Is it VHS vs Betamax, Mac vs PC, or Coke vs Pepsi? The current multibillion-dollar mobile-market war is a confusing tangle of software makers, hardware makers, and network operators. This isn’t what a theorists would call a perfect or even very clean competitive market, but it does seem to be delivering a regular flow of better, faster, more usable products to the people of Earth. It’s a privilege to be in it.
This piece is provoked first by the general hubbub; not a week goes by without someone trumpeting a ludicrously-huge number of handsets or activations or subscribers. It got intense enough that Fred Vogelstein tried to clear the air recently in WIRED, ending with the plea “let’s get our numbers straight”.
John Gruber read Fred and wrote “I think the mobile market is going to be more like the console gaming market, with a handful of major players each with a 20-40 percent slice, rather than the monopoly-dominated PC market.”
Then there’s Tomi Ahonen’s typically lengthy and rambling Understanding Smartphone Market Share? Battle not for phones, is for platform! A word about Tomi is in order; many think him completely loopy, and I think he’s spectacularly wrong on many fronts, not least his failure to notice that recent Nokia high-end phones are turds; that Symbian is by current standards stupid and ugly; that essentially all serious phone-based Internet usage these days is sourced from iOS and Android devices; and that “Smartphone”, in the sense he uses it, is a meaningless term. But give him credit, he’s a first-rate stats-and-numbers hound, and often points out things that are omitted from the mainstream Apple-vs-Android narrative. And, it (*cough*) ill-behooves me to criticize anyone for long rambly blog entries.
Anyhow, here are some things I believe.
The Numbers Are Really Big · Insane, I mean. The billion-plus phones sold per year. The number of active subscriptions, which is greater than half of the human population. The number of new Android devices that check in with Google every day. The line-ups outside Apple stores for every new iOS device. The hundreds of thousands of apps. The ridiculous number of new ones that flow into Android Market every day. Everywhere I look, I see something astounding.
This is the big league; bigger today than the computer industry ever was, and growing fast. This is as fierce a concentration of R&D heat and manufacturing virtuosity and distribution wizardry and marketing mojo as humanity has ever seen.
It’s Hard to Measure · So, um, who’s winning? The answer is, nobody knows. To start with you’d have to agree on what to count. Mobile devices? That fit in a pocket? With good Internet access? That include a telephone? Or, looking in a different direction, network subscribers?
And then you’d have to work out who’s playing, actually. We have integrated companies that do hardware and software: Apple, Nokia, and soon, they claim, Samsung. Also players on the hardware-only (HTC and Motorola) and software-only (Google and Microsoft) sides.
Let’s make it simple and focus on the really profitable and interesting part of the market: portable devices that are first-class Internet citizens. Which is to say, anything running iOS or Android.
That ought to be easier to count, right? Apple and Google regularly chest-thump about how many of this was sold or that was activated in any given time period. But the numbers aren’t directly comparable; Fred Vogelstein zeroes in on some of the problems and concludes that iOS is running at nearly 7 million devices a month; his reasoning looks sound. He also asserts that that’s more per month than the Android total. If I say anything on the subject, it might be taken a little too officially, so I won’t.
And it’s more complicated than that. Quite a few (don’t know the number) of those iOS devices are replacing existing iOS devices; more so, I bet than is the case for Android (don’t know that number either). But then some of the devices that have been replaced are sold on Craigslist or given to Aunt Effie or whoever (don’t know that number either).
So I’d rephrase Fred’s plea: “Let’s get the numbers right, and be honest about it when we can’t.”
My Take · Me, from what I see, I think that the number of new iOS users per month is huge, and the number of new Android users is also huge. I think who’s ahead varies from month to month and place to place.
Most important, I think that both the numbers are too big to ignore, and thus the near and medium term futures of both those platforms are assured.
Who’s Number Three? · I’ve asserted several times in this space that two is probably not the ideal number of mobile-software platforms. So, who’s next? The candidates are Symbian, Blackberry, Windows Phone 7, Bada, WebOS, and Meego.
