Tag: google

Truel: The Good, the Bad and the Ugly; The iPad, the Surface and the Nexus 7

The Plot

The Good, the Bad and the Ugly is a 1966 Italian epic Spaghetti western film directed by Sergio Leone, starring Clint Eastwood, Lee Van Cleef, and Eli Wallach in the title roles. ~ paraphrased from Wikipedia

Apple, Microsoft and Google are engaged in an epic tablet war starring the iPad, the Surface and the Nexus 7 in the title roles.

In the Good, the Bad and the Ugly, the plot revolves around three gunslingers competing to find a fortune in hidden Confederate gold.

In the tablet wars, the plot revolves around three tablet gunslingers competing to find a fortune in hidden tablet profits.

Clint Eastwood as “Blondie”: The Good. A subdued, cocksure, bounty hunter who both works with and works against Angel Eyes, and Tuco in shifting alliances to find the hidden gold.

Apple as “iPad”: The Goliath. An implacable, cocksure, bounty hunter who both works with and works against Microsoft and Google in shifting alliances to find the hidden profits.

Lee Van Cleef as “Angel Eyes”: The Bad. A ruthless, unfeeling and sociopathic mercenary who always finishes the job.

Microsoft as “Surface”: The Bad (ass). A ruthlessly efficient, relentlessly effective, money making machine who knows how to close.

Eli Wallach as “Tuco”: The Ugly. A comical, oafish fast talking bandit who proves to be a crafty and surprisingly dangerous opponent.

Google as “Nexus 7”: The Geeky. A nerdy, engineering and advertising company whose “don’t be evil” exterior masks a surprisingly powerful and unexpectedly ominous corporate bandit.

The Truel

In the movie’s climatic final scene, Blondie, Angel Eyes and Tuco face off against one another in a Truel.

In the climatic autumn of 2012, Apple, Microsoft and Google face off against one another in a truel.

A truel is: “a neologism for a duel among three opponents, in which players can fire at one another in an attempt to eliminate them while surviving themselves. ~ via Wikipedia

Each party jockeys for position, each itching to fire first, each wary of what the other two fighters will choose to do.

In tech, Apple, Microsoft and Google are involved in a great tablet truel. Each party jockeys for position, each itching to eliminate the other, each wary of what the other two competitors will choose to do.

The three stare each other down in the circular center of the cemetery, calculating alliances and dangers in a Mexican standoff.

The Apple iPad stands alone at the center of the tablet world. Then the Google Nexus 7 joins in the fray. And finally, on October 26, 2012, the Microsoft Surface steps into the ring. The three stare each other down, calculating alliances and dangers in a Mexican standoff.

The parties position themselves, the tension grows, the Ennio Morricone film score swells until suddenly, they draw and…

The Treasure

Remember the pundits who laughed off the tablet form factor and called them toys? No? Neither does anyone else. They were as wrong as wrong could be.

Tablets are the second coming of the personal computer. Apple knows it. Microsoft knew it long ago but they were unable to successfully seize the moment and capture the treasure for themselves. Google is only just now realizing the importance of tablets. The company or companies that win the tablet wars win the future of computing. The fight is only just begun but like a gunfight, the battle may soon – and very suddenly – be over.

The Gunfighters

Apple iPad

Apple is like Blondie. Confident. Cock-sure. Perhaps a bit too cock-sure. Apple insists on doing things their own way. Google is counting on Apple’s insistance on having a closed shop to be their undoing. Microsoft is counting on Apple’s unwavering insistance on seperating their touch and desktop devices to be their undoing.

However, Apple has an advantage. Like Blondie, they know where the gold (profits) is hidden. The key to unlocking the tablet treasure is tablet optimized Apps. And using our gunfight analogy, when it comes to tablet apps, if Google and Microsoft have six shooters, Apple has an Uzi. Or a bazooka. Or a tank…

Microsoft Surface

If Apple is the cocky newcomer – the up and coming gunslinger – Microsoft, like Angel Eyes, is the consummate professional – the grizzled vertern who has the experience, knows all the tricks in the book and is extremely confident in their ability to win in a shootout.

If Apple is cocky because they think they’re good, Microsoft is confident because they know they’re good. Microsoft has not only been through the wars, they’ve won the wars and they’ve won them convincingly.

However, Microsoft’s secret weapon in the PC wars was compatibility and familiarity. In gunfighter terms, it would be like shooting with the sun at your back. And getting in five shots before your opponent even drew their weapon. And shooting from behind a wall. It was that devastating an advantage.

When it comes to a gunfight – or a platform war – Microsoft is the best there ever was. But this isn’t yesterday and this is a whole new fight. In mobile, Microsoft’s monopoly advantage is no where to be found. If Microsoft is going to win this gunfight, they’re going to have to do it on merit.

And Microsoft is very, very late to the fight…

…and it’s never good for a gunfighter to be late.

Why is Microsoft’s Surface obsessed with Keyboards?

The Apple iPad Tablet vs. the Microsoft Surface Anti-Tablet

Battle Of The Tablet Business Models: Windows 8 And The Microsoft Surface

Google Nexus 7

Google, like Tuco, is in good position. Microsoft and Apple know that each is the greatest danger to the other. They will almost certainly fire all their weapons at one another leaving Google (Tuco) free to gain from the exchange.

Only Google, like Tuco, has a problem.

It was just last week that Google initiated a program to encourage the creation of tablet optimized apps for Android.

Last week.

Tuco doesn’t know it, but he doesn’t have any bullets. Google didn’t know it was important, so they don’t have many tablet optimized apps. And in a truel, being unarmed is a big, big problem to have.

Google Android Tablet Optimized Apps — Two Years Too Late

Battle Of The Tablet Business Models: Google Nexus 7

The Denouement

The gunfighters move into place. The eyes narrow, the hands twitch, the music swells, the tension mounts, the guns are drawn and then…

…a single shot is fired…

…Blondie shoots Angel Eyes. Tuco also tries to shoot, but discovers that his gun is unloaded.

The mobile wars are a fascinating watch. Apple dominates tablets. Microsoft dominates desktops. Google dominates smartphones. Each knows that the future – the elusive treasure – is in mobile. They can’t all win this truel. One, perhaps two, will be left for dead. Which will it be? Which will it be?

“You see, in this world there’s two kinds of people, my friend: Those with loaded guns and those who dig. You dig.” ~ Blondie (Clint Eastwood)

Unlike The Good, the Bad and the Ugly, no one has seen how this movie ends. Microsoft hopes that this will be a sequel: How Microsoft Won The PC Wars, Part II. Google thinks that this is an entirely new genre of film, the kind where open always outguns closed. Apple thinks that there are two kinds of personal computing companies: Those with platforms loaded with apps.. and those who don’t much matter.

