Android Falters as IOS Strengthens
Based on a growing number of data points, Android’s sales dominance may be nearing its apex while iOS is on the rise. Even as a daily user of both an Android smartphone and a tablet, I can’t deny the fact that Android’s partners are not doing as well as they used to. I am starting to think Android is on the decline for several reasons.
1. Early Android handset makers in free fall. In April of last year I noted that Android was a boost to hardware makers that had embraced the platform early. Specifically, I saw that an Android strategy helped Motorola Mobility (MMI) trim losses, while HTC (2498:TT) was growing faster than a field of bamboo. Fast-forward to today and Google (GOOG) is attempting to snap up Motorola even as Moto has faltered. And HTC? Monday’s news confirmed what we reported late last year: The rising star has fallen and isn’t meeting expectations.
2. Apple grabbing huge share of mobile cash flow. We often talk about smartphone sales market share, which is important to a point, but money keeps a business afloat. Apple is sucking most of that out of the mobile market. According to the excellent Asymco blog, Apple has been the top handset maker in terms of operating profits for the past 13 quarters running. It has 75 percent of the market’s profit share and 39 percent of its revenue. With the exception of Samsung (005930:KS), Android competitors are beginning to fade away; you can’t expand a business when your product sales are in decline and you’re earning less money on such products.
3. Top three smartphones are all iPhones. This data point comes from NPD on Monday: Of the top five smartphones sold in the U.S. in the last quarter of 2011, the top three are all iPhones. Samsung’s Galaxy S II and Galaxy S 4G took the fourth and fifth spots. Why is this a problem for Android handset makers? Because consumers are more willing to buy the reduced-priced iPhone 4 or 3GS—handsets that are more than a year or two old—than some of the newer Android handsets. There are plenty of low-cost Android models that compete well on price, but consumers don’t think they compete well on the experience. If they did, they would bypass Apple’s older phones.
4. First-time buyers pick Android, but … NPD did note that first-time smartphone buyers favor Android over iOS (54 percent versus 34 percent), which I suspect is mainly due to price. These folks will become second-time smartphone buyers and may be willing to spend more for an iPhone unless Android handset makers can give them a reason to stick with the platform. Now that the U.S. has achieved more than 50 percent smartphone penetration, the pool of first-time buyers will be shrinking, not growing.
5. Even now, few apps hit Android before iOS. One of the reasons I pay attention to smartphone sales by platform is because of developers. Not every software shop can support every operating system, so common sense dictates that most developers will aim their apps at the largest audience possible. But even with Android sales growing fast over the past two years, very few developers bypass iOS as the first platform to develop for. They are simply making more money with iOS, so that’s where top-tier apps start out, which in turn helps boost handset sales. I don’t see signs that this is changing. Even for apps on both platforms, it often takes time for the Android version to gain parity with its iOS counterpart. Monday’s Android update of Rdio is a perfect example; until Monday, I was using the app on my iPhone, instead of on my Galaxy Nexus, because it simply served better on iOS.
6. Android no longer has a killer app. Originally Android offered by far the best support for Gmail services but over time, Apple brought the iOS version to near parity. I still think the best Gmail experience is on an Android phone (and the free, exclusive Google Navigation is great on Android), but it’s no killer app. Even worse: Google can’t cease development on iOS at this point, else users will leave its services altogether. Google can’t afford for that to happen, because it gets data from these users, which feeds its primary revenue stream—personalized advertising. Even as an Android user, I can easily make do using Gmail, Google Voice, Google+, and other Google services on iOS. I suspect many mainstream consumers can, too.
7. Android has little lock-in cost to keep users. I looked into lock-in costs back in 2010 as I saw how these could sway consumers to stick with a platform. I still believe there is a smartphone lock-in cost: Moving to another platform could cost $100, $200, or more to replace apps. But I’m starting to believe there is less of a lock-in to keep people on Android. Why? Most of the heavily downloaded apps are free. Not all of them, of course, but far more of the top Android apps are free, vs. those in the iTunes App Store. Without this financial barrier, it is easier to switch from Android to iOS. Likewise, there is more of a deterrent to move in the opposite direction.
None of my points here are intended to suggest that one platform is better or worse than the other. As long as I have been covering mobile technology online—it will have been 10 years in 2013—I have always stood by one mantra: Use the best mobile device for your needs. I will continue to practice what I preach. Although I have an iPhone 4S, I carry my Galaxy Nexus handset on 9 days out of 10. I have an iPad 2, but that’s relegated for specific uses; my Galaxy Tab 7.7 is the tablet I take everywhere.
Independent of my own Android use, there are many reasons to suspect that Android’s growth will continue along the upward path it has enjoyed for the past few years. But Apple’s iOS platform has strong momentum that is going to slow Android down as it forces some handset makers to scramble. These will likely gravitate toward the alternative: Windows Phone. Companies are likely to see growth there. Given the history of Android, as well as what I expect from its future, will the story remain the same?
Also from GigaOM:
Connected World: the Consumer Technology Revolution (subscription required)