Mobile Opportunities and Challenges In the Android Ecosystem

by Ben Bajarin   |   June 23rd, 2014

The more I study the mobile landscape the more it becomes clear that many companies are competing for what is arguable the most important device for global consumer–the mobile device. Winning mobile, and by that I mean being sustainably relevant, is the battle that is happening as we speak. Those who entrench themselves as leaders in mobile will reap rewards. However, this will be the most cutthroat and competitive sector for the foreseeable future. Who wins these battles today will likely have huge advantages tomorrow. Battles will take place on three vectors — hardware, software, and services — and they are more related than many realize. In this article, I’ll focus on the hardware, and more specifically, the Android side of the hardware landscape/ecosystem.

Hardware

All vectors will be extremely competitive, but from a hardware standpoint what area has more churn than mobile? Consumers will change devices on a yearly or bi-yearly basis. Meaning every two years, new potential customers emerge. In no segment of mobile is this more of an opportunity, and challenge, than for Android hardware OEMs. I’ve stated time and time again that, in Google’s ecosystem, Android customers are loyal to Google — not the brand on their smartphone. I can just as easily go from Samsung, to HTC, to LG, to Huawei or ZTE, or any hardware OEM who has the best device to meet my needs whatever they may be at the time. As long as the OEM ships Android they will be competing for new and existing customers every year. This is actually a good thing. For a brief period of time, the PC industry saw an average 2-3 year replacement cycle of PCs. During this time, it was enterprises, not consumers, engaging in this churn. During this time, we saw rapid advancement of hardware. Once the lifecycle extended, then we saw less innovation happen in PCs. Smartphones will remain in the 1-2 year replacement cycle for most people, which means in the Android ecosystem hardware innovation will be key to keeping and winning customers.

This is where Google must step in. Google must advance their OS in a way that allows hardware OEMs to push the bar and innovate. Whether that be around 64-bit support, new display technology, optics, and more. All things I am anxious to see how Google addresses at their developer conference this week.

With the point of churn, and lack of OEM loyalty in the Android ecosystem, it is honestly anyone’s race. For our members, I dove into the following chart.

Screen Shot 2014-06-08 at 6.28.19 PM

No single Android OEM is safe. None can rest on their laurels. Today’s underdog could be tomorrow’s leader. Just like in the chart above, Samsung could be the new Nokia and see their share go from majority to minority. That is what makes it exciting.

The key for hardware OEMs who wish to win mobile is to come to grips with the reality that, at least for now, Google is their partner not their enemy. This will be a very hard pill for many to swallow. Until the role of the OS changes, this will be the reality. I suspect for some OEMs, Android is used but the relationship with Google is kept at arm’s length. For others however, Android could be their rise to power and global relevance.

Of course, this is where we are today. This is a battle still very much in the early stages. When it comes to the now over one billion Android users, it is still very much anyone’s game.

The Mobile Gateway

I say “winning in mobile” because I have a sense it is the gateway to other consumer electronics. From a hardware standpoint an OEM must be concerned with this reality if it becomes true. Winning the mobile experience could be the thing that leads other hardware vendors’ ecosystems. Take Xiaomi for example. A company I love to study and talk about but one that could easily be gone in five years or dominate the landscape. They sell TVs (and TV set top boxes) running Android. They sell routers and they sell tablets now. All this is possible because of their relevance in mobile. Now let’s look at Sony. A company whose best business as of late is their optics business. The TV business is suffering, they shed their PC business, and PS4 is a bright spot but still has a long road ahead. Here is a company struggling in mobile. Yet one which still has an opportunity in mobile. Could it be that for Sony to save their TV business they need to win in mobile? I think an argument can be made for this angle.

There is a centrality of mobile and owning some share of the mobile engagement, either at a hardware, software, or services layer, is intertwined with consumer electronics going forward. Some of these companies may own more of the hardware, software, and services endpoints than others but it is still related. Right now the battle is for mobile. For most of the consumer tech companies we like to talk about this is the central battle ground. The foreseeable future represents monumental challenges and monumental opportunities within the Android ecosystem.