Me? I think it’s advantage Apple. You don’t grow from nothing in tablets to a world shaker in two and a half years unless you got it right. The essence of tablets is touch. Not keyboards. Touch.

Microsoft is desperately hoping that Apple got it wrong. Microsoft NEEDS tablets to simultaneously run both touch and desktop operating systems and Microsoft needs both to run well together.

Google? When it comes to tablets, they’re still digging.

It’s clear to me that Apple’s iPad is going to remain on top. The rumored iPad mini only makes this more likely.

Normally, I’d say that – as in phones – Microsoft would have little chance of having their tablets jump past Google and into second place. But circumstances are far from normal. Despite Google’s overwhelming success in phones, they’ve done next to nothing in tablets. And I have little respect for their newly minted subsidized tablet business model and their ever shifting business strategies. And Microsoft has powerful advantages in their ability to leverage a large desktop customer base and utilize their extensive business connections. Microsoft could quite quickly vault Google in tablets and land in second place…

…and wouldn’t that be interesting. In phones it would be Google-Apple-Microsoft. In desktops it would be Microsoft-Apple-Google. In tablets it would be Apple-Microsoft-Google.

That can’t possibly last. This is about to get very real, very fast.

The world of personal computing is in flux. It’s a “truel” world and for some tablet maker – and possibly for several tablet makers – it’s about to go bad and get ugly.

Why Maps are “Really” Important to Apple

In my last Apple Maps column I discussed why Apple would have delivered a suboptimal maps experience. This analysis was really a short term view of why they would do this, and the answer was Wall Street. Net-net, Apple would have felt the Wall Street wrath more than they are already feeling post-iPhone 5 launch had they delayed their launch for a quality product. Now, I’d like to look at the long term value of “maps” and why this could be so important to Apple. The answer is simple, it’s to monetize a huge portion of the internet they aren’t getting a piece of today.

Maps are for More than Getting from Point A to B
For most general consumers, “maps”, if they are even aware of the smartphone functionality, means getting help from getting from point A to point B. My son’s pee wee football coach even places a Google maps link to each away game that provides directions on the smartphone. Even if someone isn’t aware that phone maps exist, all they need to do is click on that link and they will get directions to the game.

For more advanced consumers, “maps” help them find brands or categories of products near them to get phone numbers or driving directions. Want to see how late that Jiffy Lube near your house is open on a Sunday? Search for it and it should have that info of it’s in the database. Looking for some coffee and you don’t care about the brand? Search for “coffee” inside of maps and be directed to the closest place.

With an Android device and Google Now, users can easily check in via Google+ once they arrive at a destination. If you’re searching on Yelp or checking in on FourSquare on any phone, you may even me able to find discounts on your visit.

You see, “maps” are more than about just mapping, they are a portal to the future of local advertising, commerce and payments. You need to teleport yourself five years into the future to get the best idea of just how valuable this is. This is about big money, money that dwarfs what Apple lost in market cap over the past few weeks. Let’s peel back the onion a bit.

Local Advertising, Checkin and Deals
Advertising as a business is larger than movies, games and music combined. Most of those ad dollars get spent locally by the billions of small businesses across the globe and the large businesses trying to reach local consumers. Getting a cut of this would be huge and is no surprise that Google, Groupon, Yelp and Facebook are all going after this full force.

Today and even more in the future, every place we go will be tracked and most consumers allow it. In fact, in the future, telcos will provide subsidies to consumers who let them be tracked and be anonymously “checked-in”. In-context deals will be provided to these users that actually provide value, not the horrible deals most users get today from Groupon and Google. The problem with Groupon offers is that they don’t have good enough profiling or enough deals in inventory to tee up enough relevant deals. The same thing for Google and even Facebook.

Knowing where people are and what they are doing is crucial to building these profiles and for delivering the ultimate in ads, the “pick-off”. The “pick-off” is when an advertiser knows you are going somewhere and will provide you an ad to go somewhere else. Let’s say you search for “pizza” and get directed to “Joe’s Pizza” on 5th and Lamar. “Luigi’s Pizza” is on 7th and Lamar, and through their real-time ad network knows this and sends you an immediate $10 off coupon message if you spend $30, and a window seat for the best people watching. You accept, and you, Luigi and the ad network benefits. OK, so this may be a bit exaggerated but you get the idea.

So who could Apple impact with this? Google, Groupon, Yelp and Facebook. That’s big. This isn’t the only opportunity. How about commerce and payments?

Local Commerce and Payments
Now that Apple and their network knows you have arrived at Luigi’s, the coupon will show up in your Passbook and you are ready to roll. You show up at the front door, show the coupon, and you and your friends are seated at the best seat in the house, right in the front window. The party tweets about what good seats they have and check in on Apple’s Maps.

What about when it’s time to pay? Apple, because they are tied into Luigi’s, has a deal that everyone who uses “Passbook Wallet” gets 1% cash back. Apple has a frequent flyer kind of program where they get freebies toward content and devices. So you are motivated to pay with your “Passbook Wallet”. Upon checkout, the waiter scans your phone’s bar code with their smartphone camera, similar to a Starbucks checkout, and you are off to the next big party.

What companies does this disrupt? It effects a ton of people including Isis, Google (Wallet), VISA, Mastercard, and American Express. Can you even imagine how much profit this could be for Apple?

Maps Drive Big, Long Term Apple Opportunities
As I outlined in my previous analysis, Apple delivered a suboptimal mapping experience to limit the punishment they would have received from Wall Street had they delayed iPhone 5 or iOS 6. Long term, though, the stakes are outrageously high and involve Apple monetizing an enormous profit pool, local advertising and payments. Apple need maps, and evolved maps, to make that a reality and they are well on their way to do this.

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.

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.

Battle Of The Tablet Business Models: Lessons Learned And A Look Ahead

RECAP

We’ve been looking at the tablet business models of Apple, Amazon, Google, Samsung and Microsoft. Today we wrap up the series by seeing what lessons we have learned and by asking ourselves what the various business models can tell us about the future of tablet computing.

Lessons Learned

Lesson #1: Subsidized tablet business models are a niche

The subsidized business models of the Amazon Kindle Fire and the Google Nexus 7 are very limiting. They can only be sold where their content is sold, they can only be sold to consumers who readily pay for content or consume relevant advertising and they will have little appeal to business, government or education. Even if they are fantastically successful within their confined market space, their markets will have little overlap with the tablets that focus primarily on the importance of apps.

Lesson #2: Subsidized tablet business models need to be measured differently and judged appropriately

We tend to judge all things tech by the number of units sold or by overall market share. We should, of course, be focusing on profit instead. Profit is the goal and profit is the standard by which tablet business models should be measured.

The subsidized tablets of the Amazon Kindle Fire and the Google Nexus 7 need to be judged, not by sales, not by market share, but by the profits generated by the sale of content and advertising. In a subsidized business model, nothing else matters.

