Why Android Is Winning The Battles But Google Is Losing The War: Part 4


A Pyrrhic victory (/ˈpɪrɪk/) is a victory with such a devastating cost that it carries the implication that another such victory will ultimately lead to defeat. The phrase “Pyrrhic Victory” is named after King Pyrrhus of Epirus, whose army suffered irreplaceable casualties in defeating the Romans at Heraclea in 280 BC and Asculum in 279 BC during the Pyrrhic War. Someone who wins a Pyrrhic victory has been victorious in some way; however, the heavy toll negates any sense of achievement or profit. The term “Pyrrhic victory” is used as an analogy in fields such as business, politics, and sports to describe struggles that end up ruining the victor. ~ via Wikipedia

Series Schedule:

  • Mon: The Battle for the PC
  • Tue: The Battle for Mobile Phones Won
  • Wed: The War for Mobile Phones Lost
  • Thu: The Battle for Tablets
  • Fri: Picking Your Battles Is As Important as Winning Them

4) The Battle For Tablets

If Android’s battle for phones is a Pyrrhic victory, Android’s battle for tablets is a flat-out ignominious defeat.

Android’s Strategic Tablet Blunder

The tablet’s larger screen size demands that developers create apps optimized just for its form factor. This makes tablets a seperate platform all its own. Google’s big mistake in tablets was that they either didn’t recognize or refused to acknowledge that fact.

Google just saw tablets as big phones and acted accordingly. Rather than focusing on the creation of tablet optimized apps, Google encouraged their developers to create one-size-fits-all apps. Developers were encouraged to focus on scalability rather than optimization.

Google made their mind set clear by refusing to even establish a separate tablet-optimized classification for their store. While their nearest competitor highlighted the fact that they had 250,000 tablet optimized apps, Google categorically denied that there was any difference at all between phone and tablet apps. The result has mostly been a lot of Android phone apps awkwardly stretched to fit the larger tablet screen. Even big name apps like Twitter and Rdio looked unwieldy on Android tablets.

As recently as June 2012, when the Nexus 7 was introduced, Google Senior Vice President Andy Rubin reaffirmed that Google was sticking with its strategy of encouraging developers to write a single app for both phones and tablets.

“I don’t think there should be apps specific to a tablet…if someone makes an ICS app it’s going to run on phones and it’s going to run on tablets.” ~ Andy Rubin

Google’s policy was focused on the developer, not the consumer. It allowed developers to create apps that worked on more devices, but it did so at the expense of the user experience.

Andy Rubin went on to admit that he was upset that Android tablets weren’t selling. After looking into the reasons, Rubin declared that Google had discovered the reason for the lack of sales. While hardware really mattered on phones, consumers bought into content ecosystems with tablets. Rubin said that Google had lacked some of the ecosystem pieces that were necessary – such as TV shows, movies, magazines, etc. – to make people want to consume on a tablet.

“I think that was the missing piece,” Rubin said.

Do you hear what Rubin was saying? In his mind – and presumably in the mind of all of Google – the reason that Android tablets weren’t selling was because of a lack of compelling CONTENT. Tablet optimized apps never entered into the proposed “solution” to Android’s tablet woes. The Nexus 7 was all about content delivery since – in their minds – it was content, not apps, that was the missing piece.

Finally Google reversed course. On October 18, 2012, Google published a “tablet app quality checklist” on its Android Developer website and began to seriously urge developers to build tablet-optimized apps.Two and a half-years late and 250,000 iOS tablet optimized apps later, Google finally gets it – tablet optimized apps DO matter.

Or do they get it? Google STILL isn’t asking developers to make separate phone and tablet versios of their apps. And they STILL don’t separate phone apps from tablet apps in their store. And when asked why there still aren’t many tablet-sized apps for Android, Director for Android Partnerships, John Lagerling, said:

But before, I’ll be honest and say, yes, there was a lack of tablet apps that supported bigger screen real estate. But I’ll add that, I know we talked about the Cupertino guys, but obviously people who have smartphones are a huge target for us. If you look globally that’s something we worry more about, not so much about competing with other smartphones, but more about, how can we get more people onto the Internet on mobile phones? And that’s a big deal. That’s why low cost is so important.

Translation: Smartphones are more important to us than tablets and market share is more important to us than anything.

No wonder Android’s tablet efforts continue to languish.

Android Tablet Sales

So how is that one-size-fits-all, let’s-not-optimize-apps-to-the-tablet strategy working out for Android? The results speak for themselves.

At last report, tablets were just 5.38% of Android’s daily activations. And Nexus 7 sales – although constantly referred to as a “success” in the tech media – have been humble, to say the least.

Mark Mahaney, who follows Google for Citi Research … thinks Google sold about a million units of their tablet (that is made by Asus) and that accounts for about $200 million in revenue.

Ben Schachter of McQuarie Securities agrees and estimates that Nexus 7 sales accounted for probably $150 million to $200 million…in… revenue.

Piper Jaffray’s Gene Muster estimates that Google sold between 800,000 to a million units, while Doug Anmuth of JP Morgan says Google sold about 700,000 units of Nexus 7 tablets.

Asustek CFO David Chang told the WSJ that the company was selling—not just shipping—500,000 units a month initially, when the Nexus 7 launched in July. Figures bumped up to 600,000-700,000 in the following months, and in “this latest month,” Google and Asus have sold close to one million units, said Chang.

Let me put those numbers in perspective.

 

  • REVENUES

 

The Nexus 7 may have made as little as 200 million – in revenue, not profit – in an entire quarter. That’s pathetic.

 

  • PROFITS

 

And we know that Google didn’t make any profits from the sales of the Nexus 7 because they told us so.

“When it gets sold through the Play store, there’s no margin,” Rubin said. “It just basically gets (sold) through.”

 

  • UNITS

 

But revenue and profits really don’t matter in a subsidized model. The concept is to get as many units on the market as possible in order to enhance the opportunities to sell content and advertising. So let’s look at the Nexus 7’s sales numbers.

The Nexus 7’s sales are either as high as 1 million units a month or as low as 1 million, 800,000 or 700,000 units a quarter. And the reason we’re relying on estimates is because Google refuses to release actual sales numbers – which is telling all in itself.

By way of contrast, Apple sold a total of 3 million iPad Minis and iPad 4’s in their first three days of availaility. At its current pace, the Nexus 7 would take between 3 months to 3 quarters to even match, let alone exceed, the number of tablets sold by Apple’s first 3 days of sales.

 

  • SUBSIDIZED BUSINESS MODELS THRIVE ON VOLUME

 

Those sales numbers are bad enough, but for a subsidized product, they’re gawdawful. Remember, the Nexus 7 is being given away at cost. Can you imgagine how many more cars or televisions would be sold if they were being sold at cost? The Nexus 7’s should be selling like crazy, not badly trailing competitive offerings that cost $300 more.

This is a give-away-the-razor, sell-the-blade business model. (See my article entitled: “Selling The Amazon Kindle Fire and Google Nexus 7 Is As Silly As Selling Razor Blades To Men Who Love Beards“). Giving away the razor does not guarantee the sale of the blade but NOT giving away the razor DOES guarantee that the blades won’t be sold. Simiarly, volume sales of Nexus tablets do not guarantee that Google will profit from the sale of content and ads but low volume sales DO guarantee that they will not.

 

  • FUTURE SALES

 

Pundits are opining that the Nexus 7’s lower price will make it a hot selling item for the holiday quarter. And I have no doubt that sales will increase. But if Google was having trouble selling the Nexus 7 when its only competition was the 7 inch Kindle Fire and the 10 inch Apple iPad, then why does anyone seriously think it will do significantly better now that it also has to compete with the Apple iPad Mini and the Microsoft Surface?

Android Irony: Tablets Are Where The Ad Revenue Is

The irony in all of this is that tablets are where the ad revenue is. Android has fought and won the battle for phones but phones don’t produce much ad revenue. Meanwhile, Android has ignored tablets and tablets hold the prize that they were so desperately seeking all along. Like a General who is a great tactician but a poor strategist, Android has won all of the battles that they’ve fought, but they’ve fought all of their battles in the wrong places.

 

  • TABLETS ARE MORE VALUABLE

 

Studies have shown that tablet users are the more valuable consumers for advertisers to reach compared with PC and phone users. Tablet users spend 30 percent more time on sites and have 20 percent higher engagement.

“We found it interesting that tablets also had a smaller percentage of users who adopted ‘do not track’ settings compared to PC users,” Mr. Barnette said. “Mobile had the highest percentage of users who adopt do not track at 60 percent.”

 

  • APPLE IS DOMINATING TABLETS

 

And while tablets are dominating mobile revenues, Apple is dominating tablets.

The iPad accounts for between 91% and 98% of web traffic for all tablets. That only leaves 2% to 9% total web traffic for every other type of tablet combined.

And Apple dominates tablet downloads too.

We estimate in the first half of this year the iPad saw over five times more app downloads than all Android tablets combined.”

 

  • TABLETS AD SPENDING OUTWEIGHS SMARTPHONE AD SPENDING

 

And in the absolute kicker, it is anticipated that tablet ad spending will outweigh smartphone ad spending this holiday season.

Think for a moment just how crazy that is. The ads for all the Android, iOS, Windows Phone 7 and every other smartphone combined will be outsold by the ads sold on tablets this holiday season. Wow.

Next

Google has won the battle for the desktop. Android has won the battle for the phone. But Google’s prospects are possibly worse today than they were when they embarked on their Android strategy. Tomorrow we sum it all up and look to the future in the final article of the series entitled:

“Picking Your Battles Is As Important as Winning Them”

Why Android Is Winning The Battles But Google Is Losing The War: Part 3

A Pyrrhic victory (/ˈpɪrɪk/) is a victory with such a devastating cost that it carries the implication that another such victory will ultimately lead to defeat. The phrase “Pyrrhic Victory” is named after King Pyrrhus of Epirus, whose army suffered irreplaceable casualties in defeating the Romans at Heraclea in 280 BC and Asculum in 279 BC during the Pyrrhic War. Someone who wins a Pyrrhic victory has been victorious in some way; however, the heavy toll negates any sense of achievement or profit. The term “Pyrrhic victory” is used as an analogy in fields such as business, politics, and sports to describe struggles that end up ruining the victor. ~ via Wikipedia

Series Schedule:

  • Mon: The Battle for the PC
  • Tue: The Battle for Mobile Phones Won
  • Wed: The War for Mobile Phones Lost
  • Thu: The Battle for Tablets
  • Fri: Picking Your Battles Is As Important as Winning Them
  • 3) The War For Mobile Phones Lost

    Mobile Search Is Not The Same As Desktop Search

    THE PLAN

    Google’s plan was to transport their highly successful desktop search strategy to the phone. This only made sense. Search worked on the desktop. Mobile was the future. Therefore, Google’s future would be search on mobile.

    MARKET SHARE

    Google’s problem is not a lack of market share. eMarketer notes that Google’s share of mobile ad revenue is 55% and it controls 95% of mobile search ads. No, Google’s problem is that search doesn’t work the same on mobile as it does on the PC. In fact, it barely works at all. On the PC, search rules. On the phone, apps rule and search is the court jester.

    SIZE MATTERS

    When it comes to ads, size really do matter. One of Google’s strenghts when advertising on the desktop was that they would unobtrusively place relevant ads next to and above their search results. On a phone, this was not possible. There simply wasn’t enough screen real estate to display both search results and advertisments.

    “Size absolutely does matter,” says Christine Chen, director of communication strategy at Goodby Silverstein & Partners, an ad agency in San Francisco. “If you look at the real estate available on a smartphone, it’s really sad compared to not just banner ads on the Web, but also to TV, print and outdoor advertising.”

    “The evidence is telling: advertisers are willing to pay much more to reach a thousand pairs of eyes gazing upon a computer or tablet than a thousand pairs looking at a smartphone screen.

    INVISIBLE OR IGNORED OR INVASIVE

    Mobile ads are relegated to a tiny portion of the screen and are often invisible or ignored by consumers.

    It’s a double-edged sword that cuts against advertisers both ways. It the ads aren’t big, they’re invisible. If they’re bigger, they’re seen as intrusive.

    Phones are seen as very personal. Users to not want to be tracked. Interestingly, while 60 percent smartphone users do not allow themselves to be tracked only 7 percent of tablet users and 18 percent of PC users reject tracking on their devices.

    NO OPTIMIZATION

    For both technical and privacy reasons, advertisers lost the ability to know who they were advertising to. On the desktop, cookies were the standard. On the phone, such technology was either unavailable or seen and intrusive or even offensive.

    “What makes Web ads so attractive to advertisers is the ability to track actions and optimize accordingly,” . Because a smartphone cannot use the same technology “your ability to track and optimize is much more blunt, or in some cases nonexistent.”

    This makes phone advertisments much less valuable that desktop advertisments. A banner ad on a Web page that costs $3 to $5 for every thousand impressions may cost only 75 cents or $1 for a thousand impressions on a smartphone.

    CONTEXT

    Context is important too. People surf the web for long periods of time on their tablets and on the desktop. They use their phones in bursts. Trying to promote ads when the user is attempting to grab a quick bite of information is annoying and counter-productive.

    ENGAGEMENT

    Finally, the engagement levels for smartphone users are lower, reflecting the slower speeds and smaller screens on smartphones.

    Android Doesn’t Monetize Ads Well

    How much of a problem is all this for Google? Huge. Android is so bad at monetizing ads that a study done on Opera placed Android in third plce behind BlackBerry on value for the money.

    Let me say that again. Android’s ads were in third place. Behind Blackberry.

    Apps Rule

    Google didn’t know that search on the phone wasn’t going to work the same as search on the desktop. Another thing they didn’t know was how important a role apps would play in both search and advertising.

    Smartphones were made for apps. People love to use apps on their smartphones. If they want the time for the next train, they use an app to tell them rather than doing a search. If they want to find a restaurant, they might do a search but they’re even more likely to use an app.

    Google’s problem is that apps are not searchable by web crawlers. If Google can’t search it, they can’t sell ads against it. For Google, apps are like a large and ever expanding black hole in their advertising universe. And as that hole gets bigger and bigger Android’s advertising opportunities get smaller and smaller.