What do you think? I’m rooting for WebOS or Meego to become a player, but at this point wouldn’t be surprised if it’s a two-platform future for a little while now.
Thus I think there’s a good chance that while Gruber’s right about the no-monopoly bit, he may be wrong about the several-times-20-40% bit, at least in the Net-phone market: for the next little while it’ll be two players, with market shares something like 80/20 or 60/40 or 50/50.
The Networks Matter Most · Whatever you think of Tomi Ahonen, he makes one really important point: Having good hardware and software matters; but having good network partnerships maybe matters more. For example, if you’re thinking Android-vs-iOS in the US market, you totally can’t ignore the AT&T-vs-Verizon side of the question.
This is one factor that might bring a third platform player into a position to compete respectably with iOS and Android; in most markets there are more than two network operators with substantial market share, and since they mostly offer about the same service quality at about the same price, software platforms are among the few tools they have to differentiate themselves.
Cheap Phones? · Whether you call it a Smartphone or an App phone or an Internet phone, you’re typically talking about an expensive high-end device. Which, despite all the impressive numbers, is a small corner of the global phone market; the volume and the head count is in the phones owned by the people whose income tends towards the world’s average.
So far, none of those are very Internet-enabled. iOS will never address this market unless Apple makes a conscious decision to shift its strategy away from profit maximization to market-share growth. I sure wouldn’t if I were them.
Android might. It hasn’t so far, because of a conscious strategy so far to aim Android at the high-end market; it seems a no-brainer that the best way to establish a platform is to grab the high end and then migrate down, rather than the other way round. Moore’s Law, y’know.
These people may not spend as much per person per month. But in aggregate, they simultaneously represent Internet phones’ greatest growth opportunity, and their best chance to improve the planet. So I’m waiting for the day when we can aim Android at the rest of the people in the world.
Contributions
Comment feed for ongoing:
From: PXLated (Aug 02 2010, at 00:56)
Not so sure Apple won't go downscale, they did with the iPod. I would expect both Android and iOS to target the whole market at some point. Right now it doesn't seem they can keep up with the demand for what they already have.
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From: Martin Seebach (Aug 02 2010, at 01:46)
Re. expensive phones: HTC has a line of entry level Android handsets, the Tattoo (1.6) and Wildfire (2.1). They are roughly half the price of their high-end colleagues.
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From: Ted Wise (Aug 02 2010, at 04:44)
Apple _can't_ win. They've intentionally crippled themselves in the race for market share. They refuse to compromise their vision of what a mobile device should be. The result is that of course, Google will win. Android is all things to all people and the flood of devices from various manufacturers will eventually make it cheaper and available everywhere.
When you state market share will be 80/20, 60/40 or 50/50 you're being kind by including the 50/50. If Apple is very lucky, and the carriers continue to eat their portion of the subsidized price, then it will be 60/40 otherwise it will stabilize around 70/30.
Apple can only maintain a majority market share in markets where they have no legitimate competition. They make excellent products. But they make premium products. If their competition is all dreck then they'll own the market. But in desktops and mobile they have strong competition. They successfully own the premium portion of both markets but in mobile, like in desktops, they'll end up having to concede the rest.
Apple seems to understand and accept that. If they really wanted to win a numbers war they'd have released a CDMA phone and lowered prices enough that carriers could offer iOS devices for $150. They haven't and they won't. So Google will win the war. But in some ways it will be a pyrrhic victory.
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From: albsure (Aug 02 2010, at 08:51)
I think the real question is, "what does winning actually mean?". The words to "to gain the whole world and forfeit your soul" spring to mind in this current tech war. Android is only a win for google in so much as it will stop MS or Apple preventing them access to search data in the future. Even that is not a foregone conclusion considering how companies in China are modifiying Android so that it doesnt have any "google" in it at all.