Lesson #3: Conflicting business models are a sign of weakness

With the Nexus 7 and the Surface tablet, both Google and Microsoft have reversed their licensing models and embraced an integrated approach. There is nothing wrong with adjusting one’s business model to fit the times. There’s a lot wrong with having two conflicting business models.

Lesson #4: Platform Matters

Apple has the strongest tablet platform, by far, and it shows in their sales and in their profits.

Amazon seems to understand platform. However, subsidized business models seem geared more toward content than apps. The Kindle Fire is only a year old. We will have to wait and see how the Amazon platform develops.

Google doesn’t seem to get platform, even now. Their weak platform has not hurt them in phone sales (yet) but it’s crippled their tablet efforts. And with the introduction of the Google Nexus 7, Google has made it clear that they think that content, not apps, is what matters most.

Samsung almost certainly understands platform, but they have no control over the Android operating system nor do they control the way Android content and apps are sold. Their only choice is to suffer or get out.

Microsoft gets platform all too well but they are so very late to the game. The Windows Phone 7 platform went nowhere and Microsoft has to be terribly concerned that the Windows RT and Windows 8 tablets may share the same fate.

Lesson #5: Skate to where the puck is going to be

When the market is underserved, products move toward integration. When the market is over served, products move towards modularization. It seems to me that part of the problem with most of the current tablet business models is that their respective companies have misidentified where the market is over served and where it is underserved.

Apple: In my opinion, Apple is on the right path. Tablet hardware, software, and content distribution are becoming “good enough” and are in danger of being commoditized. Apps and ecosystem are still under serving the market and have a lot of room for growth. Apple is adding value and differentiating itself from its competitors by integrating hardware, software, content and apps into a single, cohesive ecosystem.

Apple’s problem is that they have traditionally not been very good at internet services. Look at MobileMe, Ping, Siri, Maps, etc. And internet services are the key to the future of mobile computing ecosystems.

Jonathan Ive is a genius who can design Apple’s hardware but he can’t design a database system that will work with iCloud. Tim Cook’s supply chain prowess turned Apple from a very good company into a great company. What Apple may need to thrive in the future is a Tim Cook for internet services.

Amazon and Google: I think that both the Amazon and Google subsidized strategies are fundamentally flawed. They are creating an integrated hardware and software product designed to add value via the sale of content. But content distribution has already been commoditized. It makes no sense to subsidize hardware sales in order to enhance content sales if the margins on content are de minimis.

Samsung: The problem with the current Samsung tablet model is two-fold. First, their hardware is only one part of the value chain. They do not control the software, content, apps or overall ecosystem. Second, the area where they add value – hardware – is rapidly moving towards “good enough” and commoditization.

Microsoft: In my opinion, Microsoft’s business model is focused on the wrong part of the value chain or stack. Windows RT and Windows 8 is all about creating a superior operating system. But the operating systems currently available from Google’s Android and Apple’s iOS are already more than good enough for most consumers. Microsoft is pouring all of its efforts into an area where consumers are already satisfied or over served. Windows 8 may or may not be a better mobile operating system than either Android or iOS but it is not so much better that it will compel the bulk of consumers to switch to it.

The Future

We obsess over tiny diferences between the hardware and operating systems of the various competitors but it is business models that dictate success or failure. Until those business models change, Apple has, and will retain, the lead in tablets. Both Amazon and Google have chosen to ghettoize their tablets. Their inability to generate substantial profits will be obscured by irrelevant sales numbers. Samsung tablets are nowhere and they have nowhere to go.

Microsoft is trickier. It first has to overcome the hurdle of creating a virtuous platform cycle. If developers can’t attract customers – if customers can’t attract developers – then nothing else matters because the platform will go nowhere. However, if Microsoft can overcome this initial, all-important hurdle, then they have a chance to be relevant. We should be able to gauge just how relevant they’ll be by this time next year.

Conclusion

The future of tablets will be determined by their respective business models. Yet most of the current business models are not even directed towards that future.

Battle Of The Tablet Business Models: Google Nexus 7

RECAP

We’re looking at the tablet business models of Apple, Amazon, Google, Samsung and Microsoft. Today we focus on the Google Nexus 7.

3.0 Google Nexus 7

3.1 WHERE DOES THE GOOGLE NEXUS 7 MAKE ITS MONEY?

When introducing the new Amazon tablets, Jeff Bezos said:

“We want to make money when people use our devices, not when they buy our devices.”

Interestingly, the Google Nexus 7 has the very same business model as do the new Amazon tablets. Google gives away the Nexus 7 hardware at cost and then seeks to make its money by selling content and advertising.

3.2 WHERE DOES THE GOOGLE NEXUS 7 PROVIDE VALUE?

The Google Nexus 7 has excellent hardware and it sports one the world’s premiere mobile operating systems in Android’s Jelly Bean. But where Google really brings value to their tablet customers is in the Nexus 7’s low tablet price.

Google is able to keep their tablet prices low because they don’t intend to make any (or much) money on the initial sale of their devices. They can give their customers more tablet for less because they are making it up in content and advertisement sales. Google wants to lure you into their store with their tablet and then have you buy content there.

Do the above two paragraphs sound familiar? If you read yesterday’s article on the Amazon Kindle Fire, they should because they are almost word for word the same. (Battle Of The Tablet Business Models: Amazon Kindle Fire, section 2.2.)

The Google Nexus 7 and the new Amazon tablet share the very same business model so they will naturally compete head-to-head with one another. Which one is likely to prevail over the other? Understanding their similarities and their differences should give us the answer to that question.

3.3 GOOGLE NEXUS 7 BUSINESS MODEL ADVANTAGES AND DISADVANTAGES

The Google Nexus 7 has received many fine reviews for both its hardware and its software but I think the reviewers are missing the larger picture. When I look at the Nexus 7 business model, there is little there to like. The Nexus 7 business model has all the downsides of the Amazon tablet business model and few of the upsides. Despite the almost universal praise the Nexus 7 has received from analysts and pundits, I predict that the Nexus 7 will fail to have any long lasting impact on the tablet markets other than to eliminate other Android manufacturers from contention.

The Google Nexus 7 and the Amazon Kindle Fire business models share many of the same issues:

— It’s hard to make a significant profit solely from the sale of low margin content and mobile advertising.

— Devices can only be sold in countries where content can be made available via the Google Play store. Sales of devices outside of those countries are counter-productive.

— Tablet sales must be carefully targeted at only those customers who voraciously consume (and are willing to pay for) content or who positively respond to advertising. Tablets sold to non-consumers are a waste of time, money and effort.

— Subsidized tablets draw exactly the wrong type of customer. Bargain hunters are less likely than others to consume content and respond well to advertising.