    Android App Apathy

    But Android has apps. 700,000 of them. As many or more than any other operating system. So why isn’t Google making money from the sale of apps and app advertising?

    Take the University Co-op Society, which sells University of Texas merchandise via stores, the web, an m-commerce site, an iPhone app and an Android app. When it comes to m-commerce, Apple rules.

    “IPhone app sales are about 25% of our total mobile business and Android app sales are less than 10%,” says Brian Jewell, vice president of marketing. “That leaves a big chunk of sales that come directly from the mobile site. People entering our address directly or coming to us via a search engine or also possibly clicking through from an e-mail blast.”

    And on the mobile site, Apple dominates. Today, 50% of mobile traffic to the University Co-op Society’s web site stems from iPhones, 25% from iPads, 20% from Android devices and 5% from devices running other mobile operating systems.

    Retailers of all stripes tell similar stories, which is why retailers building mobile apps invariably have started with an iPhone app. Android is an afterthought.

    “Android users do not buy. IPhone users buy,” says David Sasson, president and founder of overstockArt.com.

    Android advocates bristle when confronted with the suggestion that Android owners do not buy content or consume advertising on their mobile phones. They say it is insulting.

    First, I’m not insulting anyone. If anyone is insulting Android owners, it is the facts, not I.

    Second, Android owners are not required to buy aps and content or consume advertising. It doesn’t make them bad people. It just makes them bad customers.

    We can argue all day as to exactly why Android owners aren’t buying. There’s lots of theories. The one thing we can’t argue with is the facts. Android owners aren’t buying. And that single fact turns all the market share numbers and the arguments for Android’s dominance on its head.

    ‘Cause you see – and this is the key point missed by most pundits – developers, advertisers, retailers and others don’t follow unit sales – and they don’t follow customers – they follow the money. And until Android owners are induced to part with more of their money, their overwhelming market share numbers mean little.

    The Future

    The future of mobile advertising doesn’t look any brighter for Google either. Voice search poses a huge threat as voice activated searches, like Siri, simply bypass Google search altogether.

    And then there’s always the ultimate threat that Apple will simply purge Google from its system by making Bing or some other brand the default search engine. It is reported that Google pays Apple $1 billion to be its default search, and earns about $1.3B from searches on Apple mobile devices. In the near-term, it seems unlikely that Apple will remove Google search. But there’s no love lost between the two companies and the long-term remains uncertain. Apple made the difficult and painful decision to remove Google from their Map application. Changing the default search carrier sometime in the future seems like a very real possibility.

    It’s A Trap

    All of Android’s mobile activations don’t add up to a hill of beans if they can’t be monetized. And Android simply isn’t doing the job it was born to do.

    It’s a classic tech trap. Google provides a rapidly growing service that is popular with non-paying users while it constantly becoming less and less valuable to Google’s paying customers – the advertisers.

    The result is pernicious. More and more time, money, energy, attention and resources are devoted to Android while the return – a 15% decline in the price advertisers paid per click on a Google ad – continually becomes less and less.

    Next

    Android is struggling to monetize phones, but there is more to mobile than phones.

    Tomorrow: “The Battle for Tablets”

    Why Android Is Winning The Battles But Google Is Losing The War: Part 2

    A Pyrrhic victory (/ˈpɪrɪk/) is a victory with such a devastating cost that it carries the implication that another such victory will ultimately lead to defeat. The phrase “Pyrrhic Victory” is named after King Pyrrhus of Epirus, whose army suffered irreplaceable casualties in defeating the Romans at Heraclea in 280 BC and Asculum in 279 BC during the Pyrrhic War. Someone who wins a Pyrrhic victory has been victorious in some way; however, the heavy toll negates any sense of achievement or profit. The term “Pyrrhic victory” is used as an analogy in fields such as business, politics, and sports to describe struggles that end up ruining the victor. ~ via Wikipedia

    Series Schedule:

  • Mon: The Battle for the PC
  • Tue: The Battle for Mobile Phones Won
  • Wed: The War for Mobile Phones Lost
  • Thu: The Battle for Tablets
  • Fri: Picking Your Battles Is As Important as Winning Them
  • 2) The Battle For Mobile Phones

    The Battle Plan

    Tech insiders have been predicting that peak search would happen for some time, as people shifted from using websites – where search is a natural activity – to using mobile apps.

    Google was far from unprepared. They knew that mobile was the future of search and they carefully crafted a plan:

    Step 1: Create a (putatively) open source mobile operating system called Android.

    Step 2: Give the Android operating system away for free.

    Step 3: Sell mobile ads and other mobile services on those mobile devices running Android in much the same way that they were currently selling ads and services on the PC.

    A Glorious Tactical Success

    Parts 1 and 2 of Google’s plan worked to perfection. In fact, Android was more succesful than anyone, including Google, could have anticipated or even imagined. Internal Google documents revealed at the Oracle v. Google trial show that Android’s growth far exceeded even what Google had projected or expected.

    Just five years after its debut, Google‘s Android mobile operating software now claims 75% of smart phones shipped, according to a new report from market researcher IDC. A simply stunning overall achievment.

    A Glorious Public Relations Success

    And don’t think that Android’s spectacular rise has gone unnoticed:

    CNet:

    “Android’s ascension to glory has been incredible to behold.”

    Dan Lyons:

    “Look, when three out of four phones sold worldwide run your operating system, I think it’s safe to declare victory.”

    CoolSmartphone:

    “Why Android has won”

    CEO Nathan Eagle

    “Why Android Has Already Won the Global Smartphone Race”

    Joe Wilcox

    “Android wins the smartphone wars”

    Chris Pirillo

    Android is the New Windows (I mean that in the most polite way, too)

    Venturebeat

    “As Android hits 75% market share, can anyone tell me why this is not Mac vs PC all over again?”

    An Inglorious Strategic Failure

    “Another such victory and I am undone.” ~ Pyrrhus

    Every report, every study shows that Google got it right. More and more ad revenue is moving to mobile. An analysis of the mobile traffic from a cross section of advertisers reveals up to 25-30% of all paid search traffic is now mobile. And more and more mobile phones are powered by the Android operating system. It’s only logical to assume that the more people buy and use Android phones, the more money Google will make from the sale of search, content and other services.

    Only that’s not happening. That’s not happening at all. Android appears to be an overwhelming success in every way. But it turns out that it is only an overwhelming success in one way – market share. In every way that matters – and especially in profits – Android has been a dismal failure.

    Unexpected, exponential user growth is usually accompanied by a dramatic positive improvement in the finances of a company and a higher return to shareholders. The curious aspect of Android’s success is that it has not had an impact on either. ~ Horace Dediu

    Yearning For Earnings

    During the Q3 2012 Earnings call, Google announced that it had a run rate of $8 billion from its mobile business consisting of revenue from ads, apps and content. That was contrasted with a $2.5 billion run rate of a year ago. CFO Patrick Pichette added “Ads continue to be the bulk of [the $8 billion], the vast majority of it.” Sounds like good news, right?

    The problem with the $8 billlion number is two-fold. First, the increased revenues appear to represent more of an reshuffling of assets than actual growth. Second, despite the presumably large increase in the run rate, Google declined to disclose Nexus 7 sales, app sales, content sales or ad sales and they stoutly refused to address mobile margins and profits.

    What we do know for sure is:

    — Cost-per-click (CPC) was down
    — Traffic Acquisition Costs (TAC) were up
    — Profit from Android was un-reported and possibly non-existant

    Upon revealing the numbers, Google’s stock tanked. With Google’s stock falling a shocking $68 or 9% in a matter of hours, Google was desperate for good news to give to its shareholders. If there was ever a time to reveal Android’s profits, that would have been the time. Instead, managment adamantly refused all requests for specifics on mobile sales, margins or profits.

    With their stock plummeting, you can bet your bottom dollar that if Google had garnered any profits from Android, they not only would have revealed them, they would trumpeted them as loudly as possible. After all, it’s not like Google doesn’t like to brag about Android. They tout their Android activation numbers all the time. The fact that Google did not reveal any good news regarding Android can mean only one thing – there was no good news to reveal.

    After all, there is simply no good reason NOT to reveal Android’s numbers and associated profits. You could argue that Google is being coy and hiding numbers for competitve advantage but what possible competitive advantage could there be?

    Further, there is every reason TO reveal profits. If the numbers are rising at an appreciable rate, that would be an exciting development that Google would want to reveal. It woud prove that their strategy was correct and that Android was winning. It would put to rest any lingering doubts, questions or suspicious that things with Android might not actuallly be as they seem. It would be a demoralizing blow to their competitors and a shot in the arm to their stockholders. And perhaps, best of all, it would be an incentive for their customers to increase their ad spending and hop on board the Android gravy train

    It is, in fact, almost a certainty that Android DOES make Google a profit. But that profit must be so embarrassingly small that it would be counter-productive for Google to announce it. Doing so would not help Google’s stock, it would hurt it as the revelation would expose exactly how little Android has actually accomplished.

    Pyrrhic Victory

    Android has overwhelmingly won the battle for marketshare. But the purpose of market share is to get more developers, more apps, more advertising eyeballs, more content, to deliver more revenue – and most importantly – more profit for all involved. Android isn’t delivering any of that.

    This is a classic Pyrrhic Victory. Android is winning the market share battles but Google is losing the profit war.

    The irony here is poignant. In a reversal of the famous Rolling Stones song, Android got what it wanted – market share – but not what it needed – profits.

    Next

    How could this be? How could there be such a disconnect between the number of Android users and their value to Google?

    Tomorrow: “The War for Mobile Phones Lost.”

    Why Android Is Winning The Battles But Google Is Losing The War: Part 1

    A Pyrrhic victory (/ˈpɪrɪk/) is a victory with such a devastating cost that it carries the implication that another such victory will ultimately lead to defeat. The phrase “Pyrrhic Victory” is named after King Pyrrhus of Epirus, whose army suffered irreplaceable casualties in defeating the Romans at Heraclea in 280 BC and Asculum in 279 BC during the Pyrrhic War. Someone who wins a Pyrrhic victory has been victorious in some way; however, the heavy toll negates any sense of achievement or profit. The term “Pyrrhic victory” is used as an analogy in fields such as business, politics, and sports to describe struggles that end up ruining the victor. ~ via Wikipedia

    Series Schedule:

  • Mon: The Battle for the PC
  • Tue: The Battle for Mobile Phones Won
  • Wed: The War for Mobile Phones Lost
  • Thu: The Battle for Tablets
  • Fri: Picking Your Battles Is As Important as Winning Them
  • 1) The Battle For The PC

    A Glorious Victory

    Google began in January 1996 as a research project by Larry Page and Sergey Brin. While conventional search engines ranked results by counting how many times the search terms appeared on the page, they theorized about a better system that analyzed the relationships between websites. They called this new technology PageRank, where a website’s relevance was determined by the number of pages, and the importance of those pages, that linked back to the original site. via Wikipedia

    The Battle for search on the PC (notebooks and desktops) was a glorious victory for Google. Seldom has a company come so far, so fast, made so much money and so utterly anihilated their competition. By 2006, Google dominated search and was one of the largest, fastest growing companies on the planet. Their PC search strategy had proven to be brilliant and they were virtually printing money.

    I can give Google no greater compliment than this: They make their money by distributing ADVERTISING, yet they are liked by most and even loved by many. The words “amazing” and “awe-inspiring” don’t even begin to cover that achievment.

    All Glory Is Fleeting

    Sic transit gloria mundi

    But Google had two problems, which were really one and the same problem: “peak” and “mobile”.

    Many of us are familiar with the concept of “peak oil”. It’s a term used to describe the fact that oil production had to, at some point in time, peak because there was only a finite amount of oil in the ground and once that peak was reached there must inevitably be a steady, albeit gradual, decline in oil production.

    An equivelent peak is occuring in computing. In fact, two peaks: “peak PC” and “peak search”, both of which raise serious issues for Google.

    For eight straight quarters, search was growing. Then for three straight quarters, that growth deaccelerated. Then last quarter, something happened that had never happened before. People searched less. We have reached peak search.

    Ben Schachter of Macquarie Securities noted this in a research note:

    Notably, total core organic searches declined 4 percent y/y, representing the first decline in total search volume since we began tracking the data in 2006. While this month marks the first y/y decline in total search volume, growth rates have been decelerating since February’s recent peak at 14 percent y/y growth (for the prior two years, growth rates were largely stable in the high single-digit to low double-digit range).


    Not only is search declining, the proft from search is declining too. “Cost-per-click” – how much advertisers pay on average when someone clicks on an ad – is down. Way down. In its third quarter 2012 earnings, Google reported that its cost per click was down 15 percent.

    Cost-per-click” – how much advertisers pay on average when someone clicks on an ad – has been dropping for the past four quarters, after rising for eight previous quarters. Surrounding circumstances make it clear that there is no reason to expect it to rise again.

    Why is peak search happening and why now?

    First, there are fewer and fewer PCs. Like peak oil, we’ve reached peak PC. The PC market is in permanent decline. In fact, the PC market is not only declining, it may be headed for a cliff. (See Tim Bajarin’s fine article on “How the iPad Mini Could Impact Future PC Sales.”)

    Second, the search market is maturing. The places where people are going online just don’t pay as much as they used to.

    Third, less and less people are doing their searches on their desktops and more and more peole are doing them on their mobile devices. When it comes to search, the portability of the mobile device trumps the power of the PC.

    Smartphones have been outselling PCs (notebooks and desktops) since the end of 2010 and by the end of 2012, tablets will make up over 25% of all PC sales. Further, well respected mobile analyst, Mary Meeker believes the global smartphone plus tablet install base will surpass the install base of the PC by the end of Q2 2013.

    Fourth, and finally, try this thought experiment. You’re standing by your PC. You want to know the weather, the score of the big game, where a movie is playing or a local place to eat and how to get there (GPS). Do you perform the search on your PC or on your phone? For more and more people, this is an activity that you do on your mobile device, even when your PC is readily available.

    AUTHOR’S ASIDE: Ya gotta love Microsoft’s play in the desktop search industry. They are losing BILLIONS on Bing, buying into the desktop search market just as it has peaked and started its decline. What a company.

    Now it’s not such a bad thing to be dominating a market that is just past its peak. It means that you’ll be getting great income – nearly as much as you’re getting today – for a long while yet to come. But it also means that your’ve got no longterm future. Unless you plan for one. Which Google did.

