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.

5 Million Galaxy Note Shipments Proves One Thing

I am actually not surprised at the news that Samsung has shipped (not sold) 5 Million Galaxy Note smart phones. Given that it is doubtful that Samsung will reveal actual sales figures as well as regional breakdowns, my educated guess is that most of these devices were shipped and sold in Korea, as also pointed out by this CNET article.

If they shipped or sold nearly that many in the US that would be impressive but just like the first Galaxy Tab, I have a strong hunch the device was appealing in Korea. What this proves is how potentially different each region may be in terms of their consumer preferences. This is key to understanding these markets because the way in which different regions mature with regards to smart phones and tablets has huge impacts on regional device strategies.

My firm has a history of researching and studying consumer adoption cycles of technology products. What is becoming clear to us is that each regional consumer base may not have universally similar traits. This is reminiscent of much of the miniaturization efforts of Notebooks and other gadgets from Toshiba and Sony and their wild success in Japan alone. Of course both of those companies were based in Japan so of course Japanese consumers would be loyal. However, Japanese consumers did have a desire for smaller gadgets which is why many of those products were successful there and almost no where else in the world.

This again is what I think is happening with the Galaxy Note and there is of course nothing wrong with devices having regional success. In fact strategically designing for not only market segments but also regions is a smart global strategy.

I actually applaud Samsung’s efforts to differentiate and experiment with new form factors and use cases. The Note is positioned uniquely in the market both in terms of size and with the pen accessory and that alone is enough to get some consumers to at least check it out. This is one of the better examples of late of an Android device being designed to stand out in the sea of sameness that is Android devices.

Whether or not these devices are mass market or even global successes is largely irrelevant for the time being. What matters is that consumers are exposed to a variety of different choices and options with regards to their technology.

How Apple is Cornering the Market in Mobile Devices

I have been speaking with various vendors of tablets lately and more than once, the topic of Apple “iPodding” them has come up. iPodding basically refers to the fact that although Apple has had the iPod on the market for over 10 years now, they still have over 70% of the MP3 portable digital music player market. This fact is giving many of the tablet vendors nightmares. Although they see this tablet market as a very large one and believe there is room for multiple tablet vendors given the potential market size and potential world wide demand, they know very well that Apple has done a great job in cornering the MP3 player market with iPods and are afraid that Apple could do the same with tablets.

And even though Apple has not cornered the market in smartphones, all are amazed that Apple had record iPhone sales last quarter and realize that Apple has just started selling iPhones in the Chinese market and could be expanding to other BRIC (Brazil, Russia, India, China) countries too. And many of the smartphone vendors are certain that Apple will bring out a lower cost iPhone at some point and get very aggressive in emerging markets within the next two years. An even harder fact for them to swallow is that when it comes to smartphone profits, Apple takes about 75% of all profits made in cell phones.

While all of them 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.

For example, when they were working on the iPad, they already had in place the iTunes content store and since all were based on the iOS platform, it was pretty straight forward for them to now build the iOS iPad Apps environment that easily sat on top of this already existing software platform. Of course, the iOS app platform already existed for the iPhone so all they had to do is to create an apps toolkit to take advantage of the new screen size they now had with the iPad.

We will see this same concept repeated when they eventually release anything for the TV. The current Apple TV product is a good first step and is also based on this iOS platform and eco system. But let’s say they design an actual TV; the platform is already in place for them to tap into it and indeed, the center of design for any future TV is the platform itself.

For a lot of vendors, they had hoped that Google’s Android would deliver to them a similar platform to build on, but to date that has not been the case. The various versions of Android only complicate things for the vendors and the software community and in essence they really don’t have a solid unified platform to build anything as powerful as Apple’s iOS architecture. As a result there is a lot of fragmentation in the Android marketplace. This is more than problematic and has been at the heart of Android failures in tablets thus far.

And I am not sure Microsoft’s new Windows 8 platform will deliver what they need either. The key reason is that Windows 8 is still based on a PC Centric OS and this is being extended downward to tablets. At the same time, they have a Windows OS for their smartphones that share no code and no app base. In the end, it delivers at best splintered apps and a non-unified ecosystem even if all the devices have the same Metro UI. I believe this OS has more of a chance to challenge Apple then Google’s Android will, especially in tablets. But the lack of a powerful unified platform that the vendors can really design around and support, along with vendors own quests to differentiate, could cause this approach to have a hard time competing with Apple too.

The bottom line is that when it comes to competing with Apple, it really is all about the platform. And at the moment, I don’t see anybody creating a unified and powerful enough platform that comes close to or is equal to what Apple already has in the market. That is why Apple is cornering the market in mobile devices today and why it could continue to grow its user base WW at the expense of their competitors. Based on marketing material on Apple’s own website, I would say they understand this as well.

Google Play: What Game is Google Playing?