— A subsidy business model thrives on low cost hardware and long refresh cycles. However, we live in a world where Apple, Samsung and Microsoft are rapidly iterating their tablet hardware offerings and pushing the barriers of what it is technologically possible for a tablet to do. It will be difficult, if not impossible, to pursue the contradictory goals of spending as little as possible on the tablet hardware while still remaining competitive with the tablet offerings of competitors.

— A content focused, ad driven tablet will have little or no appeal to government, business or educational entities.

— Online only distribution will be difficult and other methods of distribution are sparse and immature.

(For a further discussion of the difficulties inherent in pursuing a subsidized tablet business model, please refer to section 2.3 of my earlier article: Battle Of The Tablet Business Models: Amazon Kindle Fire.)

In addition to the issues it shares with the Amazon tablets, the Nexus 7 has problems all its own:

— The business model relies upon making a profit from content sales and content sales are not Google’s core strength. When it comes to online stores, Google Play is a distant third to Amazon and Apple.

— Open business models are good for many things, but the maintenance of a store is not one of them. While closed companies like Amazon and Apple run their stores with an iron fist, Google runs its store with abandon.

— Google is not known for its customer service. Its current customers are advertisers, carriers and manufacturers, not end users. The one time Google did sell directly to consumers with the Nexus, their efforts failed. Customer support is hard, Google has little experience in it and it would be a radical shift in their business model. There’s plenty of doubt about whether they can pull it off and until they prove otherwise, they don’t get the benefit of that doubt.

  • Google Nexus 7 v. Amazon Kindle Fire:

    • A head-to-head battle between the Nexus 7 and the Kindle Fire will not end well for the Nexus 7. The Nexus 7 probably has better hardware and software (although I know that Amazon would dispute that) and it also has a very strong and loyal user base. But the subsidy game is all about content and in content, Amazon shines.

    The Google Nexus 7 business model is like a coach taking a great athlete and playing them out of position – like taking a superior skater and having them play baseball instead of hockey, or taking a great baseball hitter and having them play soccer instead of baseball. Amazon is playing to their strengths. Google is playing to their weakness. In the long run, Google’s putative superiority in hardware and software will come to naught. In the battle of the business models, when Amazon and Google go head-to-head in the sale of content, Amazon will win every single time.

  • Content v. Apps:

    • I think Google pursued the wrong strategy. They have focused on the sale of content when, in my opinion, they should have focused on apps and the creation of a stronger app platform. I wrote about their abandonment of tablet optimized apps in my article entitled: “With Apps, Size Matters.”

    However, it’s too late to turn back now. Google’s failure to focus on tablet apps has all but doomed their already faltering tablet efforts.

  • Reversing The Business Model: Open v. Closed:

    • With the Nexus 7, Google abandoned their open business model and adopted a closed business model instead. Now they have none of the advantages of the open model yet they’ve gained few of the advantages of the closed model. Open allowed Google to focus solely on the operating system and to license that operating system to all comers which, in turn, led to the proliferation a wide variety of low cost, inexpensive hardware options. The Google Nexus 7 has none of those advantages. It is made by one manufacturer so its production numbers are limited. It is a single form factor. All of the things that make an open business model great – cost, choice, variety, distribution, ubiquity, etc. – are lost.

    And what is gained in its stead? Not much.

    — The original Android concept was to get Android everywhere in order to capture eyeballs in order to sell mobile advertising. As discussed above, a subsidized model LIMITS production to only those who are willing to buy content.

    — The closed Nexus 7 business model will gut the tablet efforts of the remaining Android manufacturers. How are they supposed to compete with a for-cost Google tablet when they do not share in the profits that Google garners from the sale of content or advertising?

    The change from an open model to the closed Nexus 7 business model will have dramatic long-term negative consequences for Google’s tablet efforts. For the reasons described above, the Nexus 7 will not sell well enough to garner large scale content and advertising profits but it will sell well enough to eviscerate the efforts of all other Android tablet manufacturers. For Google, it’s the worst of both worlds.

    Summation

    The Google Nexus 7 does not represent a coherent business strategy. It represents the abandonment of strategy. While others are singing the praises of the Google Nexus 7, I am singing a dirge.

    I predict that we’ll continue to hear a lot about Android tablet activations but we’ll continue to hear little about content and advertising profits, which is all that matters in a subsidized business model.

    I predict that the already moribund tablet efforts of the other Android manufacturers will simply give up the ghost altogether. (Caveat: I am not counting Amazon as an Android manufacturer since their operating system is so radically forked from Google’s version of Android.)

    I predict that – unless Google makes a dramatic change – the Nexus 7 will all but fade from sight.

    Bold predictions, I know. But they’re dictated, not be me but, by Google’s own flawed business model.

    Next

    We’ve now looked at the Apple, Amazon and Google tablet business models. Tomorrow, we look at Samsung and the Galaxy Tab.

    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 iPad Is Selling like Mad And Making The Competition Sad

    At the iPhone 5 event held on Wednesday, September 12, 2012, Tim Cook announced these facts regarding iPads:

    1) Last quarter, Apple sold 17 million iPads.
    2) Apple sold more iPads than any PC manufacturer sold of their entire PC lineup.
    3) Apple has sold a total of 84 million iPads since its launch in April 2010, less than two and a half years ago.
    4) Competitors have launched hundreds of tablets to compete with the iPad. One year ago, the iPad had 62% market share. Today the iPad’s lead has grown to 68% market share.

    Five Observations:

    First, all the action, all the growth in computing is in mobile devices. As for the future of computing, in my opinion, smartphones will have the bigger numbers, but tablets will have the bigger impact.

    Second, neither Apple, nor HP, nor Dell, nor Lenovo, nor Acer, nor any one else who makes a living selling computing hardware cares a whit about whether you call the iPad a PC, a computer, a media tablet or a toy. That’s all just meaningless semantics. What they do care about is that Apple is selling more and more $500 (and up) devices while they are selling less and less.

    “Airplanes are interesting toys but of no military value” ~ Marshal Ferdinand Foch

    Third, Apple is just crushing the competition in this all-important new category. Starting with nearly 100% market share in 2010, it was inevitable that Apple’s overall market share would drop as seemingly every other manufacturer on the planet started selling this new, and rapidly growing form factor. So to see Apple’s market share GROWING after a two and a half year span is simply mind blowing.

    Fourth, Google – and therefore Android – has, in my opinion, completely missed the boat in tablet computing. Andy Rubin and Google stubbornly refuse to acknowledge that there is a fundamental difference between smartphone apps and tablet apps:

    “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

    Apple just announced that there are over 250,000 iPad specific apps in their store. Developers don’t create apps for kicks and buyers don’t buy iPad specific apps for no reason. There is a difference between a smartphone app and a tablet app. Apple gets it. Google doesn’t.

    Android tablet manufacturers have paid the price for Google’s misstep as the lack of tablet specific Apps has cut the ground out from under their tablet efforts.