    Next

    Tomorrow: “The Battle for Mobile Phones Won.”

    Windows, iOS, and Android All Have Something to Prove This Week

    Prior to Apple developing iOS and over the last 25 years, there had never been much of a threat to the Windowsecolove ecosystem. With iOS, Apple proved many things, including the value of a holistic experience delivered through purpose-built combinations of hardware, software and content. Now in mobile, it’s Microsoft looking into the window wanting to get inside. After iOS came Google’s Android, which was focused on the same areas as iOS. This week, with multiple announcements, Windows, iOS and Android all have some things to prove and I wanted to dive a bit deeper into some areas.

    Windows 8 Launch

    For decades Microsoft has been the uncontested PC market share leader. Macs made a little bit of a dent, but for the most part, Microsoft ruled and for years it looked like Microsoft would have uncontested dominance. That was until the iPad. While the iPad isn’t trying to be a PC, it did provide an optimal experience for specific usage models the PC once delivered. Sure, you can surf the web on your PC, but when kicking back on the couch is it the best way to do this? Not for me and not for 100s of millions of other people. I still must have my PC, but I prefer my iPad for certain tasks my PC previously performed.

    With Windows 8, Microsoft hopes to bridge the gap between PC and tablet. They will attempt to do this by releasing Windows 8 on about every conceivable form factor possible and seeing what sticks. This is a huge risk in that they are also sub-optimizing the experience for desktop-only experience by adding the Metro layer and removing the start button. The Windows 8 experience is optimized for devices with touch and an accessible keyboard, turning the devices into a Swiss Army device. I have used my iPads for years with an extended keyboard, so I absolutely see the value here. This week, Microsoft must prove that flexibility of Windows 8 trumps the purpose-built focus of an iPad.

    Windows RT adds another proving ground. For decades, Windows equated to compatibility with the past, which is inextricable linked to Microsoft’s IT roots and the fact that many consumers are peeved about wasting a prior, large investment. I am not saying that consumers care less about backward compatibility, but they care more about what the device does today and in the future then the past. Unlike Windows 8, Windows RT will not run all the older Windows 7 desktop applications. Microsoft bridges the gap with some key Office apps, but forget about loading up iTunes or Quicken that you have. Hardware compatibility with USB devices is an unknown as well. This has never been an issue with the iPad, but then again, neither iPad or Apple stands for backwards compatibility.

    Finally, we have Microsoft Surface, the first Microsoft-branded PC that directly competes with its ecosystem. This test will take a long time to play out but rarely do these examples of suppliers competing with customers work out well. While we don’t know exactly how pricing and features will work out over time, few premium-branded Windows tablet makers are excited about this. If Ballmer’s email to its stakeholders wasn’t clear enough, future Microsoft does two things: devices and services, and those devices that its customers currently provide.

    While we will need to wait months and some cases years to fully understand how all these play out, the official launch for Windows 8, Windows RT and Surface this week will give better indications on where Windows is headed.

    Windows Phone 8 Launch

    Windows Phone was very respectable in the early days of smartphones and was one of the few phones until RIM’s Blackberry to be accepted by businesses. Then came the iPhone and iOS, which undoubtedly changed Microsoft’s mobile fortunes for the foreseeable future. Instead of a commanding 90-95%% OS market share like it does in PCs, in mobile, Microsoft is looking right now, at best, 3% share of the mobile market. Given how Windows Phone 7.X has done, there must be some huge change for Microsoft to start gaining share.

    Microsoft’s biggest challenge in smartphones is consumer apathy. Metro is differentiated, the maps are good and Nokia has some really good imaging but consumers are not yet all that excited about Windows Phone. Microsoft needs more black and white, differentiated, and demonstrable features to break consumers out of their addiction to iOS and Android phones if they are to make big progress.

    With the launch of Windows Phone 8, Microsoft could start to reverse its fortunes. If Microsoft can show that a Windows Phone 8 is a must-have device to pair with a Windows 8/RT PC or tablet and an Xbox, I do believe they can start to make faster traction with those audiences.

    iPad Mini Launch

    Apple, plain and simple, invented a new category with the iPad. Sure, there were previous Windows Tablets, but the biggest issues were a lack of apps, pen requirement and very high prices. Tablets , particularly iPads have started to eat into the PC market. It’s not that an iPad can replace a PC, but some consumers are choosing to buy the new category (and shiny thing) instead of buying a replacement PC.

    The iPad Mini will be interesting for Apple. Apple has always been able to command a price premium in, quite frankly, all devices. Whether it’s an MP3-playing iPod, iPhone, iPad, or Mac, consumers are willing to pay more. The iPad Mini will test this pricing elasticity more than ever. I believe to hit its profit goals, Apple will need to be priced at least at $299, which puts it into that 30-40% gross profit range. They could margin blend on the rest of the iPad line to get the price even lower, but that’s pushing it.

    With Amazon Kindle Fire at $149, a $299-349 price will be pushing the pricing power farther than I have seen in a long time. I do expect an iPad Mini to have a much better experience than a $149 Kindle Fire, but with many consumers just glad to be able to have an affordable tablet, many will opt for the Fire. Apple will sell truckloads of the iPad Mini this holiday season, but not nearly as many as they could have if the Nexus 7 or Kindle Fire didn’t exist.

    Google Nexus 10” Android Tablet Launch

    While Android has done well on smartphones and 7” tablets, anything above 7” has been a business and marketing disaster. Google had clearly deprioritized the 10” category as the smartphone market eclipses the size of the tablet market. At some point though, Google needs to bring their “A” game to large tablets and incent developers to create high quality tablet apps. Right now, Google does not allow anyone to easily count the tablet-specific apps as they number in the 100’s. Not 100’s of thousands, I am saying hundreds.

    Google is rumored to announce this week a Google Nexus 10” tablet with Samsung. Price is almost inconsequential in that without more native Android tablet apps, a new Nexus tablet could be worse than bad. I expect 10″ Android tablets this holiday to be relegated to the bottom of the pricing barrel below Windows 8 and iOS. Unless Google can pull off something completely amazing and unexpected, this Nexus 10” will sell as well as all the other Android 10” tablets, not well.

    An Amazing Week

    Yes, this week will be one that all the ecosystems will have something to prove. When I step back a bit, I marvel at the amount of innovation and competition that is happening and just know this will be great for consumers this year and five years into the future. Competition and innovation are important as evidenced more than ever by this week’s announcements.

    An Interesting Take on Android in China

    Android logoAndroid is doing very well in China. But in something of an exclamation point on John Kirk’s musings on Android’s contribution to Google’s bottom line, Android in China may not be doing at all well for Google.

    That’s the conclusion of a post at Telecomasia.net by Ovum analyst Siv Putcha (tip of the hat to Steve Crowley). Putcha argues that because the Chinese government blocks access to many Android services:

    Chinese device vendors are using Android for their own purposes, and are increasingly at odds with Google’s preferred vision of Android’s developmental direction. As a result, Android is fragmenting beyond Google’s control, and Google’s Android strategy is rapidly coming undone in China with no immediate prospects for correction.

    It’s not clear whether these millions of not-quite-Android phones being sold in China ever get registered with Google or count in Google’s activation total. But it seems certain that they are contributing little or nothing to the strategy of giving the software away and hoping to monetize services.

    A Message To Eric Schmidt And Android: Put Up Proof Of Profits Or Shut Up

    There will be one billion Android devices—smartphones and tablets—in use within a year, Google chairman Eric Schmidt said.

    Schmidt made the prediction during an interview with AllThingsD’s Kara Swisher and Walt Mossberg at the 92nd Street Y in New York Wednesday night.

    Google is activating 1.3 million Android devices a day.

    “Do the math,” Schmidt said. ~ via Business Insider

    Doing The Math

    All right, Mr. Schmidt. I’ll do the math. Activations are only part of the equation. The numbers that you keep conveniently not telling us are margins, revenues and profits. Activations without those numbers are meaningless. Market share without those numbers are meaningless. You want us to do the math, Mr. Schmidt? Your numbers – without context – are mathematically meaningless.

    Now I have no doubt that Android has margins, has revenues, has profits. I have no doubt that Android is making money. What I SERIOUSLY doubt is just how much money Android is making. You want us to take you seriously, Mr. Schmidt? Tell us those numbers.

    Market Share Myopia

    We are OBSESSED with market share numbers when we should be obsessed with profit.

    — Market share is a COMPONENT of profits. It means nothing in and of itself.
    — Market share is the factor. Profit is the solution.
    — Market share is just one of many top lines. Profit is the one and only bottom line.
    — Market share is the means. Profit is the ends.
    — Market share is not the goal. Profits are the goal.

    Where Are The Numbers?

    A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large. ~ Henry Ford

    So where are Google’s numbers for Android? They have them. They’re just not sharing them. Why do you suppose that is?

    When a company has favorable numbers, they shout them from the mountain tops. When a company has numbers that are unfavorable, they remain stoically silent. This is the industry norm.

    — Apple seldom talks about Apple TV
    — Samsung stopped reporting their tablet sales numbers
    — Amazon never reveals sales or profit numbers for the Kindle Fire
    — Microsoft actually does reveal the exorbitant amounts they lose on Bing. Go figure.

    When a company says nothing about a product’s profits, they are telling us something. And that something is not good. Their silence speaks volumes.

    No Profit, No Glory

    “Business is all about solving people’s problems – at a profit.” ~ Paul Marsden

    It is somewhat ironic that I keep reading stock market “bears” claiming that Apple is a “bubble” when Apple is one of the few companies that actually reveals their numbers and is built upon a solid foundation of revenues and profits. If a company wants recognition, if a company wants to be taken seriously, if a company wants us to respect what they do, then they need to reveal their profits.

    There should be a new rule when reporting on companies. Unless a company is making a profit, words like “successful”, “winning”, “dominating”, and such should be banished. If a company wants the glory, they should have the guts to reveal their profits.

    Market Share and Margins and Profits, Oh My!

    Everyone obsesses over market share but anyone can achieve market share if they don’t care about profits. All they have to do is lower their prices or sell their goods or services at a loss.

    — Market share is easy.

    — Profit is hard.

    — Market share plus profit share is genius.

    Stop Talking About…

    The worst crime against working people is a company which fails to operate at a profit. ~ Samuel Gompers

    Now here come the excuses, the rationalizations, the justifications. “But, but, but…profit isn’t everything! There are more important things like…”

    Please stop. There’s nothing more important to a business than profits. Stop talking about:

    — market share without context.
    — how much profit you’re going to make in some distant, undefined future.
    — how much you’re making from some undisclosed and undiscoverable content, advertising, data gathering or other nebulous activity.
    — how your business model is different and it shouldn’t be compared to other companies. You’re wrong. Every company’s profits can and should be compared. Profits are the great equalizer.

    The proof is in the profits. If you don’t the have profits, you don’t have the proof. And if you don’t have the proof, then please, just stop talking.

    Office for iOS and Android Embodies Microsoft’s Strategic Failings [Updated]

    Microsoft product manager Petr Bobek has confirmed that (Microsoft) is planning to release native iOS and Android versions of Office 2013 next year. Speaking at a press event in the Czech Republic earlier today, Bobek told Czech site IHNED that native apps will be made available from March 2013. ~ via The Verge

    — Office for iOS will be introduced almost 5 full years after apps for iOS were introduced in April of 2008.
    — Office for iOS will be introduced over three full years after the iPad was introduced in January of 2010.

    Those gaps in time embody the lapses in Microsoft’s strategic thinking. Either Microsoft should have made Office available or they shouldn’t. And if they were going to make Office available, they should have done so at the earliest possible moment. The fact that it took Microsoft five full years to make up its mind and implement its policy is emblematic of why Microsoft has gone from the most valuable computing company in the world to a company that is being out-profited by a single device (the iPhone).

    UPDATE: Microsoft today disavowed comments made by its Czech subsidiary that the company will roll out iOS and Android apps of its Office suite early next year.

    “The information shared by our Czech subsidiary is not accurate. We do not have anything further to share at this time,” a company spokesman said in an email Wednesday. ~ via Macworld

    Mea culpa. I usually don’t comment on rumors and this is one of the reasons why. However, this one seemed rock solid. I’ll refrain from building my analysis on rumors in the future.

    How Google Should Fix Android

    Android logoIt’s time for Google to step up and take charge of the Android platform it has created.

    I know this sounds odd. By at least one standard, Android is a runaway success. It is by far the world’s most popular smartphone software standard and is likely to remain so for the foreseeable future. But in many other ways, the platform is a mess. If Apple’s iOS is the good child, a little too neat and a bit too tightly wound, Android is the child raised by wolves, undisciplined and unpredictable.

    Android’s most fervent defenders, from whom I’m sure I will hear shortly, rather like things this way. The great variety of available hardware and the openness of the software to modification are among Android’s top attractions to folks who love tinkering with their devices. But at the same time, the fragmentation is keeping Android from reaching its full potential, both by denying many customers the latest software and by making life difficult for developers.

    Ownership lacking. A big problem is that Google owns Android, but fails to take full ownership of it. The software is free for anyone who wants to use it. Authorized users who adhere to some fairly loose standards get important perks, including Google services, access to Google Play, and the use of Android branding. (I’m really not concerned here with other uses, such as the Amazon Kindle Fire and the Barnes & Noble Nook.) The freedom given to OEMs yields both innovation and chaos.

    Manufacturers are free to choose from a wide variety of processor and graphics combinations, with systems from Qualcomm, NVIDIA, Texas Instruments, Samsung, and most recently Intel in use. The software must also support a wide variety of display types, sizes, and resolution. This prohibits the sort of very tight, super-efficient hardware-software integration that Apple achieves in iOS and that Microsoft, to a somewhat lesser degree, seems to be striving for in Windows Phone.

    A bigger problem is the latitude OEMs have to modify the software. Almost all major Android OEMs have provided their own tweaks to the user experience, with only the Google-designated Nexus guaranteeing a “pure” Android experience.

    Whether the software modifications required both to support a range of hardware choices and varied user experiences are good or bad, they have enormously complicated Google’s task in keeping the software platform unified. Operating system updates take many months to roll out and a lot of phones are never upgrades from the major OS version they shipped with. This by now familiar table tells the story.