Apple's idea is to make as much money as possible and keep their image and soul unchanged. I dont think market share matters to apple at all, they've lived without that concept for so long they know market share is just bs.
I think its also misleading to talk about android beating iOS. Symbian beats everyone but no one cares. The party is happening at Cuppertino, regardless of what the market data says. More money, apps, peripherals, music, video .. the whole eco system is Apple's right now, because they invested in it. Google is so far away from the Apple eco-system and it's way too hard for them to get there. No matter how many free OS's they push..
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From: anonymous (Aug 02 2010, at 09:36)
Many pundits (especially in the US) think it will eventually be a 2 horse race between Android and iOS. I would be interested to hear what you think of Nokia and Intel's MeeGo effort. As a programmer I'm very attracted to the most open mobile phone OS on the market, and I don't particularly trust either Apple or Google.
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From: Arimathéia (Aug 02 2010, at 09:58)
Which system generates more profit for the U.S. market and which leads to the chinese?
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From: S. Ford (Aug 02 2010, at 10:09)
What's disappointing in this discussion is the fascination with the "cellphone". Something in my gut says this is missing the forest for the trees, akin to thinking of automobiles as horseless carriages.
I feel like iPhones, iPads, iPod Touches, Android phones, whatever are the first of a new type of device which is a practical alternative to the complicated, boxy, desktop WIMP. These things won't be portable, keyboard-less desktops and thinking of them as "smart cellphones" strikes me as misguided.
This is my biggest concern about Android, that conceptually it's a smart cellphone OS for all the cellphone makers that Google can leverage for ad sales and that architecturally it's a very purpose built stack of technologies that's relevant primarily only if you're planning to make a smart cellphone.
I develop for iOS and I'm watching Android with interest, but I'm concerned that the current focus and technology stack is too cellphone-centric. Also, please rethink the Java layer on top and consider pushing the API down lower towards the hardware.
I'm not convinced Google's ad selling interest and tech hacker centric engineering focus will make Android a good platform even the pile on effect of all the hardware manufactures chasing Apple's current lead result in it becoming the most common platform.
My $0.02.
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From: Allan Crain (Aug 02 2010, at 10:23)
@Ted: I feel I should point out that AT&T already offers an iOS device (the 3Gs) for $100. Ever since the 3G came out, Apple's been offering the last-gen model for $100, the lower-memory current-gen model for $200, and the higher-memory current gen model for $300. And you can generally get a refurb of the current-gen for $150.
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From: Ian Ragsdale (Aug 02 2010, at 10:41)
Re: Ted Wise
Your comment that Apple can only maintain a majority market share in a market that has no legitimate competition makes no sense - if Apple is winning then you will always just say that the competition wasn't legitimate! They had plenty of people going after them in the PMP market and the iPod is still king - would you say that none of the manufacturers competing in that market were legitimate?
Regarding them never moving downmarket, you can already get an iPhone for $99 with a contract and an iPod touch for $200. Apple will continue to move downmarket with the iPhone the same way they did with the iPod - release newer & better models at the same price and make the previous version cheaper. Of course they aren't going bottom of the barrel yet, they're selling every iPhone they can make. I would be willing to bet you can get an iPod touch for $150 within 18 months - it might not be a phone, but with Skype and Facetime you can probably replace one.
And to be sure, they certainly wouldn't mind if they had 20% of the market but 80% of the profits, as long as they have a big enough market share to continue to attract app development. If they keep most of the high end and Android takes all the low end that's how it will work out. I'm pretty sure Apple would define that as winning, even if you wouldn't.
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From: TheOtherGeoff (Aug 02 2010, at 10:43)
The key points are:
1) the smartphone market is really the 'ultra portable computing' market, which crosses the lines with laptops at the high end, and PDAs at the low end. Apple is the only player in all 3 domains.