    And with the introduction of the Google Nexus 7, Google has all but ended any hope that any Android manufacturer – other than Google – can make a profit on Android powered tablets.

    Fifth, when you see the above numbers, you can see how very desperately Microsoft wants and needs to be in this sector. Microsoft Windows rules the notebook and desktop markets but they have nothing going on in phones and tablets…yet.

    Conclusion

    The future of computing is in tablets. And right now, Apple owns that future.

    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 4: Developers

    RECAP

    We’ve learned that Android dominates market share, but that it doesn’t seem to matter much. iOS has most of the profit share. And it turns out that developer share, not market share, is what makes a platform strong.

    DEVELOPERS DEVELOP FOR IOS FIRST AND ANDROID SECOND, IF EVER

    — Developers develop for iOS first. (Source and Source)

    — There are seven iOS apps for every three Android apps. (Source)

    — AppStoreHQ estimates there are over 43 thousand Apple iOS developers and 10 thousand Android developers. (Source)

    — iOS has far greater developer mindshare: 89 per cent iPhone, iPad at 88 per cent, Android phones 78.6 per cent, Android tablets 65.9 per cent (Appcelerator). (Source)

    — Android developer interest may be dwindling rather than growing. (Source)

    ATTRACTING DEVELOPERS

    Why does the iOS platform attract more developers than the Android platform? After looking at all of the evidence (below), the better question might be: “Why do developers develop for Android at all?” Android may have most of the market share, but that market share hasn’t translated into dollars for developers. The iOS platform is so far superior to the Android platform that it isn’t even close.

    I can’t say it plainer than this. The reason Android’s massive market share numbers have not translated into mobile operating system domination is because Android is a terribly weak platform.

    IOS DEVELOPERS GET PAID MORE. ANDROID DEVELOPERS GET PAID LESS

    — 5.5 billion paid to iOS developers. (Source: Apple Q2 2012 earnings call.) Android? Not even a quarter as much. (Source)

    — Asymco estimates that Android developers made $210M in all of 2011, compared to the $700M pocketed by Apple iOS developers in the Q4 2011. (Source)

    — “Distimo, a mobile consulting firm, estimates that the Apple App store generates $5.4M/day for the 200 top-grossing apps while Google generates just $679K for their top-200 grossing apps. That is almost a 8:1 revenue ratio.” (Source)

    — iOS overall developer revenue is six times greater than Android developer revenue (Distimo) (Source)

    — More of Apple’s apps generate revenue, while most of Google apps are free: 67% of apps on Apple are paid for versus 34% on Google. (Source)

    — For the very same app, Flurry Analytics estimates that a developer will earn $1.00 on the Apple iOS version compared to $0.24 for the Google Android version. (Source)

    IOS CUSTOMERS BUY MORE AND PAY MORE. ANDROID CUSTOMERS PAY FOR LITTLE AND ARE WORTH LITTLE IN ADVERTISING REVENUE

    — iOS has 30 billion downloads. (Source)

    — iOS users vastly outspend Android users on apps, respond much better to adds. (Source)

    — The Apple user demographic is more affluent, an earlier adopter and more loyal than other brands. (Source)

    MOUNTAINS OF MISCELLANEOUS EVIDENCE

    — iOS App retention crushing Android. (Source)

    — iOS dominates mobile ad impressions. (Source)

    — Apple iPhone gamers spend five times more than Android gamers. (Source) 84 per cent of mobile gaming revenue captured by iOS (NewZoo) (Source)

    — Apple’s iOS takes 65% mobile browser share, Android at 20%. (Source)

    — 90 per cent of e-commerce revenue comes from iOS devices (Rich Relevance). (Source)

    — Android in enterprises ‘severely limited’ by weak management support from Google. (Source)

    — iOS has six of top 10 enterprise mobile devices (Source)

    — Android is failing to get into businesses as iPhone and iPad do. (Source)

    — Apple nabs 70 percent of global tablet market. Android? Not so much. (Source)

    — Apple iPad Accounts for 94.64% of all Tablet Web Traffic. (Source)

    — 97.3 per cent of business tablet activations are iPad (Good Technologies) (Source)

    SUMMING UP

    Wow, ‘Nuff said? Apple has a strong platform. Android has a weak platform. And I haven’t even touched on the inherent weaknesses in Android’s platform yet. It’s not even debatable (although I’m sure that I’ll get some debates on it anyhow.)

    Tomorrow we look at whether Android can fix its platform or whether its problems are inherent and intractable.

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

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

    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.

    Why do Products like the Google Nexus Q Launch?

    At Google’s I/O developer conference in June, Google boldly announced the Nexus Q, a $299 streaming music sphere.  Last week, Google stopped selling the Nexus Q and cancelled all consumer pre-orders, saying buyers would get the unit for free.  It appeared obvious to just about everyone except Google that the Nexus Q value proposition was incredibly weak.  So how does one of the most powerful companies in the world allow a product so obviously not ready get to market?  It happens for many reasons and more often than you might think.  I’d like to characterize the many reasons products like this make it this far as I experienced it through my 20 years of product management and product marketing.

    The Google Nexus Q Value Proposition

    While I detail out the Nexus Q value proposition here, let me provide a small sample.  For $299, consumers get a cool looking black sphere for music and video streaming that can only pull content from the Google Play cloud.  To control it, you must have an Android phone or tablet, and if your friends want to add tracks to the music list they must have an Android device. The Q also came with a high quality, built-in amp and speaker jacks.  Net-net, it was $200 or 3X more than an Apple TV or Roku device if you are looking at it as a content streamer.  If you are audiophile, you will be comparing it to a Sonos, which while comparatively priced, can also stream from multiple cloud services, and be controlled by iOS and Android devices.

    The press gave it the expected response.

    The Press Reaction

    The press reaction was brutal.   The best way to show just how bad it was is with the headlines:

    Google I/O was a smashing success.  They launched a great Nexus 7 tablet with Project Butter and Google Now, some cool social and search features, and who will ever forget the Google Glass demo?  Google didn’t need to launch the Q to have what I would characterize as one of the more perfect developer conferences.

    So why and how exactly do products like the nexus Q make all the way through the ideation, planning, execution, and launch phase without someone putting the brakes on?  There are many ways and reasons this happens that I outline below, and product managers need to pay heed to all of these potential pitfalls.  I am generically speaking about products, not specifically about the Nexus Q.

    Don’t Solicit Outside Opinions

    Some companies don’t solicit outside opinion by design.  Outside opinions can be via market research, consultants, tech analysts, etc.  The project is so secret that they put the team members in another building with limited access and have them sign NDAs.  This is done, obviously for security, and there are hundreds of examples of this that the industry finds out about after the fact.  This week in the Apple-Samsung trial, we all heard that the iPhone development was treated like this.  This secret method obviously works well for Apple and a handful of companies, but for other companies, not so great. Some other companies don’t solicit outside input because they just don’t see value in it.  Some say it’s too time consuming or too expensive.  That’s just code for “I don’t see the value”.  They figure they are the experts, have all the answers, and any outside inputs could lead to having the project derailed.