    Version Codename API Distribution
    1.5 Cupcake 3   0.1%
    1.6 Donut 4   0.4%
    2.1 Eclair 7   3.4%
    2.2 Froyo 8 12.9%
    2.3 – 2.3.2 Gingerbread 9   0.3%
    2.3.3 – 2.3.7 10 55.5%
    3.1 Honeycomb 12   0.4%
    3.2 13   1.5%
    4.0.3 – 4.0.4 Ice Cream Sandwich 15 23.7%
    4.1 Jelly Bean 16   1.8%
    Data: Google, October 1, 2012

     

    The Moto Mystery. At one point it looked like Google’s $12.5 billion acquisition of Motorola Mobility was a serious bid to take ownership of Android. In fact, there were widespread fears  that Moto’s position as Google’s “house” OEM would give it a tremendous advantage over competitors such as Samsung and HTC.

    But far from using Moto to dominate the Android market, Google has not even used it to demonstrate leadership. It has just released new Droid models that run on the superseded Ice Cream Sandwich version of Android. And it committed the cardinal sin of declaring that purchasers of its Atrix phones would not receive a promised upgrade to Ice Cream Sandwich, leaving them stuck with the ancient Gingerbread.

    Buyers of an iPhone or iPad know they will get the latest version of iOS and that it will be updated, up to the limits of the hardware, for at least three years (the one notable exception being the 2 ½-year-old original iPad, which was dropped from iOS 6.0.) Android buyers are likely to get a new device with software that is already obsolete, with possibly a promise of an upgrade that may or may not be honored.

    Android’s biggest fans aren’t going to like this, but what Google should do is rein in Android’s freedom in the interests of a more unified platform. On the hardware side, Google doesn’t have to go as far as Apple and maybe not as far as Microsoft, which is limiting Windows Phone 8 OEMs to a single system-on-chip family and has imposed other significant design restrictions.

    Google should also put much tighter limits on the ability of manufacturers to modify the basic Android software. It’s not clear that any of the modifications have improved the Android user experience significantly and very clear that they are a major impediment to timely upgrade of existing devices.

    Finally, Google should require an enforceable pledge that manufacturers will supply timely operating system updates—say within three months of release—to all devices for a minimum of two years after sale.

    The result of tighter limits on manufacturers would mean less choice for consumers. But there will be a payoff in remedying an environment that software developers find difficult, hostile, and a very tough place to make a living. Android today offers devices that are superior, at least in specifications, to the iPhone. But the app experience is definitely worse in terms of both comprehensiveness and quality. Reducing the fragmentation of the platform could alter the landscape for developers, making Android more attractive and improving the experience for users. That’s a tradeoff worth making.

     

     

    Google Android Tablet Optimized Apps — Two Years Too Late

    On Monday, (Google) published a “tablet app quality checklist” on its Android Developer website that urges developers to build tablet-optimized apps… ~ Wired

    I’d like to applaud Google for this move, I really would. But let’s put this in context:

    — Google should have done this when Samsung introduced the Samsung Tab some two years ago or, at the very latest, when they introduced the tablet-friendly Honeycomb Android operating system in February 2011.

    — Google should have done this long BEFORE Microsoft introduced Windows 8 tablets. Microsoft gave Android tablets a two year head start…and Google frittered it away.

    — Google should have done this BEFORE they changed strategies, introduced the Nexus 7, and made it nearly impossible for any other Android manufacturer to compete in the Android tablet space.

    For the past two years, Google has, at the very least neglected, at the very most sabotaged, their Android tablet efforts. Now they’re asking developers to dedicate their time and their resources to creating tablet specific apps. It’s a great message delivered far too late.

    For Apple’s iOS Owners, It’s Christmas In September

    On Wednesday, September 19, 2012 iOS 6 will go live. For tech devotees, this is old news. But for the vast majority of iOS (iPod Touch, iPhone and iPad) users, iOS 6 will deliver about 200 gifts – some big and some small – to make their i-devices a bit more fun, a bit more useful, a bit more valuable.

    If adoption goes as it did with iOS 5, we can expect to see iOS 6 on 60% or more of all iOS devices – including the now three year old iPhone 3GS – within a month or so. Due mostly to hardware constraints, not every device will support all the additions but all the devices will support the vast majority of the additions.

    Compare that to Android. As of this date here are the adoption percentages for Android’s three most recent operating system updates:

    — 01.2% Jelly Bean
    — 20.9% Ice Cream Sandwich
    — 77.0% Gingerbread or older

    What good does it do Android to add great new features to their operating system if they can’t deliver those features to their users? It’s like buying Christmas presents and never letting anyone open them.

    Operating System adoption is one of iOS’s greatest strengths and one of Android’s greatest weaknesses. When it comes to operating system updates, Apple is a bit of a Santa Claus…and Google is a bit of a Scrooge.

    The New OS Wars: The Variety of Android Boosters

    20120905-110541.jpgThe verdict in Apple v. Samsung unleashed a flood of commentary on the relative merits of Apple and Android, and the one thing that has struck me as I read through the posts and comments is the passion of Android supporters. I’ve been following OS wars for 25 years or so since the heyday of Mac OS vs. MS-DOS and I’m still surprised at how invested some people get in their choice of software, the code equivalent of fans who show up at Lambeau Field in December with their half-naked bodies painted green and gold.

    I spent years being taken to task by Apple advocates any time I said anything less than totally favorable about any Apple product, often being accused of being on the Microsoft payroll. Today, the Android fans (please don’t call them, or anyone else, fanboys. It’s a childish epithet) seem to be the most passionate. In reading their views, I have identified several sub-species of Android enthusiasts.

    The Makers. This is the group I find most appealing. They are inveterate tinkers drawn to Android because what others see as chaos in the Android world they see as opportunity. To them, the most important characteristic of a new Android handset is the ability to “root” it to circumvent whatever restrictions Google, the phone manufacturer, or carrier may have placed on it. They will sacrifice convenience and even functionality for freedom and are repelled both by Apple’s “control freak” approach to apps and the closed Apple software/hardware environment. Tinkering is the mother of innovation and let us not forget that Steve Jobs and Steve Wozniak got their start as phone phreaks. The Makers’ principal sin is failing to realize that they represent a tiny slice of the market and assuming that their views are far more widely held than they are.

    The Open Source Hardliners. This group is related to the Makers, but not nearly as much fun. The truest believers find the idea of making money from software morally repulsive. Their problem is that while Android may look open in comparison to iOS, Android’s open source cred is a little shaky. In theory, anyone can take Android code and use it freely under an Apache license. In practice, most of the major OEMs (Amazon, hardly a paragon of openness itself, is the leading exception) have chosen to use Google’s official versions of Android and to play by Google’s rules. The principal practical difference in openness between iOS and Android as they come from the factory is that Android requires only a simple change in preferences to install apps that do not have Google’s official sanction while an iPhone requires a warranty-voiding “jailbreak.”

    The Underdog Backers. There seems to be something in human nature that causes people to back an underdog. And even though Android is backed by a powerful Google and Android handsets have been outselling iPhones for a while, it is still seen by many as David to Apple’s Goliath. Some of this same sentiment worked in favor of Palm’s webOS, even after Hewlett-Packard bought it, and actually strengthened for a bit after HP killed it. (Death is the ultimate underdog status.) Somehow, though, back-the-underdog sentiment hasn’t done much for poor Research In Motion, and viewing Microsoft as a spunky challenger seems to make people’s heads explode, even if Microsoft is a very distant third or fourth in the business.

    The Apple Haters. This is the group, in some sense a more hard-edged and nastier version of the Underdog Backers, that I find most troubling. It almost seems as if a whole group of people who used to hate Microsoft have transferred their animus intact to Apple. Strangely, the complaints are almost exactly the same. Folks used to denounce a greedy Micro$oft. Now they complain about a greedy Apple’s prices. They regularly denounced Microsoft as a bully using its power to crush competitors; now they say they exact same thing about Apple. There’s at least a bit of truth in this charge. What is much stranger is the charge that Apple is brilliant at packaging and marketing but provides no innovation and develops its products by copying, or in the less polite version, stealing. Of course, the exact same charge used to be leveled at Microsoft. It wasn’t true of Microsoft and it most certainly is not true of Apple. If Apple had done nothing but the iPhone, it would still be one of the most innovative companies in history. I have trouble figuring out just what motivates the Apple haters, but I imagine I’ll be hearing from plenty of them.

    Of course, the great majority of Android buyers don’t fall into any of these classes. The are buying Android for a large variety of reasons, ranging from supersized displays to super-low prices. Some carriers push Android hard because they don’t have an iPhone to offer. Some with iPhones in their portfolios push Android anyway because it is more profitable or more in line with their strategy. Verizon, for example, has been soft-pedaling the iPhone because it made a strategic decision to push only phones that support its massive investment in LTE technology (this is likely to change with the release of the next iPhone.) Of course, most of these people also don’t write or comment on blogs. They just buy, use and, I hope, enjoy their phones, whatever device they have chosen.

    Android v. iOS Part 6: The Future

    RECAP

    Last week, we took a deep dive into the Android and iOS operating systems, looking at market share, profits, developers and platforms. Today we wrap up the series and attempt to peer into the probable futures of these two great mobile operating systems.

    The truth is, seeing the futures of Android and iOS isn’t so much about following the signs – there’s plenty of them and they’re almost all pointing in the same direction – it’s much more about unlearning some of the lessons that we’d thought we’d learned. When it comes to Android and iOS, it’s not what we don’t know that hurts us so, it’s what we “know” that just ain’t so. Once we free our minds from past preconceptions, the scales will fall will from our eyes and the broad outlines of what is and what is about to happen will become clearer.

    1) It is a mistake to assume that the “best” operating system will “win”

    “Best” is a subjective opinion, one of the weakest forms of evidence.

    “Best” is contextual. What’s right for one may not be what’s right for another. A school bus is a poor form of transporatation- unless one is a school bus driver. What’s “best” needs to be what’s best for the user, not what’s best for you or me.

    “Best” is often irrelevant. Betamax may have been the best video recording device on the market, but it didn’t win out over the VCR. Things such as distribution, production, costs, marketing, first to market, and a slew of other factors often trumps “best”.

    Let’s take our focus off of our subjective opinions as to what is “best” and rest our gaze, instead, on objective, measurable, factual information.

    2) It is a mistake to assume that any operating system will “win”

    Android v. iOS is undoubtably a platform war, however, not every platform war ends with a single standard.

    — Musical records split into two standards with the 33 1/3 being used for albums and 45’s being used for singles.
    — Gaming consoles are currently split into three different standards.
    — Petroleum is split into two standards, with gasoline (the American term) being used for most cars and diesel being used for most trucks and other heavy commercial vehicles.

    All of these standards exist side-by-side and serve different markets. And that is what is happening with Android and iOS too. We need to stop focusing on the idea that one mobile operating system is going to serve every market and, instead, start focusing on which markets are being best served by each operating system.

    3) It is a mistake to let the exception swallow the rule

    An exception to a rule does not invalidate the rule. So long as something is true most of time, it’s worth noting. Too often we focus on the exceptions and let those exceptions blind us to the overall patterns.

    It’s important to recognize the exceptions to a rule. But it’s even more important to recognize which is the rule and which is the exception.

    4) It is a mistake to assume that market share equals profits for Google

    Whenever it’s pointed out that iOS is making a lot more money for Apple than Android is making for Google, or when it is pointed out that that iOS is making a lot more money for iOS developers than Android is making for Android developers, we’re told that Google has a different business model than Apple – that Google is selling eyeballs (advertisements) and that market share matters because every Android device is another pair of eyeballs consuming Google services and Android advertisements.

    That’s a fine theory and all except for one thing: It’s simply not happening.

    Google’s business model is no where near as profitable as Apple’s. Google gives away Android in order to make money from Google services and Google ads on a per device basis. It is estimated that Google makes $6.50 per device. Apple, on the other hand, makes an estimated $300 per iPhone and Apple sells apps and ads on top of that. For Google’s Android to come close to matching Apple’s, Android devices would have to outsell the Apple’s iOS devices by a factor of 30 to 1. (Source)

    Further, Google’s mobile ad model is not working all that well. There is little correlation between Android’s market share and Android’s ad revenue. According to e-Marketer, Google earned $125 million in mobile display ad revenues in the US last year, compared to $92 million by Apple. While that’s 30% more ad revenue than Apple, Google has acknowledged that two-thirds of their mobile revenues come from iOS, not Android, devices.

    All in all, Mobile ads are simply not shaping up to be the same kind of money maker for Google that desktop ads are. According to research by Internet Retailer, Invodo, and Comscore, mobile video appears to be a more effective than display ads in converting potential customers into paying customers. And 70% of the retail videos accessed by mobile devices are accessed by an iOS devices, not Android devices. (Source)

    An even more disturbing trend for Google is the migration from search to apps. Users are increasingly using apps rather than search, and Apple leads in the app market by the number of apps, the amount of money made in apps, the number of developers developing apps and the “buzz factor” surrounding new apps too. (Source)

    Flurry Analytics reports that on mobile devices, 94 minutes per day are spent on apps compared to 72 minutes on the web. Mobile users are spending more and more of their time going directly to an app that gives them exactly the information they want and they are spending less and less of their time searching the mobile web. (Source) That’s good for apps. That’s bad for Google search revenue model.

    Android may have market share, but that market share is not translating into dollars – not for Google and not for Android’s developers either. With mobile users trending toward the use of apps and away from the use of search, despite Android’s greater market share, it’s going to become more and more difficult for Google to keep up with Apple’s revenues and for Android’s developers to keep up with the revenues being made by iOS developers.

    One final point on profits. I can anticipate the argument that it is unfair to compare Google to Apple – that Google’s business model and Apple’s business models are nothing alike – that Google gives away the Android operating system; that Apple sells both the operating system and the hardware; that, of course Apple makes more money than Google. This argument complete rubbish.

    There’s nothing fairer than comparing profits to profits. Profits are the great equalizer. The top lines of companies can often be quite different, but the bottom line is how every company is ultimately measured. It’s not unfair to compare profits – it’s exactly what we SHOULD be comparing.