2) what is a low end phone: it makes calls and does texts. Will Apple stoop that low in the food chain? As pointed out the iPod Shuffle was a gateway device to control the low end. The question is... When will Apple have the efficiencies and the investment recoup to sell a 'zero dollar' [after carrier subsidy] phone, that has 2GB, does SMS, facetime, email, phone, and web (and everthing else, except not well... running an old chip and limited capabilities. ? My Guess... 1 year. (current IPhone 16 next year will be $99, the next iPhone+ will be $199 (32)/$299 (64), and an iPhone - (2GB) will be free with 2 year contract ('facetime for the family'). Key differentiator: All new phones will do Facetime over LTE.
3) The vortex of ATT and Flash past decisions will disappear after next year. LTE obviates the need for an GSM only phone. And Flash is well, going the way of Delphi, Borland, and ActiveX. If you need these components on your computing device, you're coding in the past.
4) the app store is not an issue: if you want a kewl app that can't be sold... serve it up as a HTML5 app, or provide jailbreaking services. Apple will distance itself, but will gladly sell you a phone for you to break.
So long point, short: Apple's integrated environment, HW to SW to Desktop to Cloud will be one major player.
So the key question is: how many 'generic smartphone OSes' do you need? My argument is: 2. Android, and someone willing to compete with Android.
Much like most political worlds, you'll have 2 parties controlling 70-80% of the mindshare (moderate/conservative/liberal), and 1-2 minor parties (independent, Tea party). These 3rd and 4th parties will drive innovation and drive the big parties to adopt new components (and/or acquisition).
10 years from now, the Apple Model will tire, much like the old IBM mainframe model tired when Unix and PCs made it too entrenched in it's own efficiencies to be effective in the current business model. Until then Apple is going be the 60-70% _PROFIT_SHARE_, and the other players will be fighting for the rest. Like the BUNCH of the 70's, most of today's phone OS makers will die or consolidate into a future business model yet to be exist.
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From: Derek K. Miller (Aug 02 2010, at 10:47)
There was a discussion on CBC Radio's "The Current" this morning about whether RIM/BlackBerry, which still has a huge share of the smart(ish) phone market, is likely to remain a big player or is on a downward slide.
I'd certainly like RIM or webOS (now HP's) to remain as a third or fourth player in the market. It's a pity Palm wasn't more successful with webOS -- my kids each have a Palm Pre, and the OS really is quite elegant. And Windows Phone 7 at least looks interesting, but may be too little too late for Microsoft.
It's certainly fun to watch, and reminds me a little of the crazy early days of the microcomputer industry around the turn of the '80s, except the companies involved are much bigger behemoths now.
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From: anonymous (Aug 02 2010, at 10:50)
To get the figures right is a good attempt. But what figures count in the end? Market share of what?
Or it is simply money earned? I strongly suggest that companies are called successful if they earn money, not if they claim a certain market share.
So who is it? In regard of money earned I would give the title of most success to Apple.
Fell free to disagree.
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From: Sivan (Aug 02 2010, at 11:29)
I think Gruber is correct to point to the continuing success of the BlackBerry. It's unashamedly optimized for communications first and it works with a wide range of hardware configurations, price points, and many carriers. Android and iOS are in an arms race without clear purposes.
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From: Scot (Aug 02 2010, at 11:56)
"Having good hardware and software matters; but having good network partnerships maybe matters more."
That probably depends on where you are. I can see that mattering in the US, where the iPhone is on a single carrier and there are two different mobile phone standards (limiting phone portability), whereas in the UK it hardly matters at all as the iPhone is available from every major network (and is even available unlocked direct from Apple) and there's one mobile phone standard (so you can, usually for a small fee, take your phone with you when you move to any other carrier).
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From: John Dougan (Aug 02 2010, at 12:11)
I think you're counting RIM and the Blackberry out of the game too quickly. Blackberries are still common and RIM's recent purchase of QNX leads me to think they're working on an overhaul of their mobile software.
