An Irrational Belief: Android Can be Completely Beaten by Apple

“Competition brings out the best in products and the worst in people.”

—David Sarnoff

Apple, Inc. under the leadership of Steve Jobs, practices a specific philosophy. That philosophy has many elements that we’ve come to know and love. Unfortunately, it has some inherent weaknesses that prevent products from becoming populist, and so, to a certain extent, trying to win back the gains that Android has made and will make will be in vain.

There was a time when the Apple community thought: wow, Apple has done it. They’ve finally figured out how to win convincingly and totally instead of lose. Windows was a fluke. Surely, now, it’s been established that under great leadership and a level smartphone playing field, Apple will show its true winning colors in every aspect.

iPhone 4

Apple iPhone 4 (Credit: Apple)

It’s not happening.

I should explain. Apple is winning in every respect except market share: awards, public awareness, profitability, iOS popularity, the app store, and the financial health of the company. I am aware of all those things. The iPhone has been great for AT&T. AT&T has attracted many customers and made a lot of money. So has Apple. iOS still maintains a healthy market share and is enormously profitable for Apple. There are many people who are glad to see Apple prospering.

I’m not overlooking all the good things that have been driving Apple’s iPhone success. Instead, I’m looking at one subtle point. And that is, in the long run, Apple can’t win the smartphone market share battle. While many might dismiss that as an issue, it does have consequences.

In that realm alone, we’re back to the same old arguments we used in the Mac world. Market share doesn’t matter. It doesn’t matter to BMW. Profitability is king. Eventually, smartphone vendors and carriers who hang their hat on Android aren’t making decent money and will eventually go bankrupt. Our hopes and rationalizations are all over the Mac Web.

But there’s a fly in our ointment of rationalization.

Sure Packard Bell and Compaq got into tough times and were subsumed. The fact is that big, rich companies always figure out how to 1) gobble up little companies for what value they have 2) cut costs, 3) dupe their customers through advertising. And if you don’t think advertising plays a role, just watch the political ads on your local station and the product ads during an NFL game.

Apple’s Focus is Also Weakness

Apple is great at focusing on the customer. Apple is great at creating great products that we love. To keep doing that, Apple has to maintain control. That’s in conflict with the business forces that always apply. Products, like Android, that allow companies to jump in, rather than toil over their own innovation, will always be in demand. There will always be individuals who retain a bad taste in their mouths for Apple. There will always be industry forces that want Apple to fail, lest they look bad and get squeezed out of the game. There will always be Microsoft, wiling to pay a half billion dollars to bend people’s minds around Windows Phone 7. Will it work enough to boost WP7 market share? It probably will.

Back to Android. Android lets companies look cool, make products that look like the Apple iPhone, and lets everyone take a shot at a cut of the smartphone pie. It’s exactly what the industry craved, and it’s everything Apple isn’t. That’s the fundamental contradiction of our time.

The bad news is that, in time, it will become clear that millions of customers are willing to settle for something less than the iPhone and don’t care about what the iPhone has to offer in terms of security and compatibility. Think of that as psychological warfare against Apple. Apple will never achieve 100 percent dominance because, like Windows, there will always be millions of customers who are willing to settle for something that isn’t Apple.

It’s essential that Apple work a deal with Verizon to stem the tide, but that’s a thorny issue about which volumes have been written. In the long run, Apple’s belief (or maybe our own belief that we presume on Apple’s part) that its superb products and customer approach can outright win the market share war against Android remains irrational. Once that sinks in with investors, in 2011, there could be problems.

There are emerging signs that the rest of the industry is going to try the same strategy against the iPad. The iPad era started in April, and this is October. There’s still time for competition.

Bottom Line

Don’t take this wrong. Apple is hugely successful. And that success is all the more reason why the rest of the competitors will work doubly hard to cash in on Android, the advantages they have, the market forces they can invoke and their knowledge of customer behavior. That will slow Apple down a little and keep complete dominance of the smartphone market beyond Apple’s grasp.

That’s okay with me. Apple’s huge financial gains, fabulous publicity, halo effect, innovation and contributions to the smartphone state-of-the-art can’t be hurt by occasional moments of introspection and humility. By the company and by us.