    It is true that Google and Apple have very different business models. So what? Business models are a strategic decision made by the companies themselves. Google chose it’s business model. Now that have to live with the results.

    5) It is a mistake to assume that market share equals retention

    One argument for the value of Android’s greater market share is the contention that Android gets to new smartphone owners first, builds unshakable loyalty in the Android brand and locks iOS mobile devices out of the market thus insuring iOS’s demise and Android’s future market domination. Only thing is, all of the existing evidence points in to the exact opposite conclusion.

    — iOS has a 75% satisfaction rating with Android coming in a distant second at 47%. (Source)

    — iPhone has topped J.D. Power’s semi-annual satisfaction list 7 straight times. (Source)

    — iPad has an astonishing 98% satisfaction rating. (Source)

    — iPhone owners are the least likely to switch from their carriers – even when that carrier’s service is deemed to be just awful. (Source)

    Goldman Sachs recently conducted an extensive consumer survey of over 1,000 Apple iOS users and reported that:

    — 71% of respondents are “highly likely” to choose an Apple device for their next tablet or smartphone purchase, while 23% are “likely” to stick with the platform. In other words, 94% of respondents are “highly likely” or “likely” to purchase their next tablet or smartphone from Apple. Only 1% of respondents said that their next device purchase was “unlikely” or “highly unlikely” to be from Apple. Further, a surprising 21% of respondents to the survey said: “there isn’t a discount that would make it worthwhile” to leave the Apple platform. Now that’s brand loyalty.

    — A study by Gene Munster at Piper Jaffray indicates that only 47% of Android users expect to buy another Android device and 42% expect to buy an iPhone. (Source)

    — Another study by Gfk in the UK indicated that 84% of iPhone users will repurchase an iPhone compared to just 60% who would repurchase an Android phone. (Source)

    — A survey of more than 2,000 smartphone users by Robert W. Baird analyst William Power shows that 48% of Android smartphone users plan on buying another Android device for their next smartphone while 17% say they plan to buy an iPhone and 34% say they’re undecided. The story is much different for fans of Apple’s smartphone, however, as 77% say they plan to buy an iPhone for their next smartphone, with just 5% planning to switch to Android device and 18% still undecided. (Source)

    Android may be winning the race to the new smartphone consumer, but Android is not retaining those users. Switching is primarily a one way street, with Android users going from Android to iOS, but iOS user seldom leaving the iOS platform.

    6) It is a mistake to assume that market share domination equals app ecosystem domination

    When it comes to platform, developer share – not end user market share – is what matters. And iOS dominates Android in developer share.

    iOS developers are paid better, develop for iOS first and iOS customers buy more apps and pay more for them.

    It has been argued that Android’s platform is every bit as good as the iOS platform. That is demonstrably untrue.

    — iOS overall developer revenue is six times greater than Android developer revenue. You don’t generate that much more revenue without having first generated much more value to your customers.

    — There are over 43 thousand Apple iOS developers and 10 thousand Android developers. 33 thousand additional developers add a lot of value to the iOS platform.

    — There are seven iOS apps for every three Android apps. Arguing that more apps has no more value than less apps is not an argument, it’s an assertion that reality doesn’t exist.

    Argue as loudly as you like that the Android platform is as good as the iOS platform. The iOS developers, the iOS apps and the iOS buyers will shout you down.

    For additional details and sources, see: Android v. iOS Part 4: Developers

    Some day, all this may change, but if it does change, it will be because of a change in developer share, not a change in market share.

    ANDROID IS THE SUPERIOR SMARTPHONE DEVICE. IOS IS THE SUPERIOR PLATFORM

    Android and iOS have different inherent strengths and weaknesses and instead of fruitlessly trying to decide which operating system is going to win everywhere, we should be focusing our efforts on determining which markets each OS is destined to dominate. Neither Android nor iOS is going away. Instead, each OS is going to go their separate ways.

    Android’s value is in the device. iOS’s value is in the platform. Android will take the low end of the market. iOS will take the high end.

    Android will appeal to third-world nations, emerging markets, tech aficionado’s who admire the virtues of “open”, those who require more freedom, those who require more options, those who require more diversity, those who use a single device, the cost conscious, and those who admire the value of free.

    iOS will appeal to more established nations, maturing markets, non-technical users who admire the virtues of easy and intuitive, those who require more security, those who require more consistency, those who require more integration, those who need multi-device management across multiple device form factors, the quality conscious, and those who fear Google’s ad-supported business model.

    iOS will appeal to Enterprise, businesses, governments, institutions, organizations, and other entities that require more structure and control. (As one who lived through the Windows v. Mac wars, the irony of this statement is not lost on me.)

    THE ONCE AND FUTURE PRESENT

    “It’s tough to make predictions, especially about the future” – attributed to Yogi Berra

    The truth is, we’re already living in the future of the Android and iOS operating systems. Both are well along on their respective paths. The future is going to be much the same as the present – only more so.

    Android will continue to grow like a weed. iOS will continue to grow like a well tended farm.

    Android will continue to rapidly iterate their hardware and their operating system. iOS will continue to relentlessly integrate their hardware with their software and their platform ecosystem – methodically moving both their iOS and their OS X software platforms forward together in lock-step.

    Android will continue selling a mind-numbing array of diverse products. iOS will continue selling products like the three year old iPhone 3GS because iOS’ value is found primarily in the platform, not in the the device itself.

    These two great operating systems actually complement one another. The Yin to the others Yang. And one unintended consequence of that symbiosis is that they will continue to hold the dogs of anti-trust at bay. No one is going to sue Apple for anti-trust so long as Android has most of the market share. And it’s going to be awfully hard to say that Android has a monopoly on mobile phones when Apple’s iOS has most of the profits.

    Android and iOS is less about which one is superior and more about their relative strengths and weaknesses. It’s less about how they compete with one another and more about how they complement one another. It’s less about their radically different futures and more about how the future is going to be an extension of the present.

    The future is uncertain and there are sure to be lots of twists and turns along the way. But don’t expect this war to come to a head any time too soon. The two sides are too evenly matched and yet too divergent in form. Like Britain and France during the Napoleonic wars, Britain ruled the sea and France ruled the land and seldom did the twain meet. But unlike the Napoleonic wars, don’t expect there to be a decisive battle of Waterloo. A lingering, uneasy state of detente is far more likely.

    Android v. iOS Part 5: Android Is A Two-Legged Stool

    RECAP

    This week we’ve been looking at the Android and iOS mobile operating systems. In part 1, we looked at how Android was dominating market share. In part 2, we looked at how iOS was dominating profit share. In part 3, we tried to reconcile that seeming paradox. Turns out that, with regard to platform, developer share – not market share – is what gives the platform its value and developer share is what makes a platform strong. In part 4, we showed that iOS was, by far, the stronger of the two platforms. Today we look at why iOS has an inherent advantage in platform, why Android has an inherent disadvantage in platform, and what that means for the futures of these two great mobile operating systems.

    A PLATFORM IS MUCH MORE THAN JUST HARDWARE AND AN OPERATING SYSTEM

    A computing platform is made up of (at least) three parts: hardware, operating system and an application ecosystem. An application ecosystem is also make up of three parts: well-paid developers, a high volume of quality applications (apps) and lots of happy customers buying those apps.

    Android boasts some of the finest hardware in the world. And their operating system is arguably second to none. The Google team is world class. Their operating system is chock full of features and it iterates at an incredible pace.

    But when it comes to application ecosystem, iOS rules and it isn’t even close. While Apple’s iOS leads the world in profits, apps, well-paid developers, paying customers, customer satisfaction and retention, Android leads the world in:

    — Malware (Source)
    — Piracy (Source)
    — Cloning (Source)
    — Confusing buying options (Source)
    — Belated operating system updates (Source)
    — Hardware fragmentation (Source)
    — Underpaid developers (Source) and dwindling developer interest; (Source) and
    — Customers who won’t pay for Apps (Source)

    WHEN IT COMES TO PLATFORM, iOS HAS AN INHERENT ADVANTAGE

    As Tim Bajarin previously wrote for Tech.pinion in “How Apple is Cornering the Market in Mobile Devices“:

    “While all of (Apple’s competitors) think that they can compete with Apple when it comes to hardware, and maybe even software, what they all pretty much know is that the secret to Apple success is that they have built their hardware and software around an integrated ecosystem based on a very powerful platform. And it is here where their confidence level lags and the “iPodding” fears raise its head. And to be honest, this should really concern them.”

    “Apple is in a most unique position in which they own the hardware, software and services and have built all of these around their eco-system platform. That means that when Apple engineers start designing a product, the center of its design is the platform . For most of Apple competitors, it is the reverse; the center of their design is the device itself, and then they look for apps and services that work with their device in hopes that this combination will attract new customers. In the end, this is Apple major advantage over their competitors and they can ride this platform in all kinds of directions.”

    WHEN IT COMES TO PLATFORM, ANDROID HAS AN INHERENT DISADVANTAGE

    Android is based on an “open” philosophy. In software and web-based architectures, an open platform:

    “describes a software system which is based on open standards, such as published and fully documented external programming interfaces that allow using the software to function in other ways than the original programmer intended…” – Wikipedia

    Open has many advantages – but it has many inherent disadvantages too. The very same open policies that make Android’s sales stronger are the very same open policies that make Android’s platform weaker.

    An open policy towards carriers encourages rapid dissemination of devices but it also permits the carriers to take unwanted liberties with Android’s core services and allows them to shirk their responsibilities with regard to operating system updates. An open policy towards manufacturers allows for rapid hardware iteration but it also creates rapid hardware fragmentation. An open policy towards the sales of applications leads to a wide variety of apps but it also leads to a wide variety of piracy, cloning and malware too. An open policy towards the operating system allows for rapid feature iteration but it also allows competitors to split off a confusing variety of competing operating systems and App Stores too.

    Open is not bad or good, it’s a tradeoff. But what open giveth Android in sales, it taketh away in application ecosystem. The very same things that makes Android sales strong are the very same things that makes Android’s platform weak. It’s inherent and intractable. The only way to make Android’s platform stronger is to make it less open. And the less open Android becomes, the fewer advantages in sales it has.

    THE ANDROID PLATFORM RESTS UPON A TWO-LEGGED STOOL

    A stool needs at least three legs to support it. A platform needs at least three legs to support it too. The first leg is hardware. The second leg is operating system. The third leg is application ecosystem. For the sake of argument, let’s assume that the Android hardware and the Android operating system are equivalent or superior to iOS.

    Android’s third leg – its application ecosystem – is weak. Terribly weak. And just as two legs are insufficient to support a stool, the two legs of hardware and operating system – no matter how strong – are insufficient to support a computing platform.

    The Android and iOS wars are not what they’ve been made out to be. The combination of great hardware, great operating system and an open architecture has made Android THE premiere smartphone of our times. The sales numbers prove it.

    But the story doesn’t end there. The combination of great hardware, great operating system and a great application ecosystem makes iOS THE premier smartphone platform of our times. The profit numbers prove it.

    Android aspires to be a great device. iOS aspires to be a great platform. Both have achieved their objectives – which will lead them down radically different paths with radically different futures.

    Coming Next Week: Android v. iOS Part 6: The Future

    Android v. iOS Part 1: Market Share
    Android v. iOS Part 2: Profits
    Android v. iOS Part 3: Network Effect
    Android v. iOS Part 4: Developers

    Android v. iOS Part 3: Network Effect

    RECAP

    We’ve looked at Android and iOS market share and profit share. Android is winning in market share and iOS is winning in profit share. In any other industry, the analysis would probably be over at this point. Profit is literally the bottom line in business and iOS has it in spades.

    FIXATED ON MARKET SHARE

    However, everyone in mobile is fixated on market share rather than on profit share. This is because mobile operating systems are software platforms and the lesson we learned from Microsoft Windows in the eighties and nineties was that the platform with the largest market share won. Period. This was due to the Network effect.

    NETWORK EFFECT

    The Network Effect is when “the value of a product or service is dependent on the number of others using it.”-Wikipedia.

    The classic example is the telephone. In the early 1900’s, there were over 40 separate phone providers in the United States. This kind of fracturing of the service was inefficient in the extreme. If you joined network “A”, you could only speak to others who had also joined network “A”. You could not speak to anyone who had joined networks “B” through “Z”. It was only when Bell began to consolidate the phone services that the benefits of the Network Effect truly kicked in. The more subscribers Bell had, the more value – and the more lock-in – they obtained.

    THE PC PLATFORM WARS

    This is exactly what happened in the PC wars too. There were many competing platforms. Microsoft licensed so many copies of its Windows operating system to its hardware partners that they overwhelmed the competition. The more copies of Microsoft Windows they sold, the more valuable Windows compatible hardware and Windows compatible software became. The Network Effect that had propelled Bell to dominate phones, propelled Microsoft to dominate personal computers.

    THE MOBILE PLATFORM WARS

    The Network Effect dictates that market share matters and that it matters a lot. If Android has almost all of the market share, even if it makes little or no money, at some point Android’s Network Effect will kick in making iOS irrelevant just as Windows made the Mac irrelevant in the nineties. Then all those lovely Apple profits will disappear or, at least, they will shrink appreciably.

    At least that’s the way it was supposed to work.

    IF ANDROID HAS ALL OF THE MARKET SHARE, THEN WHY DOES iOS HAVE ALL OF THE BENEFITS FROM THE NETWORK EFFECT?

    In addition to garnering most of the profits:

    — iOS developers are much better paid. (Source)

    — iOS developers develop for iOS first and Android second, if at all. (Source)

    — iOS Customers buy more iOS Apps and pay more for them. (Source)

    If Android has all the market share and market share triggers the Network Effect and the Network Effect guarantees platform victory, then how can this be?

    ONE OF THESE IS NOT LIKE THE OTHER

    The value in the phone network is the end user. The more customers there were – the more people you could call – the more powerful the Network Effect and the more valuable the platform.

    The value in a software platform is the software, not the end user. The more developers there are, the more applications you can buy and the more powerful the Network Effect and the more valuable the platform.

    The customer is everything to a phone network. The developer is everything to a software platform. The only value a customer brings to a computing network is the number of dollars they transfer to developers in exchange for the Apps, content or advertising they consume.