Ben Bajarin

Ben Bajarin is a Principal Analyst at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research. He is a husband, father, gadget enthusiast, trend spotter, early adopter and hobby farmer. Full Bio
  • Space Gorilla

    “I’ve stated time and time again that, in Google’s ecosystem, Android customers are loyal to Google — not the brand on their smartphone.”

    Are there two different groups here? One, Google users who are plugged into that ecosystem and do have some awareness and loyalty to Google’s brand/services. Two, Android users who aren’t that aware of the OS and simply buy “a Samsung” or “an HTC” or whatever the sales person was pushing.

    • stefnagel

      Android’s biggest fans, and it’s only real customers are advertisers. As I’ve said time and time again.

      • Space Gorilla

        True. I’m wondering how large the active ‘Google/Android user’ group is (as opposed to the smartphone-as-feature-phone-upgrade group). I suspect nowhere near as large as many analysts think. I’ll be very interested to see what kind of metrics Google shows off at the I/O keynote (this week?).

  • stefnagel

    Hardware, software, services integration rules. Doing only two out three? Not so good, Once Google gave up on hardware, it condemned itself to be a second class UI provider. And its hardware vendors provide one of the three legs. Very unpleasant for them.

    • Dan

      Very pleasant for them, 1 billion+ devices running google services with no way of being locked out. Android makes certain that no one controls the mobile landscape. Google has made it so, that the mobile landscape is defined by services. Services is a court google will gladly battle on.

      Hardware, software, services integration is good for apple, a device and services company.
      For google whose goal is data and analyzing data, market share is what is good for them. If google woke up with Apples market share (profit share different story) Larry Page would rip out his hair.

      Google and Apple playing different games. Google would prefer you use android, but if you use apple devices as long as you use google services they dont care.

      • stefnagel

        I suspect Larry has been ripping out hair for quite a while.

        Only Apple delivers UX; the others aim at getting paid. Apple empowers; the others exploit.

        • klahanas

          Apple empowers, except when it doesn’t. Then it just “no”.

          • Kizedek

            Well, it really depends on your definition of empowers.

            If you mean that you are empowered to feel like a real techy power-user who is in charge of his device and knows how to manage it under the hood, then great, Apple isn’t the one for you.

            But, if empowering has to do with all sorts of people getting some job done, producing something, accomplishing something in the real world, learning something, etc. …then evidence clearly shows that an Apple device is your tool.

          • klahanas

            I prefer devices that can do both. Do you mean to tell me that competing devices can’t do all those things you mentioned? I don’t think that’s what you meant. Apple may win on UX, but it does so at the expense of the techie stuff, which some (like me) find valuable. It need not be so, but so it is…

            I reserve the right to be able to view a webpage littered with Flash and Java at my discretion. Or to personally decide not to. To have access to the filesystem. To sideload apps obtained from other sources, and to run any video and audio codecs available. I’ll take my own security precautions (’cause I know that’s coming).

            I don’t mind if you don’t want to use your computers that way, I’m sure you don’t mind if I do.

          • jfutral

            I disagree that there is the option to “do both”. I have found the more “techie friendly” (as Kizedek defined and as you imply, but as a self professed techie, admittedly as a hobbyist, I thoroughly enjoy and prefer Apple’s offerings over any other platform out there) a platform the less reliable and thus less empowering it becomes, either in operations or even just OS vendor business model. Android isn’t just “techie friendly”, their business model is about gathering my personal data to help them sell ads. Additionally, Flash is demonstrably a liability to reliability, especially to mobile. I appreciate a mobile vendor taking a stand in such a way that I benefit.

            Joe

          • klahanas

            No one would force you to watch a Flash site. There is no poorer experience than “does not run” if you want to however.

            Though I also find the gathering of my behavioral data for profit offensive, Google at least offers things for free in exchange. Do you think that Apple isn’t gathering data about you? They are and are keeping it for themselves. And they are charging you handsomely.

          • jfutral

            But the way Google operates I am now twice removed as a customer. Their customer is who buys their ads. That affects my comfort level regarding their collection of my data. They have a foundational level of lack of concern about me with what they do with my data.