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From: jehrler (Aug 02 2010, at 12:47)
Tomi Ahonen may be a "first-rate stats-and-numbers hound" but this paragraph from his post shows that he leaves a lot to be desired as an economist and, in my mind, raises serious questions about his qualification to comment on the market share/price trade-off:
What do I mean? I mean that 'ceteris paribus' ie 'all other things being the same' if you and only you lower your price in the market (rivals do not change their prices) then under normal economic laws, you gain sales. In other words, your market share grows. But also, ceteris paribus, if nothing else changes in your company and you just lowered your prices, then you have cut your profits. So yes, economic theory suggests that if nothing else changes, then lowering prices should increase market share but reduce profits; and conversely, if you raise your prices, you also raise your profits but it will hurt your market share.
Even in Econ 101 they teach about elastic/inelastic demand and how lowering prices can *increase* profits by having higher volumes. The example I gave in his comments is suppose I make gum for 5 cents and sell for 10 cents to 10 customers. My revenue is 1.00, my cost is .50 so I net .50. If I lower my price to 9 cents and now have 100 customers, my revenue has grown to $9.00. My costs have grown too to $5.00. But my profits have gone crazy so I now net $4.00.
I mean really, this is freshman economics and something that a former "Nokia executive" should really understand.
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From: Reinder (Aug 02 2010, at 13:07)
"So far, none of those are very Internet-enabled. iOS will never address this market unless Apple makes a conscious decision to shift its strategy away from profit maximization to market-share growth."
Aren't they already doing that? They cannot meet demand, but do not raise prices either. To me, that sounds as a strategy to prevent others from taking the lower-priced segment before Apple can ramp up production enough to meet demand there.
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From: Robert Young (Aug 02 2010, at 13:08)
until such time as "the network" is built, and regulated, as a monopoly, that is to say, just one of 'em; none of this will matter. as AT&T/Verizon/etc. are making clear, there is no such thing as infinite bandwidth. what there is is fragmented among non-interacting suppliers, so that at each moment in each location there may be sufficient supply, but not where (your network) it's needed.
this requires smart people deciding among the various networking hardware, and installing the best of them. and moving them out when a better one comes along. paying the "private sector" to make the decision will never be in the best interest of the population.
figuring out what the necessary bandwidth is needed to support smartphones for X billion humans is simple arithmetic. it will be a very big number, and the only way to reach it is to build out with a single protocol, unless wasting trillions of dollars is good sport, for you.
the network is the computer only when its pipes are as the water pipes in your town. being a regulated utility doesn't mean it has to be mismanaged. mismanagement is rampant in the "private sector" all the time. good management is a function of smarts, and most smart people are smart for the sake of it, not to get rich. if you want to get rich, sell life insurance.
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From: JulesLt (Aug 02 2010, at 13:14)
My guess is that we're actually going to see regional splits. Most software markets are regional - there are relatively few global titles, let alone global hits.
If you're developing an application to integrate with Germany's public transport web services, it doesn't matter what OS they are using in China and Taiwan.
Nokia are never going to increase their US market share, but I think they could quite easily hold their position in the European market, which is large enough to sustain them.
I think Tomi's analysis about the cost of developing an OS is wrong - I'd wager manufacturers spend vastly more on hardware R&D to churn out nearly identical devices, and on having a different custom UI for each sub-brand they've built over their OS.
Without wanting to suggest it's easy, both iOS and Android built on open source foundations - it's not as if anyone starts from scratch these days. Chinese firms are already building their own Android fork (for their usual reasons of wanting to make devices for the rest of the world, but keeping their own market incompatible from imports).
Not knowing anything about the cost of mobile OS licences vs the cost of amortising in-house development over millions of units, I would still be surprised if the difference in cost was significant.
What will kill of smartphone OS, on the other hand, will be the failure to develop a wider profitable developer ecosystem. That is what really killed off most of the pre-Windows home computer systems - it wasn't that firms couldn't afford to develop their own hardware and operating systems, but third party developers moving towards the most profitable markets.
