Thursday, 05 August 2010 09:50

Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space

The following is a synopsis of a recent Fortune/Tech article: Google passes the 200,000 Android activations/day mark

    1. There are now a million Android devices sold every five days, and that number continues to grow.
    2. Google CEO Eric Schmidt told reporters at the Techonomy Conference tonight that Android had passed the 200,000 unit/day milestone.  That's incredibly up from 160,000 at last month's earnings call and 100,000 at Google I/O in May.  Google (GOOG) has doubled the Android run rate in 4 months.
    3. The growth explosion is being attributed to the Motorola Droid X which is being marketed strongly by Verizon.  He also was excited about the Samsung Galaxy line which is being sold on all networks in the US and in over 100 countries, more than doubling Android's footprint.
    4. At the current rate, Google is selling 18 million Android devices a quarter.  If you add up all of Apple's iOS devices in the just announced quarter, iPods: 9.41 million (half-ish are non-iOS Shuffle, Classic and Nano) , iPhones: 8.4 million (including 1.7 million iPhone 4s) and iPads: 3.27 million you struggle to reach that 18 million. Technologizer put together Canalys numbers below which seem to agree with that assessment:

Android looks to have passed iOS devices globally and is pretty close to passing Blackberry for number 2.

The author goes on to drive the point home that I have harped on in "The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift" and "", and that is the pace of innovation in the Android space is literally staggering and will be nigh impossible to match by a single company with a completely vertical channel. To wit:

"It is really incredible how fast the Android platform is growing.  Remember, the first real Android phone to sell in big numbers was the Motorola Droid, which debuted only eight months ago.  Since then, it seems like every month a handset maker ups the ante.

In August alone, Verizon has the Droid 2 and Fascinate.  Sprint has the Epic 4G.  T-Mobile has this Emerald/Glacier thing coming and AT&T  has the the Sony Xperia X10 and Dell Streak.  This month also sees the long awaited adoption of Froyo on major handsets like the EVO and Droid."

These are all phones that are vying to knock the Evo off of the top of the Android "King of the Hill" perch, and the Evo just had its OS upgraded to Android 2.2. Before the upgrade, the most popular consumer tech site on the web awarded the Evo the best smart phone title over the iPhone 4 (see A First in the Mainstream Media: Apple’s Flagship Product Loses In a Comparison Review to HTC’s Google-Powered Phone), and that was BEFORE the upgrade. It is likely before sometime next year that one of these many phones will outdo the Evo in features and functionality, and even if they don't, HTC (the Evo's manufacturer) is sure to obsolesce their own product (as they have been doing for the last 4 years) to keep the pace of this race nice and brisk. As I said the pace of innovation in this space is dizzying. Development years are being compressed, literally, into months - and the consumer is guaranteed to benefit, as they are currently doing in real time.

Many commenters are lamenting on the fact that Google is not making money on Android sales since the OS is given away for close to free while Apple is making $250 per handset sold. Those who are looking at it from this perspective are missing the forest due to that big fat tree that is in their way! Yes, Apple is making a killing on its iPhone sales, and it would be difficult to attempt to catch them with a fat margined product. They have managed to produce both margin and volume and have wrapped it up with extreme customer loyalty. What the armchair pundits are missing is the power of reach. Google is developing massive reach, and developing it ridiculously quickly. A byproduct of this reach is the commoditization of the smart phone platform which will probably cut the fat margined business model off at its knees. That is not to say that Apple will be cut off at the knees, but they will have to alter their business model for the competitor-less margin that they enjoyed for the last three years will no longer be a given. It also means that anyone else reaching for the crown (including Apple) will have to spend more upfront to gain less per unit sold. This actually benefits Google, for they are not in the hardware race, yet they benefit from each and every handset, tablet, desktop and automotive unit sold. Google is trying to become the new Microsoft!

In the meantime, Google ramps up the potential to push software as a cloud service, downloadable software and interactive, activity/context sensitive rich media ads and services to hundreds of millions of new users. This opens up a phenomenal opportunity for Google, and it appears as if many are missing the point because Google (wisely) decided not monetize it immediately, but to let it gestate and grow. Do you remember 15 years ago when many felt the same about search and the fact that Google wasn’t making any money providing search (pre-advertising)? Now this is not to say that Google is going to win the Smart Phone Wars, although at this point Google looks like the number one contender (IMO, Apple, Google and Microsoft are the ones to look out for). Apple has a very different and unique approach that is executing quite well from a profit and market share approach. Google has very strong momentum, and Microsoft has, by far, the strongest infrastructure. The only definite that I see is that this is a very exciting time to be a consumer of these products, for the competition is forcing everybody to push out the best that they have to offer – very much unlike the time when MSFT ran everything and which produced Windows Vista. Don’t believe me? Well, if you haven’t had a chance to yet, check out the features packed into the new Windows Mobile 7 OS - After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play.

Other perks from the Smart Phone Wars competition:

  • You can bet your left ass cheek that the iPhone 5 will have an Evo-sized screen with resolution to match today’s LCD flat screens, accompanied by the opening up of the iPhone to standards-based peripherals, ex. HDMI plugs and USB. The screen size increase is a definite, but peripherals is a maybe. Die hard Apple fans won’t mind that they have to jump through hoops to connect their device, but the rest of the world will lean towards an Android device if they can’t easily use their phone/tablet with existing hardware. Apple sees this as well as I do. I’m sure they’ll find a way to gimp the standard somewhat, but more open is better than less open.
  • You will probably see Nokia adopt Android or Windows Mobile on some of its devices, or you will see continued market share decline. Nokia makes some kick-ass hardware, and will challenge HTC if they had the OS to go along with it.
  • Microsoft is guaranteed to extend their hegemony on the desktop and enterprise server space to the handset, as well as their reach into the consumer living room via the Xbox. The result? More functionality, more usability, and better overall products.
  • The Android clan (which is nearly everybody who is not RIM, Apple and MSFT, and maybe Nokia) will try their best to pump their R&D departments to their limits, and you will be getting bleeding edge products pushed to your door step on a quarterly basis until a clear winner is selected - which will probably be sometime from now.

