is a lot of politics, but give it time.  I’m only pointing out that in the near term, operators have a role in the great platform game and as a result there will be fragmentation.  That role will not last forever.

    The almost certain defeat of net neutrality flies in the face of this IMO. Telecos/Cable are deep in the pockets of D.C. Wait until the Comcast//NBC monster rears it’s ugly head (restrict bandwidth, refuse access to programming that doesn’t fit their political beliefs, etc.) - u will see regulators sitting on their hands.