With the news today that Google is re-branding the Android Market as Google Play, I am forced to wonder what that says about their strategy. Is playing all Google is really focused on? I also wonder if this branding is not more confusing to consumers than the clearer Android Market brand.

I don’t disagree that what they are doing to unify their store per-se is a bad idea. I am only questioning the branding behind it and what having something loosely called “Play” says about Google’s strategy. If nothing else I think it makes it clear that Google with Android is 100% focused on consumers. Something that I somewhat disagree with especially given the BYOD trend within corporate IT. If Google devices, or at least a large percentage of them, are not even options for IT to support than it will preclude consumers who need IT support from buying them. Granted that is not everyone but it is certainly a healthy fraction.

As I stated, unifying the different elements of their store is a good idea. I am just not sold on the branding and whether or not it is more or less confusing to consumers. I thought Android Market made a lot of sense and was clearly differentiated from other stores or services on other platforms.

This also takes Google one step closer to browser based computing paradigms we have been watching. Now that the Google Play is becoming increasingly more browser based as a part of the experience, it opens the door to more hardware agnostic experiences. I can already access my Google music through any browser regardless of my hardware and now books and perhaps in the future apps build for Android may be accessed and perhaps even used in this strategy.

I have often said that in the future we won’t install software or services we will simply access them. Perhaps Google’s strategy with Play is in line with my vision.

Windows 8 CP Tablet Experience: Distinctive yet Risky for Holiday 2012

A little less than a week ago, Microsoft launched to the public the Windows 8 Consumer Preview (CP). This is a follow-on to the Developer Preview (DP) that I’ve been using on a tablet and all-in-one desktop since it was introduced last September at the Microsoft BUILD partner conference. After 6 months and reportedly 100,000 code changes, is Windows 8 ready for prime time? Based on over 20 years of working with Windows development code and launching real products, I believe that Windows 8 is very distinctive but is risky for a Holiday 2012 release.

If you haven’t actually used Windows 8, I urge you to download it here. Truly using beta software is the only way to truly get the “feeling” of preview software and devices. What I will do is take you through the areas where I believe Windows 8 shines, needs work, and finally, areas where there’s not enough data to make a recommendation one way or another. I want to stress that my assessment is based on “preview” or “beta” code, not the finished product. Finished code is called RTM, or “Release To Manufacturing”. One very important hurdle for preview or beta is that it must be feature complete, which in some areas Windows 8 is and others, not.

Tablet Experiential Plusses

  • Fast response: My tablet booted very quickly and most times, woke up very quickly from “sleep.” Like DP, Metro was very fluid and fast as well, a first for a PC platform. Even installing apps was fast.
  • Content mashups:  Unlike Apple iOS or OSX, Microsoft has attempted to deliver what people really want who have multiple on-line services; a focus on the content and interaction, not the service. For example, those who have LinkedIn, Facebook, Twitter, multiple address books, etc., Win8 makes it simple. Instead of having to go to multiple services or apps, consumers go to apps like “People” (Facebook, Twitter, LinkedIn, Google), “Pictures” (Local, SkyDrive, Facebook, Flickr), and “Messenger” (Facebook, Microsoft, etc.) All of this saves time and places focus on the content.
  • Metro apps visually stunning: Microsoft pulled the “essence” of the app experience from Windows Phone, Zune and theXBOX 360. This results in beautiful looking apps like Music, USA Today, Weather, Bewise Cookbook, and iCookbook. When playing music, cover art and band photos are “silhouetted” on the display giving the feeling of a premium experience. Photos are huge and there is always a lot of white space. App beauty matters; just ask Apple.
  • Live tiles: Microsoft took what Android started in mobility, perfected the notification system with Windows Phone and extended it to the tablet. Without even opening up an app or swiping, consumers can see latest emails, next calendar item, most important stock prices, weather, and social media updates.
  • Dual use experience: I have been a proponent of modularity for years as it ultimately where the future of computing is going. With Win8 mid-term, Microsoft has the unique ability to capitalize on this with tablets, unlike Apple or Google. It’s simple; when users want to use the tablet on the couch or in bed, they use Metro. When I want the full desktop,they dock it with a full sized mouse, keyboard, 32” display and am doing real work. Microsoft ultimately needs to enable a way for a Metro and Desktop app to share the same local data files, but cloud-sync is an acceptable start particularly for the tech-aware audience.
  • XBOX integration: Like Windows Phone, Windows 8 CP integrates XBOX functionality quite well but is just a start. Using the XBOX Companion app on my tablet, I could find movies, TV shows, and music and even launch games to be watched or played on the XBOX. It is like an XBOX remote on steroids. I am still waiting for the enhanced “play to” functionality to share local content like photos and web pages to the TV via the XBOX. This functionality was discussed in-depth at the BUILD conference.
  • Search: Unlike the iPad, users can do full document and app content search. This what consumers expect and this is what Windows 8 CP delivers.