To keep iOS in the game, all Apple need to do is ensure that the revenue stream for developers remains high. Electronic Arts are unlikely to throw away millions of nicely profitable American consumers for the sake of an audience of hundred of millions of developing world customers who paid $10 for their phone, and object to paying 10% of the hardware cost for a game.
On the other hand, I think there will be interesting opportunities for indigenous developers for whom the opportunity to make hundreds of dollars would be significant - provided they are not immediately poached by outsourcing firms scouring for talent.
The other thing Timo ignores is the possibility that in the same timescale that will deliver the $10 smartphone, platform will cease to matter
(i.e. someone will figure out how to properly monetise web apps without using advertising. A low-cost pay-to-play-next level model could be very effective on mobiles, for instance, and attractive to carriers).
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From: JulesLt (Aug 02 2010, at 13:33)
Derek - I think HP will be able to do a lot more with WebOS than Palm can, because they've got the capital to do it, and I think they know the pain that being tied to Microsoft's schedule has caused them.
i.e. consider the Win7 tablet - I'd wager Ballmer did the full deal on them, giving them a massive discount on Win7 is they could do it in time for the iPad launch - but that someone internally realised that the damage in reputation would stick to them.
There are printers and cameras that let you completely cut the PC out of the picture (and how much will these benefit from WebOS?).
At the other end of the scale - they now own EDS and are busy pushing EDS sites to migrate their big legacy systems from IBM and Solaris over to HP-UX or Linux - not Windows Server.
I wouldn't go as far as to describe them as an 'enemy' of Microsoft, but they are biggish and bullish enough to resent being tied so closely to another firms agenda.
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From: Olivier Lalonde (Aug 02 2010, at 15:33)
You left out what I believe to be the most likely to succeed platform... HTML5.
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From: Mark (Aug 03 2010, at 02:56)
"Symbian is by current standards stupid and ugly"
This is proper bullshit, right there.
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From: Randy Magruder (Aug 03 2010, at 06:26)
You know, I think the only thing preventing total domination of smartphones is the ridiculous data plan pricing. You can share minutes in a family plan, but, at least with T-Mobile, every additional family member with data access is another $25/month. A family of 4 doing that adds a nice $100 premium to your monthly bill. In this economy, that's enough to keep my wife and daughters on 'dumbphones' not running Android or iOS. And with carriers throttling back their data allowances, they don't seem inclined to grow the numbers with shared data plans. I think we may be peaking in terms of who is willing to pay this premium and the market won't grow until data goes the way voice did.
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From: Tim Gorree (Aug 03 2010, at 08:44)
"his failure to notice that recent Nokia high-end phones are turds"
Very scientific.
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From: Tony Fisk (Aug 03 2010, at 21:59)
Not to be depressive, but there is a large pachyderm that has been wandering around the room for a while now, and is about to park its derriere in somebody's expanding market share:
We're running out of addresses. (IPv what?)
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From: Michael Smith (Aug 04 2010, at 05:00)
The cheap phones are all over india, indonesia and brazil but they tend to be knocks offs -
companies like Nexian - http://www.nexian.co.id/ in indonesia are scaring the pants of the incumbents. I fear it is all downhill from hear on our for companies like Nokia.
Nexian is using MediaTek - http://en.wikipedia.org/wiki/MediaTek to build their chips, phones and OSs. With this stack you can get very capable sub 100 USD feature phones.
Now companies like Nexian are slowly seeing what Android can do for them: http://www.andromarket.com/2010/07/nexian-journey-a890-launched-in-indonesia/
The world is changing but you may be forgetting about the "rest of the world" as you describe the playing field.
great article.
thanks!
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From: VV (Aug 06 2010, at 10:22)
Dude,
you got the numbers totally wrong!
BB is leading the Smartphone race in the USA, not apple or Android.
The lack of acknowledgment of this basic fact makes your entire analysis a farce.
BTW: in the rest of the world it is Nokia and BB. Android is growing but still has some quarters to go before becoming as relevant as it is in the US.
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