            Joe

          • jfutral

            BTW, I disagree that there is no poorer experience. The poorer experience is when Flash keeps making your machine freeze, even when you aren’t trying to watch a Flash site.

            Joe

          • klahanas

            You can choose not to install Flash. Just like on your Mac.

          • jfutral

            I have chosen not to install it. I bought an iPhone and an iPad. Haven’t missed Flash once.

            Joe

          • klahanas

            That’s not a choice and you know it. Rather, your degree of choice isn’t fine grained enough. For me anyway.

          • klahanas

            PS

            “I appreciate a mobile vendor taking a stand in such a way that I benefit.”

            I can “almost” agree with that. So then you wouldn’t mind if I wanted Apple to discontinue Quicktime, because, you know, it kills battery life and offers a poor experience. Never mind that the internet is littered with Quicktime and I may want to view it.

            If Flash sucks (it does) that’s between me and Adobe, not me and Apple. I don’t mind if it does not come installed or if it’s not in the App Store, as long as I can install whatever I want under the non-existent “supervisor” mode.

          • jfutral

            If the only thing Apple was selling was devices, you _might_ have a point, although if Quicktime was anywhere near the mess Flash was on mobile (so much so that even Adobe had to give up) I would not fault either MS or Google for not allowing QT on their devices. Apple is selling a user experience that their devices revolve around. If anything causes an issue with that experience it is gone.

            Really, if you want ocean front property, stop expecting it in Michigan and stop blaming Michigan for not offering it.

            Joe

          • klahanas

            A computer is not the same as a geographically defined region from a software POV. That’s part of their beauty, function, and utility. I’m more of an MSNBC kind of person, over Fox News, but you know what? I would scream bloody murder if my cable operator curated Fox New out.

            MS and Google don’t forbid QT, Apple chose not to code for those platforms. My quarrel remains with Apple.

        • Anders CT

          “Only Apple delivers great UX. ”

          That is just not even remotely true.

          • stefnagel

            Too true, in fact. Great UX requires great hardware, software, and services. Only Apple delivers all three. Only Apple insists on delivering all three. Google can’t give a fig what hardware you get. That’s why it second rate UX.

      • klahanas

        Android makes certain that no one controls the mobile landscape.-Dan
        Exactly why I buy Android. The opposite is exactly why I don’t buy Apple any longer.

        • stefnagel

          Precisely. No control over UX is what you get. And that’s a good thing?

          • klahanas

            Nothing wrong IMO with the UX and total control over the interface if you are willing to do so.

        • Kizedek

          Uh, what that means is that Google is ensuring that no-one else controls the mobile landscape, by removing all value to the online layer above. Why worry about the landscape when Google controls the planet?

          And Apple hardly controls the “landscape”, only their patch of some 10%, an oasis in a desert. Apple is digging deep wells there, so that anyone who comes and sets up camp around this oasis can prosper. Google is attempting to control the rain and collect it for itself to dole out.

          • klahanas

            “Google is more like a rapacious force of alien invaders seeking to suck up all the planet’s natural resources”
            Wait, wait, I think I’ve seen this one! Is this the one where Mini Me shaves the cat? :-)

  • jfutral

    In light of Amazon’s Fire smartphone, are they other potential niche markets that a vendor or even a clever start up could pursue vs trying to compete in the general smartphone market?

    Joe

  • http://naofumi.castle104.com/ Naofumi

    in the Android ecosystem hardware innovation will be key to keeping and winning customers.
    This is where Google must step in. Google must advance their OS in a way that allows hardware OEMs to push the bar and innovate.

    I agree. My concern is that Google is not advancing the platform but rather focusing prematurely on their vision of wearables (In my opinion, Google should be waiting till Apple cracks open this market and then go and imitate it. Opening up new markets simply isn’t in Google’s competency.) and also on making Android work on low-end devices. This strategy will hinder hardware innovation in the Android-world.

    At the same time, Apple has integrated to the point that their hardware innovations will not subsequently be available for Android OEMs to use. Apple used to be and still is the R&D center for the rest of the industry. This may not happen this time around.

    Google’s vision is, of course, that great hardware isn’t really important; services are where the value lies. If that truly is the case, then congratulations to Google. If not, then things will start to get interesting.