    THIS EXPLAINS EVERYTHING

    Now the Gordian knot is cut and the paradox unraveled. While we’ve been manically and obsessively focused on customer market share, we should have been focusing on developer market share. It is developers, not customers that bring value to the platform and trigger the Network Effect.

    Apple knows this. Microsoft knew this. Google? Maybe not so much.

    End users buy the platform that has the most software because it provides the most value. It’s the software that initiates the Network Effect and creates the famous virtuous cycle.

    We think that developers chase customers, but they do not – they chase customer dollars. A customer who does not pay for Apps, content or advertising has no value to a platform. They are an empty cipher.

    Coming Tomorrow: Android v. iOS Part 4: Platform

    Android v. iOS Part 1: Market Share
    Android v. iOS Part 2: Profits

    Android v. iOS Part 2: Profits

    RECAP

    Yesterday we looked at Android and iOS mobile operating system market share. Today we look at mobile operating system profit and profit share.

    ANDROID HAS WON THE MARKET SHARE BATTLE BUT…

    On the strength of market share alone, TechCrunch has (and many others have) declared Android the inevitable victor of the mobile operating system wars.

    “The latest numbers are in: Android is on top, followed by iOS in a distant second. There is no denying Android’s dominance anymore. There is no way even the most rabid Apple fanboy can deny that iOS is in second place now. Android is winning.” – Android Is Winning

    However, a funny thing happened on the way to the Android victory parade — they forgot to bring along the industry’s profits.

    …IOS HAS WON THE PROFIT WAR

    “However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill

    — Apple made 77% of the entire mobile industry’s profits in the second quarter of 2012. (Source) The Android operating system may be outselling the iPhone 4 to 1, but Apple’s iOS operating system is out profiting not just Android but the entire mobile industry 3 to 1.

    — iOS second quarter 2012 revenue was approximately $28 billion.

    — iPhone revenue in it’s five years of existence is over $150 billion. (Source)

    — iPhone, by itself, is worth more than all of Microsoft. (Source)

    — Apple’s stock has soared in comparison with Google’s stock since the launch of the iPhone. (Source) In fact, Apple is now worth one Exxon more than Google. (Source)

    — Not only has iOS made Apple the most valuable publicly traded company in the world, (Source) but if the iPhone were split off as its own company, it is probable that it would be, all by itself, the most profitable public company in the world. (Source)

    SOME QUESTIONS

    — If Android has won, then why does Apple have all of the profits?

    — If Android has won, then what exactly have they won?

    — Which is more important, market share or profit share?

    — Isn’t profit literally the bottom line in business?

    MYOPIC MARKET-SHARE MADNESS

    Market share is a means, not an end. Profit is the end for which market share was meant. Without profit, market share is meaningless.

    Honestly, what is up with our fixation on market share? This simply isn’t that hard. Ask any business person whether they’d rather have market share or profit share – whether they’d rather sell more product or make more money – and they would, without hesitation, take the latter every single time.

    Every CEO knows this. Every business owner knows this. Every entrepreneur knows this. Every mom working out of her home knows this. Every guy working out of his garage knows this. Every teen working out of his mom’s basement knows this. Heck, even the kid down at the corner selling Kool-Aid off of a folding table knows this. Ask that kid if they would rather sell more Kool-Aid or make more money and, “duh”, they’d say “make more money.”

    But hire that kid to work for Google or write for TechCrunch or provide analysis of the tech industry and boom! They lose their minds. They reverse themselves and declare market share all important and profit share a mere side show. It’s as if these pundits were metaphorically drinking the market share Kool-Aid.

    IS THERE MORE TO THE STORY?

    If this were any other industry, the analysis end here. In no other industry does anyone seriously contend that market share is more important than profit share. However, this isn’t any other industry. This is computing and this isn’t just the sales of goods and services. Android and iOS are platforms and this is a platform war.

    Clearly iOS is winning – in the short run. But in a platform war, is market share more important than profit share? Does market share lead to platform dominance, which eventually leads to industry wide dominance, which eventually leads to profits? Tomorrow, we’ll take a look at those questions and more.

    Coming Tomorrow: Android v. iOS Part 3: Network Effect

    Android v. iOS Part 1: Market Share
    Android v. iOS Part 3: Network Effect

    Android v. iOS Part 1: Market Share

    INTRODUCTION

    This is the first article in a multi-part look at the Android and iOS operating Systems. An operating system (OS) is the software that manages computer hardware resources and provides common services for computer programs. Applications (or Apps) require an operating system in order to function. The most famous and prevalent operating system in the world is Microsoft Windows. However, Google’s Android and Apple’s iOS operating systems are the two prevailing operating systems in the world of mobile devices, and since mobile appears to the future of computing, one or both of these two operating systems may well be the future of computing too.

    There has been much confusion and even more debate surrounding the Android and iOS operating systems. Some see Android v. iOS as a repeat of the Windows v. Mac wars in the nineties with Google’s Android playing the role of Windows and Apple’s iOS playing the role of the Mac. Others think that, this time, Apple’s iOS is the operating system destined to rise to the top. Still others think that the entire debate is moot – that the new OS wars are already over and that Android should be declared the de facto winner. Their argument rests on Android’s staggeringly rapid growth and massive market share numbers:

    “According to research firm IDC, Android devices made up a whopping 68.1% of all smartphone shipments in Q2 2012. That calculates to 104.8 million of the 154 million smartphones that left manufacturers plants in the quarter. By comparison, Apple shipped 26 million iPhones in the quarter, good for 16.9% of the market. – As reported in ReadWriteWeb

    TechCrunch takes these numbers and sums up the thoughts of many:

    “The latest numbers are in: Android is on top, followed by iOS in a distant second. There is no denying Android’s dominance anymore. There is no way even the most rabid Apple fanboy can deny that iOS is in second place now. Android is winning.” – Android Is Winning

    AN HONEST COMPARISON

    When making comparisons, we should always be careful to compare like with like. Android is an operating system. The iPhone is a single device within an operating system. Comparing Android to the iPhone is an unfair and incomplete analysis. A better comparison – in fact the only accurate comparison – is to compare the Android operating system to the iOS operating system. When you do that, the market share numbers take on a whole new look.

    QUARTERLY MARKET SHARE

    The iOS operating system includes not only iPhones but iPod Touches and iPads as well.

    We know that over half of the iPod’s sold are iPod Touches and we know that Apple sold 6.8 million iPods last quarter. That means there were at least 3.4. million iPod Touches sold last quarter and perhaps many more as well. While it’s true that Samsung has an iPod Touch-like device on the market, their sales numbers for this device appear to be nominal.

    Turning from the iPod Touch to tablets, we know that Apple sold 17 million iPads last quarter or about 70% of the total tablets shipped. That number includes all tablets, including those by Amazon and others, but just to be conservative, let’s assume the the entire remaining 30% of tablet shipments can be attributed to Android devices.

    Add the iPod Touch, the iPad, and the additional Android tablet numbers back into IDC’s figures and Android’s market share numbers, while still impressive, don’t look nearly so intimidating.

    TOTAL MARKET SHARE

    We also know that if one combines iPod Touch, iPhone and iPad sales numbers all together, that Apple surpassed 410 million cumulative iOS devices by the end of June 2012. It’s almost certain that total Android sales now exceed those of iOS (it’s hard to know for sure since virtually no Android manufacturer announces numbers) but even if they do, they exceed iOS’ numbers by a couple of percentage points, at most.

    MEASURING WHAT MATTERS

    Experts often possess more data than judgment. – Colin Powell

    If market share is the measure by which one determines who is “winning”, then we need to measure again. And while we’re at it, maybe we should be asking ourselves whether market share is the be all and end all of metrics. Tomorrow, we do exactly that – we explore whether market share is the only way, just one of many ways, or just a component of the way to measure who’s really “winning” the mobile OS wars.

    Coming Tomorrow: Android v. iOS Part 2: Profits

    Android v. iOS Part 2: Profits
    Android v. iOS Part 3: Network Effect

    The One Feature I Still Want From My Smart Phone

    I love smart devices and more to the point I love the potential for smart devices. At the core of my work as an analyst I try to the best of my ability to look at what smart devices do today but to also look at what they may become in the future. I like to look at technologies, products, solutions, etc., and analyze their future potential in light of their present value. It is with this mindset that I have been taking on an experiment I have not done in quite some time.

    Since attending Google I/O I have been using as my primary smart phone the Google Nexus running the latest Android OS Jelly Bean. When I get new Android devices, and I get many, I can generally only stand using them as my main smart phone for about a week. My patience runs thin with Android due to the role my smart phone plays in my professional life. The focus of this column is not entirely on my Android experience as I intend to write one just on that subject. But I have been using the Google Nexus with Jelly Bean for almost two months now and it is the first time in a very long while that I have not felt the need to rush back to my iPhone. The last time that happened was with the very first Google Nexus.

    I still have my gripes, but the fact I have been able to integrate Android into my life for this long is saying something in my opinion. However, there is one new feature Google has developed with Jelly Bean that has thoroughly piqued my interest.

    Google Now and the Anticipation Engine

    The feature that Google has developed that has not only piqued my interest but given me quite a bit of food for thought around the potential of smart devices in the future is Google Now. Google positions Google Now as a feature that gives you just the right information at just the right time. The emphasis of this feature is contextually relevant information but it runs much deeper than that.

    At the core Google Now learns about key habits on top of attempting to present contextually relevant information. The goal being to present at a glance timely and contextually relevant information. We have written before about this concept of glance-able information and we believe its future is bright.

    At a much higher level, Google Now has made me think about something I had trouble articulating before. Namely the one feature I have been wanting as a part of my smart devices overall potential. The feature I speak of is anticipation.

    Amazingly somewhere in the core of Jelly Bean and Google Now lies the framework to begin building an anticipation engine. With Jelly Bean we are experiencing the ground level of this foundation and I have found some very interesting examples of its value and potential.

    One example is how Google Now looks at my calendar and as long as a location is included in my appointment details, I can launch Google Now at any time and see real time traffic to my next meeting location. I can also simply click from the appointment Google Now card to get navigation to that appointment from my current location. More interestingly, Google Now will alert me via a notification when the is appropriate time to leave for my next appointment based on real time and timely traffic analysis. I found this to be extremely useful.

    Another interesting example is related to search. Regardless of what browser I am using, if I am logged into my Google account, when I search for things on Google interesting things start to happen in Google Now. For example my wife and I were recently in the market for a new family car. She started searching for local car dealerships on my notebook using Google. A few minutes later I happened to pull up Google Now on my phone and the top Google Now cards presented to me were map cards including traffic information to all three local car dealerships she had just looked up. I had no idea she was searching for this information so when I asked her why I was seeing directions to Gilroy Toyota on my phone she replied “that’s weird I just looked up Gilroy Toyota on your computer.”

    As I further experimented with this I found it quite interesting to search for things like restaurants or other locations either on my notebook using Google or the Nexus itself and know that I could easily jump from that search to Google Now and get exact directions or other information related to that location quickly and easily without having to enter in any more information. Once I started integrating this into my search flow it became habit to utilize the information at a glance Google Now presents and I again found it extremely useful.

    As I stated, we are observing the beginning of this anticipation engine concept. There are many ways I would love to see this advance. For example, related to the traffic information, I would love it if my smart device knew not only where I was headed but who I was meeting with. This way if I happened to be hitting traffic on the way to a meeting my smart device could anticipate my time frame and if I happen to be running late present me with the option to email or text those I am meeting with and alert them that I may be running a few minutes late.

    There are more examples than I have time to get into of how this anticipation engine has been changing how I think about the usefulness of smart devices going forward. But I am convinced that Google is onto something with this and I am excited to see where it goes.

    How Android Raises the Experience Bar with Nexus 7

    As a technology insider who has actually planned, developed, and launched products, I have always believed it was important to spend inordinate amount of time living with new and emerging technology products.  Only this way, can you get the “feel” of a product; where it is and where the category is headed.  With regards to Android tablets, I have lived with every version of operating system since inception on 10” and 7” tablets. For every Android tablet version, I added every single personal and business account and used it as I would expect general and advanced users to use it.  While I had experienced some very positive things about each Android tablet version, whenever I held it to the iPad, it just didn’t compare.  Either my preferred apps weren’t available, the content I wanted was missing, or it just didn’t “feel” right.  After using the Google Nexus 7 for a few days, I can say the experience is solid and a lot of fun, something I have never before said about an Android tablet.

    Why Non-iPads didn’t Sell Well

    We must first understand Google’s previous missteps with Android tablets to fully appreciate how far they have come with the Nexus 7.  While I penned this post a year ago outlining why Android tablets weren’t selling well, let me net it out for you.  Non-iPads haven’t sold well over the last year because:

    • tablets were sold with incomplete collections or no available movies, music, TV, books, and games
    • tablets were sold with minimal applications optimized for the platform
    • tablets were released with unusable features like LTE, SD cards, and USB ports
    • tablets didn’t “feel’ good as there were stutters and sputters
    • with all the issues above, most 10” tablets were sold at the same price as the iPad

    Think about the horrible stories consumers who paid full price for an HP Touchpad, Motorola Xoom, or BlackBerry PlayBook tell their friends and colleagues today.  Given tablets are a new category and still a “considered” purchase, everything other than the iPad was considered risky, particularly for the non-techie consumer.

    So why will the outcome for the Nexus 7 be any different? Well, it’s all about its integrated and holistic experience.

    Nexus 7 is a Big Phone with Access to 600,000 Phone Apps

    No one doubts that Google’s Android has been successful in smartphones.  They’ve been so good, in fact, that Android even eclipses iOS in market share.  This is why it’s so important to understand the implications of Google choosing the phone metaphor for the Nexus 7 as its it’s all about apps.  Even today, Android tablets apps are counted in the hundreds and iPad tablet apps are in the hundreds of thousands.  Apps and content are to tablets as roads are to a car, and consumers have access to at least 600,000 of these Android apps.  It’s not only about leveraging the phone app ecosystem as the HTC Flyer were phone-based 7” tablets and didn’t exactly set the world on fire in sales.