    Living in an Alternate Universe

    Sometimes, companies will solicit external input on a concept or product but don’t listen to the advice or heed it.  Many times you will hear the phrase, “well that’s only one piece of input we’ll incorporate.”  This usually means the outside input won’t be used or even heeded, because, quite frankly, the company “knows” more than the outsider giving the input.  Or so they think.  These kind of folks get outside input because the rule book says they needed to get it and once they did, it becomes a filled-in check box versus valued input.  The product planner may believe the input, but just not heed the outcome.  The end result is the same as not soliciting input.

    Underestimating the Downstream Impact

    Many times, a product will successfully make it down the gate process only for the PM to be surprised down the line by a cost over-run or an internal team missing a delivery date.  This could very well have happened to the Nexus Q.  I can imagine the Q had a very long list of required features and nice to have features.  Judging by what launched, the “must-have” features didn’t even ship.  I can see just a few features that could have been added to make the Q the must-have party device.  What happened next was where the damage was done.  So what is a product leader’s reaction if their product is hit with a significant cost overrun or schedule slip?  In the case of the Q, the impact was most likely minimized.  Look at many Google products that get sent out as “Beta” at Google.  Most of them do.  Google News and Shopping were betas for years and cost the consumer nothing but time to use.  The difference is that the Nexus Q was $299 and it was more like Alpha stage if you gauge on feature completeness.

    The Emperor Has No Clothes

    When I have been privy to post-mortems of train-wreck projects, many times it comes down to a lack of leadership.  The entire team had a decent vision, knew the customer and what they wanted, solicited external input, listened to it, and knew the downstream impacts of issues that existed if they trudged forward.  But the leader in charge felt they had to meet the date at all costs or didn’t listen to the team members.  The leader made a commitment to someone, whether it be to their VP, SVP or board of directors to deliver something by a certain date and they were going to do it come “hell or high water”.   Leaders are trained to listen, be decisive and stick to their guns, sometimes at big costs.

    What’s Next for the Nexus Q?

    I believe the team managing the Nexus Q had a deadline to hit with Google I/O , they got in over their heads on features and just couldn’t deliver.  And no one stopped the project.  The Nexus Q name and Google brand has been damaged, but I think it’s recoverable.  To maintain the Nexus Q price, Google will need to add a ton of features.  I am envisioning the “ultimate party device” where everyone who comes to the party can play videos, music and games from their own device and the cloud.  I can also see “party mode” where every picture, video clip, and social media post  taken at the party is shown on a large HDTV. If something like that is a bridge too far, then Google will need to pull the price lever.  The BOM cost cannot be over a $100 with the built-in 25W amp, so they have a lot to work with.   Whatever Google does, they need to make some decisive moves if they hope to be successful with living room devices.

    Is There No One At Google Who Knows How To Say “No”?

    Google, in an email to those that pre-ordered a Nexus Q:

    We also heard initial feedback from users that they want Nexus Q to do even more than it does today. In response, we have decided to postpone the consumer launch of Nexus Q while we work on making it even better.

    Google amazes me and not in a good way. They are one of the largest, most powerful, most important companies on the planet, yet:

    – They spend the time and money to prepare a device that has glaring deficiencies.

    – They take a lot of time from Google I/O to demo the device.

    – They allow customers to pre-order the device.

    – They then pull the device because they discover what everyone has known from the get-go: That the Nexus Q was a flawed concept that was Dead On Arrival (DOA).

    Is there no one at Google who knows how to say “no”?

    The Case for 7-inch Tablets

    Last week the rumor mills and tech blogs were bustling last week about the possibility of a 7-inch iPad, potentially called the iPad Mini. Rather than focus this entire column on why it makes sense for Apple to make a smaller version of the iPad, I figured I would point out why I think there is a market for 7″ tablets and how such a product may fit in Apple’s and others portfolio.

    The Evolution of Portable Entertainment

    In my view the 7″ tablet represents the evolution of portable entertainment. In many of the same ways that the iPad itself represents the evolution of portable computing, so would a smaller iPad represent the evolution of portable entertainment. I spoke about this and was quoted on the subject last week with many press, and my overall point was that the right way to think about a smaller iPad is that it represents more the evolution of the iPod than the evolution of the iPad.

    7″ tablets may very well be the ideal size for an ultra-portable entertainment focused tablet. The form factor itself makes it highly portable. It can fit in purses, coat pockets, and many other places easily. The screen size is more enjoyable for entertainment than the most pocketable computer (the smart phone) but still small enough to be more portable than a 9.7-10.1 inch tablet.

    The larger tablets like the iPad are more mobile than notebooks but still capable of being used for productivity. In my view the iPad is a general purpose tablet where a 7″ tablet is more specialized and its value will be centered around entertainment.

    For the iPad customer I don’t see the value of owning an iPad and an iPad mini. The iPad in my opinion is capable of fulfilling the task of personal computing for the vast majority of mass market, non power user consumers. In our talks with this specific group of consumers were are finding that their iPads are slowly replacing their traditional PCs and we expect this trend to continue.

    However, there will still be plenty of consumers who still desire, want, need, a new notebook. This market may very well benefit from a more portable media companion like a 7″ tablet. The notebook plus a 7″ tablet combo will be an ideal solution for a certain segment of the market. And the sufficiency of the iPad as a portable media companion and personal computer will meet the needs of other segments of the market.

    An iPad mini strengthens Apple’s ecosystem plain and simple.

    For Google, and Amazon, a 7″ tablet is not an ecosystem strengthener it is an ecosystem extender. Amazon’s strategy is to drive commerce and they desire their screen to be consumers personal window to spend money in the Amazon commerce engine and consume Amazon services.

    Google’s desire is to extend all of the Google services to a market broader than smart phones. The Nexus 7 is the first solid step in this direction and has all of Google’s services tightly integrated.

    For all the above companies a pure media tablet play makes sense. All the above companies have more ways to make money on these devices than just the hardware. So where does that leave everyone else?

    There was no MP3 Market

    I recall the saying that there was not an MP3 market there was only an iPod market. The same case can be made for the iPad to date. The question in my mind is whether or not this 7-inch tablet market is sustainable for many or just a few. More specifically can anyone but Apple, Google, and Amazon make any money from this form factor?

    I use the MP3 market illustration because I am willing to bet that the fundamentals of the 7″ tablet market will function very similar to the iPod market. Namely because the 7″ form factor represents the evolution of portable entertainment, which the iPod was an evolution of as well. These devices will also likely not see subsidization from a carrier any time soon or heavily discounted from a retailer. They are also highly dependent on a rich media ecosystem of services like music stores, video and TV show stores, digital books and magazines, etc. In many ways these devices represent to consumers a larger version of what they knew and loved about the iPod.

