2012: The Year Google Fixes Android or Loses the War

on January 31, 2012

The end of 2011 brought about some interesting market developments. Both Nielsen and NPD shared data that the once so dominant Android actually declined in market share over the holiday quarter of 2011. Both Nielsen and NPD also shared that during the same quarter iOS, mostly due to the iPhone, closed the gap on overall Android market share.

Now, with all of these quarterly market share reports, we have to keep in mind that this data only reflects the current quarters data and not the annual or overall installed base. Still, it is important to note that during the holiday quarter (perhaps the most important quarter) Android market share declined and iOS jumped dramatically. This reality should concern Android partners and Google.

We sensed this trend early on and shared with our clients last fall the fact that Android could be headed for a decline in market share. In my TIME column in October of last year I outlined many of the ways that Google was mis-handling Android and unfortunately further straining their already strained relationship with their partners. If Google does not get a handle on not only the fragmentation issues but also their relationship with their partners (by being more transparent and trusting with them) then I anticipate the decline in Android market share to continue. Not solely based on more consumers choosing iOS but by Android’s partners vesting more resources and upping their commitment to Windows Phone.

I don’t expect any Android vendors to completely dump Android but I could see them shipping fewer Android devices overall as a part of their product mix in favor of Windows Phone, which inevitably would lead to fewer Android devices on shelves at any given time, which would lead to even further Android market share decline. I firmly believe that Android device volume is its strongest competitive advantage. Right now Android currently has the bigger share of OEM resources and overall device mix per OEM. However, that could all change very quickly and in 2013 Microsoft will have a compelling story around Windows Phone and Windows 8 for their partners. If Google does not adjust their strategy with Android quickly they run the risk of OEMs shifting the balance of their resources more toward Windows Phone (or something else) and away from the Android platform.

If you line up all of these underlying trends it could spell real trouble for Android. My biggest concern for Android overall is that the platform itself creates no significant hardware loyalty. That is a dangerous truth for any of Google’s hardware partners. The same can be said of Windows Phone, or any other horizontal platform for that matter. If you are going to be in the hardware game you have to differentiate and more importantly create a partner ecosystem that creates customer stickiness.

Lastly, on my point that Android’s competitive advantage is volume of devices in channel at any given time. NPD shared their data on the top devices sold over the Oct/Nov time period. If you look at the chart you see that the top three are iOS devices. Note these are three different phones. If Apple does continue to diversify their products on the market and leave legacy devices in channel at lower price points, they will themselves be creating their own iPhone army of devices that could further hurt Android’s market share over the long haul.