    Nexus 7 Uses State of the Art Hardware and Software

    I liked my Kindle Fire when I first got it, but in reality, I was most impressed with the price versus the iPad than the experience. Over time, my Kindle just sat in my drawer at home and I used my iPad 2 then the iPad 3.  I stopped using my Kindle because the web and mail experience were just so pathetically slow, and quite frankly I got tired of staring at pixels as I am very near-sighted.  I attribute this to the cheaper hardware, a much older Android 2.3, a slow browser for complex sites, and a lower resolution display.  I must reinforce, though, it was at less than half the price of the iPad 2 when it shipped and millions looked the other way as they were just happy to have a tablet.

    The Nexus 7 uses state of the art hardware and software and at least for 6 months, buyers won’t have too many levels of remorse. The two main drivers of the experience are Android Jelly Bean and the NVIDIA’s Tegra 3. Jelly Bean, the latest Android OS, adds a tremendous amount of new features but, in short, enable:

    • Project Butter which doubles the UI speed to 60fps so Android finally feels responsive
    • fully customizable widgets at any size the user chooses
    • voice search and dictation that actually works, as Google moved much of the logic and dictionary back to the client and off of the cloud
    • fully customizable notifications, to see just what you want to see and very little of what you don’t want to see
    • Google Now, their first intelligent agent

    The NVIDIA Tegra 3 SOC is just as impressive as it has:

    • quad core processor clocked at 1.3Ghz which speeds up tabbed browsing, background tasks, widgets, task switching, multitasking, installing apps, etc.
    • 5th battery saver core which operates in idle mode, which saves battery life
    • GeForce graphics with 12 cores clocked at 416MHz to play the highest-end Android games and HD video

    When you add these features to the 7”, 1280×800 (216 PPI) display, you get a very solid experience that just “feels” good.

    It’s All About the Experience

    As the rest of the phone and tablet industry has painfully learned from Apple, it is about the delivering the holistic and integrated experience between software and hardware, not the ingredients that make it up.  The Nexus does deliver a good, holistic experience, and not just at a certain price point.  While what defines as “good experiences” are very personal, here are many of the experience points I believe will be universally appreciated:

    • light enough to comfortably hold in one hand and small enough to put in a coat, cargo pant pocket or purse
    • the UI “feels” fluid and very fast
    • cannot see any pixels which can distract from the visual experience, particularly when using in bed or with near-sighted users who hold the tablet near their face
    • the tabbed browsing is very fast, focuses well on desktop-sized sites, and bookmarks sync with desktop Chrome
    • the apps and content users want will be available, at least in most countries
    • email is full-featured and very fast, with no lag to delete, create, or linking to web sites
    • notifications are subtle, non-invasive, and speedy to resolve
    • live tiles are fully customizable and save time to see content, even eliminating the need in many cases to open an app like email or calendar
    • with multiple apps running in the background with data feeds updating, it still feels smooth

    The holistic experience is greater than just the sum of its piece parts, a first for Android tablets.

    Nexus 7 Significantly Raises the Android Tablet Experience

    As Ben Bajarin pointed out here, usage models will differ between 7” and 10” tablets. One thing I must add is that like the Fire, the Nexus 7 will pull some potential sales away from the iPad if Apple does nothing.  This is an element that many fail to recognize.  The analogy I will use to show this is between sedans and minivans.  If minivans had never been introduced, sedans would have sold more.  In parallel, without a Nexus 7, Apple would sell more iPads, even if they aren’t the same exact usage models or price points.

    Will Apple roll over and let Google and Android slow down its march toward digital dominance?  Probably not, as I do expect Apple to introduce a 7” tablet for many reasons and also as Apple laid out at WWDC, iOS 6 is very compelling, especially when connected with other Apple devices.  Today, the broad tech ecosystem and investors see Apple as invincible, understandable as they have plowed over many of the largest companies in tech.  If Google and Android start to gain credibility in the tablet space, what message will that send about invincibility?  Apple needs to stop Google in their tracks and remove all of the oxygen during the holidays to maintain its dominant status.

    One thing for certain is that the Nexus 7 and Jelly Bean significantly raise the bar for the Android tablet experience, something that has been absent for 18 months.

    Android’s 7-Inch Tablet Future

    It wasn’t a secret that Google was going to announce a 7-inch Nexus tablet made by Asus and running Nvidia’s Tegra 3 chipset. And announce it Google did yesterday to much applause and fan fare. As we and a great many anticipated the tablet is designed as pure media tablet rather than a general purpose tablet like the iPad. As we watched the demo it became clear the Nexus 7 is targeted right at the Kindle Fire and nothing else.

    I have been thinking a lot about what Android’s future in tablets may hold and I believe we now have the answer. Android’s sweet spot for tablets may be 7-inch pure media and entertainment slates. These devices will be built and optimized specifically with entertainment not productivity in mind. They will also be very low cost and derive a significant amount of value from cloud services. This also fits right in line with Google branding their store “Play.”

    This makes sense if you think about the fact that the most successful Android tablet to date, the Kindle Fire, is a 7-inch pure media tablet. With the iPad, and now on the eve of Windows 8 tablets all targeting the 9.7 to 10.1 tablet screen sizes with more general purpose tablet strategies, I anticipate the larger screen Android tablets to struggle.

    Android has struggled as a tablet solution in the general purpose segment due to the immature nature of Google’s tablet ecosystem. Apple remains dominant in this area and it seems like many firms strategies are to avoid competing with Apple entirely. This is clearly the direction Google is taking with the Nexus 7.

    With that context I want to point out two areas important for this segment. One that favors Amazon and one that favors the Nexus 7.

    Cloud Services and Consumer Trust
    The Kindle Fire commerce ecosystem both in terms of digital media and consumers trust in Amazon as a commerce vendor are key areas where Amazon has an advantage of the Google right now. Amazon has over 100 million credit cards of consumers on file who all trust Amazon as a vendor. I don’t believe Google has released how many accounts they hold but I guarantee you it isn’t nearly as many as Amazon, or Apple for that matter.

    Amazon has a more mature ecosystem when it comes to digital media and consumer trust for commerce. This is an area Google is attempting to strengthen with the Nexus 7. During the announcement of the Nexus 7 the statement kept being made that the device was built for the Google Play store. Google is clearly hoping that this device will generate more trust for their commerce platform and strengthen their commerce ecosystem.

    Retail
    This is an area where Google 7″ tablets may have an advantage over the Kindle Fire. Google has not yet stated when or if the Nexus 7 will ever appear in retail but you know other OEM will come out with 7″ media tablets who will get them in retail.

    Retailers have been understandably conscience of Amazon’s commerce strategy with the Fire being potentially disruptive to their own brick and mortar store strategy. If that trend continues you can imagine more retailers not carrying the Kindle Fire and filling that hole with other OEMs Android 7″ media tablets.

    To the extent that retail will be important for this segment the advantage goes to Google in this area.

    I am not sure the extent the tablet market is ready to segment into specialty tablets but if they keep their prices low and overall time investment low then I think they have a chance to become companion media devices.

    Of course if Apple jumps into this segment with a 7″ tablet I will have to re-consider some positions I am taking currently. However, if Apple does this it will only validate the 7″ media tablet segment at which point I would expect OEM investments in the category to ramp extremely quickly.

    The Terrible Tablet Tsunami and the Future of Computing

    IDC just issued a press release updating their expectations for tablet shipments. Here are their numbers, year by year:

    2010: 19.5 million tablet shipments.
    2011: 69.6 million tablet shipments.
    2012: 107.4 million estimated tablet shipments.
    2016: 222.1 million estimated tablet shipments.

    When looking at the above numbers, you need to keep two things in mind:

    1) These numbers DO NOT include the anticipated shipments of Windows RT and Windows 8 tablets. If Microsoft has its way, that’s a lot of missing tablets. Further, IDC expects the coming Windows tablet shipments to be ADDITIVE to their existing tablet estimates.

    2) IDC has consistently UNDERESTIMATED the number of tablet shipments in each of its previous forecasts. By a lot.

    For example, in March 2012 – just three months ago – IDC increased their estimates of tablet shipments in 2012 by 21% from 87.7 million units to the 106.1 million units. That still wasn’t enough of an upward adjustment and three months later IDC had to tweak their totals from 106.1 million to 107.4 million.

    Further, if you look at the current growth in tablet shipments and compare it with IDC’s predicted 222.1 tablet shipments in 2016, you can see that their estimated growth rates are far below current levels and conservative in the extreme.

    What does this all mean? It means that if desktop shipments continue to stay flat or modestly decline as they have for the past several years, then tablet shipments will be on a par with desktop shipments within the next 4 years.

    The implications are industry shattering.

    First, he who makes the most tablets makes the most growth.

    Second, only platforms that are able to sustain significant market share in tablets will remain viable in personal computing in the long run. The first implication is self-explanatory. The second may require some justification.

    Three Categories of Computing. Today, there are three distinct categories of computing: smart phones, tablets and desktops (including notebooks). Some consumers own devices in only one category, some own devices in two categories and some consumers own devices in all three. The trend is definitely toward multi-category computing ownership.

    If you’re going to buy devices that span multiple categories, it only makes sense to buy devices that run on the same or a compatible platform. In other words, if your platform doesn’t support phones, tablets and desktops, then your platform is going to become marginalized.

    I don’t hear analysts, pundits or commentators talking about this much and I don’t know why. Platforms are “sticky” – they have high retention rates. Multiple device platforms are like glue. Once you own two or more devices on one platform you’re very unlikely to every leave that platform. The company or companies that work well across all three computing categories will dominate personal computing for the next five to ten years.

    APPLE: Right now, only Apple has a multi-category solution in place. Apple’s mobile operating system (iOS) runs on both its phones and its tablets and Apple is working hard to make the transition between their mobile OS and their desktop OS (OS X) as familiar and as comfortable as is possible.

    Apple not only has a lead in creating solutions for all three computing categories but they are working hard to extend that lead as well. Last Fall, Apple announced that they would synchronize their mobile and their desktop operating system updates and put them on an annual schedule. This commitment to parallel development makes it much easier for Apple to move their two operating systems in lock step.

    With iCloud binding their phones, tablets and desktops together in a seamless whole, Apple is well positioned for the multi-category computing market that lies ahead.

    MICROSOFT: Currently, Microsoft has a big problem and an even bigger proposed solution. Right now, Microsoft dominates the desktop, has minuscule share in phones and no share at all in tablets. That’s a big problem.

    Their big solution? This Fall Microsoft intends to introduce Windows RT tablets, Windows 8 tablets and, perhaps, even an ebook reader. Microsoft is currently well behind Apple but they intend to provide a solution that spans and ties together all three computing categories. And they plan to do it in a hurry.

    Can they make it happen? Unknown. We’ll have to wait and see. If they don’t, they are in deep, deep trouble, at least so far as personal computing goes. If Microsoft’s tablet solutions are only as popular as their phone solutions have been thus far, then those who seek a multi-category computing solution will soon learn to look elsewhere.

    Microsoft has its work cut out for it but if they can gain acceptable market share numbers in the tablet sector (which will presumably translate over to the phone sector, as well) then they are well positioned to create the type of ecosystem that makes multi-category computing such a joy. Microsoft has flaws like any company, but ecosystem is not one of them. If Microsoft can just get back in the game, they can play the multi-category computing game as well, or better, than anyone.

    ANDROID: So wither Android? Right now Android dominates overall smart phone sales. But just as Microsoft is currently stranded on the desktop, Android is currently stranded on phones. Their struggles with tablets have been well documented and they’re not even trying to provide an Android solution on Desktops (Chrome, yes. Android, no.) If you want a single platform to support your multiple category devices, Android is currently the last place you’re likely to turn.

    Can Android turn things around? Of course they can. Google has committed to putting more resources into Google Play (I still don’t understand why they re-branded Google Marketplace as Google play – Google Play is an awful name) and they’ve promised us a tablet “of the highest quality” this summer. But promises are only promises, nothing more. Just as Microsoft has to prove that they can field a successful tablet product, Google has to do the same. And while Microsoft has a proven track record in building strong and vibrant ecosystems, Google seems to struggle in this oh-so-crucial facet of the multi-category computing game.

    Conclusion: Right now, Windows dominates desktops, Android dominates smart phone sales and Apple dominates the cross-category solutions. But rapidly growing tablet sales may not only be the key to computing growth, it may also be the key to the future of all three categories of personal computing.

    As tablet sales grow, not only will Apple’s share of the computing market grow but the current positions of the big three operating systems will necessarily shift as well. Like a monstrous game of Jenga, as the pieces move in and out of place, there will be a titanic shift in power as someone, or several someones, find themselves unable to satisfy the desires of a demanding consumer base.

    Apple’s place in the new world order seems assured. But as Google and Microsoft fight to gain tablet share, the one who fails to become relevant where they are weakest, will also risk becoming irrelevant where they are currently strongest, as well.

    The future is uncertain, but one thing is for certain. If you like tech, the next 18 months are going to fascinating to watch.

    Google, Quickoffice and Productivity Beyond X86

    In an interesting move today, just weeks before Google I/O, Google has announced via their blog that they have acquired Quickoffice, a productivity suite of software, and team. This move has a number of interesting implications.

    First and foremost I believe this move again signals Google’s intent to go vertical. Acquiring Quickoffice certainly gives them a differentiator for their own hardware when it comes to productivity software, should they choose to use it that way. Of course on the surface and in the short term I would expect them to bundle this productivity suite on all Android devices. This move on the outset is designed to go right after Windows on ARM (Windows RT) and the inclusion of Microsoft Office on all Windows RT devices out of the gate.

    This move is largely focused on tablets. It is no industry secret that Google is in the weakest position when it comes to tablets. The iPad has continued to dominate, and most likely will for the foreseeable future, but the lack of industry confidence in Android tablets has been astounding. In fact many analysts, our firm included, have more optimism for Windows 8 based tablets which are not even in the market yet over Android tablets which have been in the market for 2 years. It is not everyday that professional forecasters and industry observers will give an advantage to an unproven and unreleased platform, yet that is exactly what has happened. This again just re-enforces the lack of confidence in Android tablets to break into the mass market.

    Google will obviously seek to change all of this with their acquisition of Quickoffice. This demonstrates, to this analyst at least, that Google may be starting to understand tablets and that tablets are a viable platform for productivity. I have been of the opinion that Google had not been interested in tablet productivity and in particular tablets (or Android for that matter) in a business setting. Most of Google’s moves and posture toward this market has been focused on consumers. Just look at the renaming of their store as an example. The Google Play Store doesn’t make me think I should go purchase productivity software or applications.