    The devices being positioned primarily as entertainment devices, and their subsequent dependence of rich media services, only strengthens the case that this market favors the few over the many. I am in no way saying others can’t compete only that it will be very difficult and they may need to turn over new stones in order to find partners who own all or parts of a rich media ecosystems.

    Where is Microsoft?

    This discussion about the 7-inch tablet segment begs a fascinating question. Can Microsoft play in it? Microsoft has fundamentally built their next generation operating systems as the purest blend between a full desktop and full tablet software platform. This philosophy is not going to work on a segment that is focused purely on media. Metro may all by itself but not Windows 8. So is the answer Windows Phone? Is Windows Phone the solution Microsoft can offer any potential customers looking at the 7″ segment? Microsoft has Nook assets at their disposal but the Nook platform was built on Android. Do they need to revamp Windows Phone or create something new around Nook assets? Or does Microsoft let Android have the 7″ market as the platform of choice for any company not named Apple?

    Microsoft is on the eve of simply trying to gain a foothold in tablet computing at large, while on that same eve a new category is dawning that I don’t believe the are even remotely prepared for. Microsoft’s reaction to the 7″ tablet market will be one of the more interesting story lines to watch.

    All in all the tablet category is still the fastest growing segment in personal computing. Even though 7″ tablets will be focused on entertainment and media they will continue to ignite this new growth phase of personal computing. I think we can again confidently predict that tablets will be hot again this holiday.

    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.

    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.

    Why Google Should Fear Facebook

    I have written quite a bit about my doubts of Facebook’s long term value. And amidst all the recent news about their IPO woes it seems like investors are skeptical as well. Last week I wrote an article highlighting my thoughts on why I am skeptical about Facebook’s long term value. Today I would like to explore a scenario that is the flip side of the argument I laid out last week. In this scenario Google should be very worried about Facebook–if they are not already.

    Maybe this is weird but I have debates in my head where I argue many sides of a point or hypothesis while I am building my analysis. Even though I may have a conviction that a scenario goes a certain way, I believe it is important to examine all sides. My overall skepticism with Facebook’s business model, and value, is based on the assumption that their advertising business model and other potential revenue streams is limited to Facebook–their only asset to date.

    There is no question that Facebook is gathering a database of extremely detailed profiles of Facebook users. The assumption has been that they would use that detailed user profile to match advertisers up with the right consumers as those folks use the Facebook service. As I pointed out last week, the reason consumers use the Facebook service is different from other services or content they consume where advertising actually works. Advertising works well when the ads are related to the content being consumed. With that in mind, if Facebook was to create an advertising network similar to what Google does with AdSense they could potentially take a big chunk of Google’s business.

    One Ad Network to Rule Them All

    Google has built their ad network by linking advertising up with related searches. This makes a great deal of sense and works quite well. Google uses services like Gmail, Android, Picassa, etc., to try and gain more information about people so they can sell more targeted ads. However for Google to come even close to knowing intimate details about me and my life, I would need to use all of their services. Something that it is not common for many consumers. However for Facebook to know all the intimate details of me and my life, I only need to use Facebook. Therefore, Google basis most of its targeted advertising value by knowing what was searched but Facebook can base its targeted advertising by knowing more about the searcher.

    If Facebook created a service like Google’s AdSense they could extend their extremely targeted advertising strategy beyond the walls of Facebook. Given that many websites which require you to log in to sign up for a service, give consumers the option of logging in with Facebook, there are a myriad of ways Facebook can leverage their consumer profiles with all their online partners.

    Extending value to advertisers and brands beyond the walls of Facebook is key to Facebook’s value in my opinion. This model could be completely disruptive to not only Google but the vast majority of advertising networks.

    The Broader Opportunity

    Even if Facebook employed this strategy, displacing something like AdSense is no easy task yet the upside is significant in my opinion. On Monday, Tim explored whether Facebook’s best days are over or ahead. He pointed out that the trend of vertical social networks is one we are watching quite closely. Whether it is publishing sites or communities based around specific interests, we believe those are the places where targeted advertising can thrive and return value. Facebook either needs to figure out who to create these niche communities within the walls of Facebook or do what I propose and give those sites access to their ad network.

    What makes this strategy so interesting is that if it were done right, Facebook as a service could exist solely to collect key data needed for advertisers. If Facebook could have success building an ad network and monetizing it primarily with partners then potentially Facebook itself could be advertising free. Ads on Facebook right now clutter and detract from the experience which brings me there in the first place ( I also believe they are useless in their current form). I truly believe that if Facebook is reserved to only make money within the walls of Facebook, that they will make compromises that will seriously detract from the Facebook experience and drive consumers away. However, if they can make money outside the walls of Facebook then they have a chance of creating better experiences and keeping loyal Facebook communities.

    Lastly, the broader opportunity becomes even more interesting as we think about mobile and emerging platforms like the television. My point that Facebook may very well know more about me than any other company pitching advertisers becomes interesting with mobile advertising and even my future experiences with TV. If TV networks can partner with Facebook for example they could begin to deliver some of the most valuable advertising in the form of rich media due to the amount of information they know about me. Which if you think about what ads I see today on TV, in print, online, etc., it becomes clear very little is known about me.

    Facebook, in my opinion, is the only company today who is in a position to completely change the advertising realm across a range of mediums. However, it depends on them thinking bigger than themselves and the destination they built.

    Why Google Will Use Motorola To Become Vertically Integrated

    If you look closely at the most successful company in tech today, it is Apple. And they are in this position for a major reason. They are completely vertically integrated. They own the OS, the hardware and the ecosystem. And although they don’t manufacture their own chips, the IP in their chips are homegrown and designed to meet the needs of their advancements in OS and hardware designs. The result of this vertical integration is that they have complete control of their future.

    Another company that is pretty much vertically integrated is Samsung. They do their own design, their own chips, and in their case they even do their own screens and manufacture their own products. Their only weak link is with the OS since they are licensing Android for their smartphones and tablets. However, they are about to launch their own cloud services and take even more control of their destiny by tying all of their products together to cloud based applications and servers. And as you know, they have gained great ground in smartphones and while still struggling against Apple in tablets, they have become more aggressive in looking at alternative operating systems to Android and could soon deemphasize their use of Android in favor of their own OS solution to guarantee even tighter vertical integration in the future.

    But there are two companies today that at the moment have very little control of their future because of their lack of vertical integration and that is Google and Microsoft. And without out being vertically integrated, their prospects of wide spread success in the future in my viewpoint is highly questionable.