Must read Smart Phone Wars commentary:

  1. There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
  2. The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
  3. An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
  4. This article should drive the point home:
  5. A First in the Mainstream Media: Apple’s Flagship Product Loses In a Comparison Review to HTC’s Google-Powered Phone
  6. After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
  7. Android is gaining preference as the long-term choice of application developers
  8. A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple
  9. Math and the Pace of Smart Phone Innovation May Take a Byte Out of Apple’s (Short-lived?) Dominance
  10. Apple on the Margin
  11. RIM Smart Phone Market Share, RIP?
  12. Motorola, the Company That INVENTED the Cellphone is Trying to Uninvent the iPad With Android
Last modified on Thursday, 05 August 2010 09:51

12 comments

  • Comment Link Reggie Middleton Friday, 13 August 2010 19:17 posted by Reggie Middleton

    I have heard this issue several times and although quite valid there is one fact that stands out. Android paired with Samsung and HTC hardware has produced products that are simply incredible. Thus, it can be done. A more pertinent issue is the Oracle law suit over Java. Will this kill the Java open source movement?

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  • Comment Link Charlie J Friday, 13 August 2010 18:39 posted by Charlie J

    HP has announced that they will do tablets with the Palm OS and they will do tablets with Win7.

    Reggie, as an experienced software publisher, I am still skeptical of Android kicking butt over everyone else, because there isn't one Android spec to develop apps for. Every piece of hardware is a bit different. I think this is going to be a big issue for Android.

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  • Comment Link Reggie Middleton Friday, 13 August 2010 08:24 posted by Reggie Middleton

    "So what does that mean?"

    It means Google will be push cloud based software to those devices, ex. office suites, location services, mass storage, etc. Google is angling to be the next nest Microsoft.

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  • Comment Link john kramarz Friday, 13 August 2010 08:20 posted by john kramarz

    " Google (wisely) decided not monetize it immediately, but to let it gestate and grow."

    So what does that mean? One day, after it gestates and grows and 'dominates' the market, people will turn on their Android devices and be blasted with ads that come with their free OS? Will that annoy Android Fanboys? Or will malware and info mining of people's phones supply the revenue?

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  • Comment Link Reggie Middleton Wednesday, 11 August 2010 18:23 posted by Reggie Middleton

    Last week I showed a comparison of the HTC Evo running Android to the Sony PSP, see http://boombustblog.com/community/community/Reggie-Middleton/Technology/72-HTC-Evo-vs-Sony-PSP.html

    Well, Sony is about to release a PSP phone running Android 3.0, complete with a 4 way rocker joystick and the well known PSP controls. This also brings the popular 3D games such as Modern Warfare and God of War - real games that best iPod offerings and match that of MSFT's Xbox! That's right, Android gets real 3D games while Sony gets an opportunity to sell a phone version of their wares without having to create an OS. See http://www.engadget.com/2010/08/11/exclusive-sony-ericsson-to-introduce-android-3-0-gaming-platfor/ for more.

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  • Comment Link Reggie Middleton Friday, 06 August 2010 06:33 posted by Reggie Middleton

    Quote from the article:
    "In the meantime, Google ramps up the potential to push software as a cloud service, downloadable software and interactive, activity/context sensitive rich media ads and services to hundreds of millions of new users. This opens up a phenomenal opportunity for Google, and it appears as if many are missing the point because Google (wisely) decided not monetize it immediately, but to let it gestate and grow. Do you remember 15 years ago when many felt the same about search and the fact that Google wasn’t making any money providing search (pre-advertising)?"

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  • Comment Link Punit Pandey Friday, 06 August 2010 04:50 posted by Punit Pandey

    Article seems to be missing two important points -
    1. Google is eyeing application selling revenue (they get 30%, i guess, on each app they sell from android store)
    2. The big fat advertisement revenue by controlling smartphone market

    These two are huge and that is the reason they are not bothered about hardware or software money.

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  • Comment Link NDbadger Thursday, 05 August 2010 22:47 posted by NDbadger

    HP is going to have a difficult go at it, IMO.

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  • Comment Link Reggie Middleton Thursday, 05 August 2010 10:40 posted by Reggie Middleton

    Let's wait and see what new, integrated product they are coming out with, then I'll add them into the mix. Since HP is not adopting Android or Windwos mobile 7, they are obviously throwing all of their chips in the WEbOS basket. The WebOS seemed pretty slick, but Palm didn't have the resources to follow through. Obviously HP does.

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  • Comment Link Angie Trapp Thursday, 05 August 2010 10:36 posted by Angie Trapp

    Good analysis but I'm still salty that you aren't giving HP/Palm any love.

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  • Comment Link Reggie Middleton Thursday, 05 August 2010 10:34 posted by Reggie Middleton

    It is too early to tell who will win this contest, but one thing for sure (just like with Gold), very few Apple commentators, analysts and investors bother to take a truly objective stance when viewing Apple. This will cause many to miss the paradigm shift when it comes.

    Apple will probably be able to continue to deliver strong earnings for the near term, but past that is really to murky to forecast with precision.

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  • Comment Link shaun noll, CFA Thursday, 05 August 2010 10:26 posted by shaun noll, CFA

    I wish AAPL didn't have so many levers to pull to increase earnings or it would be one helluva short.

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