    The other interesting observation I would throw out is that the myth that X86 (or Intel and AMD Silicon) is the platform of choice for productivity is certainly busted. I believe I could make an extremely strong case of this point simply doing an analysis of the iPad but with Microsoft Office on Windows RT and now Quickoffice as a standard for Android, we certainly have enough evidence that ARM platforms will be fully sufficient not only computing platforms but productivity platforms.

    Why Google is Creating Their Own Tablet

    It is pretty well known now that Google is about to release a Google branded tablet. Sources tell us that it was designed by Asus and made by Quanta. Most expect it to be shown at Google I/O the last week of June and in the market sometime in July.

    At first glance, the fact that Google will now be going head-to-head with their partners seems like a bad idea. Google has worked hard to convince partners to back Android and to date, in smartphones and tablets they have had many vendors commit to Android. And partners have taken Google at their word that they would not compete with them if they license Android and help make it successful.

    There are a lot of reasons for the lack of Android success in tablets, some related to Google’s missteps in their designs and releases of Android for tablets, but no one can deny Apple’s great iOS and sleek designs that continue to give them an edge over competitive tablets based on Android. And at the vendor level, most Android tablet vendor’s products have paled in comparison to Apple’s iPad in both sleekness in design and marketing execution.

    Also, Android in tablets has forked a couple of times already. While Android is the OS of Amazon’s Kindle, it has been optimized and customized to Amazon’s needs and is not considered a pure open and extended version of Android. And Barnes and Noble’s Nook has followed a similar path with their tablet. At the same time, vendors like Samsung, HTC and others have added their own UI and extra features to Android to make it their own.

    While this may be good for the vendors, it does not necessarily mean it is good for Google. Yes, most conform to some of Google’s guidelines and include the Google search engine as well as connections to ads. But in some cases, especially the one from Amazon, they are much more interested in driving commerce and ads through their program then adhere to any of Google’s ads and commerce links that benefit Google.

    I believe that once Google began to realize they were losing control of Android within the tablet market, they decided that they needed to have a vendor that would adhere to all of Google’s conventions no matter what they were and become the true “poster” child for Android tablets.

    And who could do this better than Google themselves. In this scenario, Google would control the integration of the Android OS, the overall design of the tablet itself and all of the ads and eCommerce links tied to a tablet so they would have full control over it. And, they could drive its marketing, distribution and even the customer service needed to make a true Android tablet successful.

    The operative word here is “true” Android tablet. Up to now, most Android tablets were true Android tablets only in the sense that they used Android at its core. But as you may know, fragmentation within the Android OS world has been rampant and this has had an impact on Android’s ultimate success in tablets. But Google wants to correct this and insure that Android can be very successful in tablets as well as smartphones.

    In the end, they would be basically following in Apple’s footsteps. Although Google professes blind allegiance to an Open Source program, the fact remains that the most successful company in the tech world today turns its back on that model. Apple’s success comes through their control of the hardware, OS and applications eco systems that allow them to deliver complete solutions to their customers. And if Google creates their own Google branded tablet that is tied to its purest version of Android and linked to its own services and apps, this sets them up to finally have an Android tablet that will be truly competitive with the iPad.

    I don’t know if Google would have moved in this direction had it not been for Amazon’s decision to use Android and make it the heart of an Amazon “closed” commerce loop. I suspect that when Android was created Google pretty much expected people to follow their program to a “T”. Silly Google.

    Apparently Google has decided that it is time to take control of Android in tablets and do their own version that is tied tightly to their own business model. And if their partners get angry with them, then so be it.

    One more thing- Although most expect that Google’s tablet will be priced at $199 and go head to head with Amazon’s Kindle, I would not be surprised if they actually go to school on Amazon and do some type of subsidization of their own with this product. We believe Amazon Kindle’s BOM cost is between $209 and $217. The difference in cost to consumer vs BOM is made up through some form of subsidization tied to what people buy on their Kindle’s Fire.

    But I would not be surprised if Google matches fire with fire (pun intended) and prices their Google branded tablet at $179 and ties their subsidization to add revenue gained through purchases via their Google branded tablet. If so, this would have a disruptive effect on any Android tablet partners and could also force Amazon to be even more aggressive with their subsidization pricing on future Kindle Fire’s.

    HTC One X International: Trading in My iPhone 4S?

    One X

    HTC announced the HTC One family in Barcelona at Mobile World Congress 2012. The HTC One X was one of the bigger standouts as it indicated the best in breed of Android phones available on the market. Some even said it would threaten the iPhone. Does it live up to the hype? I had the chance to use the HTC One X International version for a few days and I wanted to share my first hand experiences with you, which were very positive.

    Background

    I have been evaluating Android phones well before the first T-Mobile G1 launched back in 2008. I was a BlackBerry addict like many for so long until the Nexus One arrived, then I switched to Android wholesale….. for a while. The iPhone 4 finally pulled me from the Android world with its consistent performance, robust app store, quality photographs, and perfected HDTV Airplay mirroring functionality. Could the HTC One X International pull me back over to Android with its much more sophisticated ICS Android 4 operating system and higher quality app and media store? Maybe.

    What I Enjoyed About the HTC One X International

    Facial Login
    I have been evaluating face login for about a decade and this is one of the first I have used that worked well. It’s missing a few features like auto-adjusting the display to provide light, but it worked well in most environments. If it did miss-read my face, it backs off to a secondary security method like typed password or drawing a pattern. I have not tested for false positives using photographs or videos either.

    Multitasking
    Quite simply, I have never used a phone this fast and did so many tasks at the same time as I did with the One X International; installing apps, updating apps, syncing Sugarsync data, and browsing in Chrome Beta at the same time were very fast. As hard as I tried to slow the system to a crawl using real apps and not benchmarks, I failed. This is a first for me as I had previously tried nearly every major flavor of Android phone. I attribute most of the multitasking prowess to the Nvidia Tegra 3 processor with its 4-PLUS-1 quad core architecture. When doing heavy multitasking, all four cores were blaring. When reading email, it only uses the one battery-saver core.

    Display
    The One X sports a monster 4.7″ HD display at 1,280×720 resolution. In comparison to my 4S, this provides 60% larger viewable image area at a very comparable PPI (pixels per inch). The contrast ratio was one of the best I had ever experienced, too. The georgous display made web surfing, viewing photos, watching movies, and playing games a very enjoyable experience.

    Games
    This is where the One X showed one of its key strengths. I prefer the eye candy and my preferred games are FPS (first-person shooters). I tried many of the titles in the Nvidia TegraZone to stretch the Tegra 3 as far as it would go. ShadowGun THD looked great not only on the integrated display, but also when displayed on a 60″ HDTV screen. I have an XBOX 360 and while I wouldn’t say it’s the same quality graphical experience as the latest Halo, it is close. To have this capability built into a phone, for “free”, is exceptional. I can see how tomorrow’s phones based on Tegra graphics will give future consoles a run for their money.

    Camera
    The camera experience overall was positive. I appreciated the fast, multi-picture taking capabilities and taking pictures in low light. I thought my iPhone 4S was fast, but the HTC One X was even faster. I also appreciated taking pictures while I was taking videos, and I can imagine making some very interesting photo-video mashups. Unlike the iPhone, I’m not limited to sharing my pictures from Photos just to Twitter. Right from Gallery, I can share to Facebook, Dropbox, SkyDrive, Flickr, Instagram, Picasa, Skype, and yes, Twitter.

    Battery Life
    I was pleasantly surprised with the battery life as I didn’t notice many demonstrable differences between the One X and my 4S. One area was web browsing where I was using Chrome beta on the One X, which delivered a fuller web experience than Safari, but felt like it was using more battery. Most impressive was that I could get decent battery life with a four core processor, great mobile graphics, on a display with 60% more area. I have to admit, when I first heard about Tegra 3 on phones, my head went directly to concerns on battery life. Nvidia pulled off something real big by enabling good battery life while having four processor cores and Nvidia graphics.

    What I Would Like to See Changed About the HTC One X

    Size
    This is a personal preference, but I like to control the phone with my thumb, without two hands. . The One X requires me to use two hands which rules it out of quick stop-light usage in the car. Techpinions columnist Ben Bajarin goes into depth here on this idea here.

    Charging
    Like I said above, I like to multitask with my phone, using it more like a mini-tablet than a simple phone. As I would near the end of a battery charge, I would plug in the phone so I could keep playing or working. Often, I would get a warning message warning me that I was draining power quicker than I could charge the unit. This will hopefully get addressed in a software update as it is inconvenient.

    Packaging
    A beautiful phone deserves beautiful packaging. If you like eggs, great. The One X ships in what looks like a giant, single egg carton. The phone is beautiful and deserves to sit right next to the iPhone 4S, but the packaging should be hidden from human eyes.

    Photo Skin Quality
    All my shots of people outside in bright sunlight has a red or pink tinge to their skin. Either I had a defective unit or some calibration is required in the driver. I scoured the web and found a few instances of this happening to others. I cannot imagine this not getting fixed.

    Trading in my iPhone 4S?


    As I said previously, I prefer smaller phones I can control with one thumb. For those who desire the benefits of a larger display phone like the HTC One X International version, I can recommend this phone to those who don’t have access to LTE. The multitasking and games are better than anything I have used to date and when combined with the awesome 4.7″ display, the One X satisfies.

    Google Created the Mess and Now Must Fix Android Tablets

    Android for phones by any measure has been a success, while Android for “premium” tablets by every measure has been a disaster.  According to IDC, the iPad held 55% market share of all tablets in Q4 2011.  When you remove lower end tablets like the Fire and Nook and leave "premium" tablets at $399+, best case Android has approximately 13% market share, leaving Apple with 87% share.  This incorporates sales from some very nice Android tablets from Samsung and ASUS.  This is beginning to appear like the iPod market where Apple is squeezing every ounce of life out of the premium competition.  So who is to blame for the fiasco and who needs to fix it?  The responsibility lies squarely on the back of Google who in turn needs to fix the problem.

    I was very excited about Android the first day I learned about it in 2005.  The market needed another strong choice for client operating systems to ensure the highest growth as Linux just wasn’t making headway. I bought the  T-Mobile G1 Android phone in October  2008, the Google Nexus One in January 2010 and many more Android phones including the HTC EVO 4G, the Motorola Atrix, and more after that.  The phone apps were there, more importantly the popular ones.  While the experience wasn’t as fluid as the iPhone, I and many others appreciated the openness, notifications, and live screens.  While the market was very excited about Android phones, it was a completely different story for tablets.
     
    The first looks at Android for tablets, aka "Honeycomb" were amazing. Honeycomb, on paper and in demos, did almost everything better than the iPad. The interface was incredible and looked three dimensional and “Tron”-like. Multitasking, notifications, Flash video support, SD storage and Live Screens looked great.  The Motorola XOOM at CES 2011 won many awards including CES’s "Best of Show Award."  The anticipation mounted and the ecosystem was excited…. until it actually shipped.
     
    As I explored here, I show that the XOOM was slow, buggy, without many apps, without Flash, without SD card support, and sold at a $300 premium to the iPad at $799. New models and prices were introduced starting at $379 seven months later.  Needless to say, it was a complete disaster. This was followed by Samsung with the Galaxy Tab 10.1 in June 2011 starting at $499.  This tablet experienced a similar fate as the XOOM but not as pronounced because it more quickly moved to Android 3.2.  The best premium Android tablet out there was and still is the ASUS Transformer Prime with its optional keyboard, but it also struggled because of Google’s operating system.  Google then released Android 4.0, aka "Ice Cream Sandwich" which didn’t add meaningful features for tablets, but instead aligned the application development environment between phone, tablet, and TV.  Android 4.0 tablets missed the holiday selling season and didn’t sell many at all compared to the iPad.
     
    In summary, the following are the characteristics of what Google allowed to be introduced into the premium Android tablet market place:
    • buggy with crashes
    • slow interface
    • few tablet optimized applications
    • few services at launch for music, books, and movies
    • unfinished features
    • price points on top or higher than market leader Apple with lesser experience
    • missing key consumer retail time frames
    So why do I place this primarily upon the shoulders of Google and not the brands, retailers, or component suppliers?  It’s about leadership.  If Google had fully understood what they were walking into, they should have:
    • waited to release Android 3.0 until it was feature complete.
    • waited to release Android 3.0 until there were at least 100 optimized, popular applications.
    • waited to release Android 3.0 until it had full support for movie, music and book services
    • waited to release Android 3.0 until there were greater levels of application compatibility issues that resulted in crashes.
    • instituted some tighter marketing management of hero SKUs to assure their experience was flawless

    The result of Google allowing Android tablets out the door before it was fully baked is that the operating system is now viewed by most as a liability as opposed to an asset. Every major tablet maker that I’ve talked to loses money on premium Android tablets in a big way.  Also, anyone’s brand associated with the Android tablets has been marked as well. Motorola and Samsung both had premiere brands but I believe has been sullied by their association with Android for tablets.

    Google’s reaction to all of this was to buy a hardware company (Motorola) versus working even more closely with their partners like ASUS and Samsung. Additionally, it’s rumored that Google will introduce their own Google branded tablet which will alienate Google all that much more.  Does the Google brand lend a cachet’ to the equation?  Absolutely not.

    All of these issues and confusion benefits Microsoft right now. What was previously considered a free ride from Google with its "free" operating system now has turned OEMs directly into the arms of Microsoft and Windows 8 for tablet.  What a turn of events over the last 18 months.  The pandemonium isn’t over yet.  With undoubtedly more information coming out at this year’s Google I/O, Google is planning Android 5.0 which I am sure will be positioned as the savior of Android for tablets.
     
    The problem is that there’s no savior in sight for Android on premium tablets.  We all know Android sells at $199 without much or any hardware profit, but how about $499 where the entire ecosystem can make money?  Google needs to seriously reconsider everything they are doing with  for tablets starting now because nothing else is working.  The new plan needs to fully account for the needs of the silicon partners, ODMs, OEMs, channel partners, application developers and most importantly, the end user.  It needs to find an entirely new name, too, because the Android name has been thoroughly destroyed in the high end tablet market. 
     
    It’s time to stop treating Android for tablets like a hobby and start treating it more like a business.