    The Vertical-ization Trend

    Ironically, at the moment, Google is actually in a better place than Microsoft to develop a vertically integrated strategy but Google is in denial about how important this is to their future at the moment. In their case, they own the software OS and a lot of the services layer but have little control of the hardware and the marketing needed to guarantee that Android will be successful in the future. In fact, if you read a lot of the recent posts about Android, you see numerous reports that suggest that Android is in trouble and losing ground, especially in tablets.

    Today, Google has to completely rely on their Android hardware partners to drive Androids success. While this has been OK with smartphones, their partner’s performance in advancing Android in tablets has been dismal. Now to be fair, a lot of this is Google’s fault in the way they have handled the various versions of Android and the uneven, if not disastrous way they handle upgrades and OEM relationships.

    But Google is about to have an even bigger problem on their hand when it comes to partners. To date, Android has been the only game in town when it comes to alternative operating systems for smartphones and tablets. But that is about to change. With Microsoft now entering the market with Windows based operating systems for smartphones and tablets, these vendors now have a solid alternative to Android. And pretty much every one of them will be doing a Windows Tablet. And with doing a Windows Tablet comes major marketing dollars from Microsoft as well as huge industry interest for this tablet platform since it includes backward compatibility with existing Windows Apps.

    This means that Google has even less control of their partners push for any Android tablets and this probably translates into Android tablets in general losing steam. Sure, Amazon will continue to use Android and in a sense advance Android in tablets. But their version of Android is their own amalgamation of the Android OS and their own special tweaks and in no way really advances Android itself in the market.

    Now, when Google is asked about their Motorola purchase, they say it was for the patents and they plan to treat Motorola just as if it is another Android vendor and not give them any preferential treatment. Well, if you buy that, then I have bridge in NYC that I want to sell you very cheap! I believe Google knew full well that at some point Android could become really challenged and that their vendors could desert them. So the Motorola purchase was insurance. At first they could just gleam value from the patents and hope that this alone was worth the price. However, having Motorola in their backpocket that would let them become vertically integrated at the turn of a switch was the real goal of this acquisition.

    Now, in my opinion, it is not a question of “if” they make Motorola their hardware arm. It is a matter of when and I believe that this will happen this summer. Put yourself in their position. By the fall, all of their key Android vendors will also be backing Windows 8 and you can be sure that this will be the beginning of these vendors de-emphasizing their Android products. Google better be ready to pick up the ball with Motorola by then or their ability to control their own destiny will take a real hit given the momentum that will come in Windows 8 tablets this fall.

    More Acquisitions Will Happen to Go Vertical

    A week before Google bought Motorola, my son Ben wrote an article in Tech.pinions arguing that Google should buy Motorola if they wanted to control their destiny. Although Google continues to deny that it will make Motorola its hardware ARM, both us believe that Google has no choice if they want to see Android succeed for their own purposes.

    Related Column: Why Google Should Buy Motorola

    So what about Microsoft and this issue of vertical integration? Aren’t they also completely beholden to their OEM partner’s to carry out their OS dreams and must trust them to be successful in hardware if Windows 8 on tablets and Windows Phone are to be big winners? Absolutely. Their model of using vendors for Windows 8 on desktop and laptops is intact and will succeed on its own. And perhaps even with tablets this will be the case since Windows 8 backward compatibility will be a big driver for these products and all PC OEMs will use this to extend their reach in tablets. But where Microsoft is very vulnerable is in smartphones since they pretty much are relying on Nokia to make Windows Phone–and beyond–succeed in these devices. Early this year, I wrote an article in Tech.pinions saying that Microsoft “will” buy Nokia and reasoned that in the end, when it comes to smartphones, Microsoft is so late in the game that ultimately they need to control its hardware destiny.

    Related Column: Why Microsoft Will Buy Nokia

    With the news last week that Nokia lost $1.9 billion last quarter and rumors of bankruptcy swirling around them, I am more convinced then ever that Microsoft will buy at least Nokia’s handset business. Although Nokia officials have denounced reports of bankruptcy, if they have another bad quarter their long-term position in the market could be even more questionable. In the end, Microsoft will have to be at least vertically integrated when it comes to smartphones if they want to guarantee the ultimate success of Windows phones.

    Take a close look at why Apple is successful and you will see that their vertical integration allows them control their entire ecosystem and as a result, be master of their destiny. I don’t see any way for Google or Microsoft to ultimately control the success of Android in tablets and Windows Phone/8/9 on smartphones and tablets without becoming vertically integrated in these areas. If they do not do this, Apple will continue to eat their lunch and leave them in the dust.

    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.

    Android is Losing Momentum

     
    I wrote a column earlier this year titled “2012: The Year Google Fixes Android or Loses the War.” In that column I laid out a number of issues facing Android as well as the business reasons why many problems existed. When we think about Android we need to remember that Google is an advertising company and that is how they think. With that in mind Google’s platform decisions will be made with that agenda. This point needs to be clear, Google is an advertising company, Apple is an experience company.

    Recently as well ZDNet writer Jason Perlow wrote an interesting article on why he is “sick to death of Android.” In fact if you survey the media sentiment toward Android over the past six months you will see that much of the excitement is gone and it has moved to frustration. With these observations in mind it comes as no surprise that recent Nielsen data gives evidence of Android’s momentum slowdown and what I believe will be inevitable market share decline.

    Over the past six month’s iOS has closed the gap in smart phone platform share. Look at this data from Nielsen released about smart phone acquirers for the October 2011-December 2011 time frame. Then look at the data this morning Nielsen released and what you will see is that iOS closed the gap on Android platform share with buyers over the past 6 month’s with recent purchasers. In fact if you look back over the past 9 months you will see the momentum change. Since I was interested in this data I created a graph here using Nielsens data of smart phone buyers over the past 9 months.

    Prior to June of 2011 Android was on an upswing then as you can see the months after with recent smart phone purchasers momentum has shifted. I anticipate that this trend of Android’s decline and momentum loss will continue unless Google shows me something to convince me otherwise. If developer interest, OEM support, market interest, etc, all continue to decline as it is right now then it would not surprise me that by the end of 2013 Android will no longer be the dominant OS platform in smart phones–at least in mature markets. This is of course contrary to much of the data and forecasts put out by my analyst colleagues but I believe momentum shift is happening just not in the same direction they do.

    This actually opens the door for Windows Phone in my opinion. AT&T has been very vocal about being aggressive with the Nokia Lumia 900. Sascha Segan wrote a great article yesterday titled “Windows Phone Smokes Android, But Can’t Sell” . He highlights Windows Phone and how high it ranks in net promoter scores. We track net promoter scores closely because it represents user sentiment and specifically about their potential to recommend. Interestingly net promoter scores with the Nokia Lumia devices are very high.

    The momentum downswing of Android and the inevitable decline of inventory as more OEMs support Windows Phone as well is why I agree with my colleagues at IDC that there is a platform shift taking place. However I believe iOS for sure and potentially Windows Phone are the longer term winners, unless Google can make some market moves to convince me otherwise.