Too Early to Tell

  • ARM experience: Microsoft and its partners have been very selective on showing the Windows on ARM experience. It has been shown on stage and behind closed doors, but unlike the X86 versions, the public cannot touch the devices. Even at January’s CES show, the public was not allowed to touch the devices. If it were working great, there wouldn’t be a restriction and as I pointed out here, there are many challenges with Windows on ARM.
  • Updates: Every operating system and apps have updates and for good reasons, namely security and bug fixes. What is unknown with Windows 8 is the size and frequency of updates. We all know that the current pace and method of Microsoft updates is unacceptable in the modern world, and if it continues at its current pace, will detract from the tablet experience. The first day after I installed Windows 8 CP and got my system ready for desktop use, I received 34 updates; 4 for Windows 8 and 32 for Office. It took over an hour and that’s unacceptable in a modern, tablet world.
  • Tablet Games: I was very impressed with Pinball FX, but one game make not a trend. Given games are the most popular iOS and Android app category, I would have expected more by now.
  • Metro SkyDrive: I have used SkyDrive and Live Mesh for many years but primarily use Dropbox and SugarSync. There are two main issues I have found. First, I can see no more than 14 icons on an 11″ tablet display and there isn’t search capability. Sorry, consumers don’t like to create file folders nor do they manage them tightly. I am expecting Microsoft to change this or it renders SkyDrive useless.
  • Number of relevant apps: Certainly this will grow given Microsoft’s big bet and investment into developers but I was expecting more apps 6 months after Visual Studio was shown at the BUILD conference. 15 games and 3 social media apps 6 months after the developer preview isn’t the progress I expected.
  • Tablet OS footprint: The size of the final tablet installation is unknown, but if it’s more than a few GB, this will be a cost issue for tablets. Hard drives are “free” on desktops, but on SSD-based tablets, it’s a premium. The current download size for Win8 CP is between 2.5GB and 3.3GB, but those then get “unpacked” and increase in size. Microsoft is recommending 16GB free space for 32-bit and 20GB for 64-bit so the reality is the build will be between the download and the recommendations. Keep your eye on this one….
  • Tablet battery life: Microsoft and its partners have made a tremendous effort to improve battery life. Early indications show that by re-architecting the ways drivers work and BIOS work, using Metro as the front-end user experience, and by leveraging the lowest power ARM and X86, battery life will be competitive. I expect battery life to be competitive, but less than iOS or Android devices; but then again, it does more and I believe that it won’t become a consumer issue.

Experiential Improvements Needed

  • Too many bugs: Yes this is preview, but I was surprised to see this far into the development process the amount of application “hangs” with Metro apps like Mail, SkyDrive, and Photos. I experienced many situations where the screen just sat there in one color as if it were waiting for something. I used Microsoft’s recommended hardware tablet platform so that cannot be the issue.
  • Universal email inbox: The Metro Mail application doesn’t support a universal inbox. This is just basic and is surprising a feature complete preview launched without one.
  • MS Office file format viewers: Unlike iOS, OSX, and Android, the Win8 CP doesn’t include local viewers for MS Office documents. But it does support viewing PDF files.. huh? Click on a Word doc and you get sent to online SkyDrive where you can view and even edit a document. I see why Microsoft would want this as it “motivates” you to buy Office, but with all of the competition providing this, it really messes up the experience. The Windows 8 on ARM systems do contain Office but it isn’t clear what will ship on X86 systems. For the user’s sake, we can only hope that OEMs install at least viewers or Office Student Edition.
  • Metro Windows Explorer: Sorry, the newly designed Explorer doesn’t cut it in a touch environment. Even on an 11” display, it’s just too easy to click on the wrong icon or accidentally delete or move a file.
  • Metro Internet Explorer bookmark folders: Even Apple fought against but finally learned on iOS that for a browser to be usable, it needs an easy way to file bookmarks. And that means folders. 50 bookmarks strewn all over the place is just a mess and will repel users.

Conclusions

Windows 8 Consumer Preview builds upon the Developer Preview by adding application previews and cloud connectivity.  Windows 8 for consumer tablets is very distinctive in that it can effectively be used as a tablet device for “lean-back” usage models and for “lean-forward” usages when docked in desktop mode. Like Android, Windows 8 takes a content-first approach, albeit with much more beauty and style, and simplifies user’s interactions between different local and cloud-based services.

Unlike iOS, Windows 8 is “alive” and vibrant with its live tiles, white space, and over-sized imagery. When launched it will pose a serious threat to high-end Android tablets and will help thwart competitive threats on the desktop by Android, iOS (in convertible form), and even OSX. The biggest challenge I see is Microsoft’s and its partner’s ability to hit the 2012 holiday selling season with a stable operating system for tablets to compete with the iPad. That risk is being mitigated with special image loads for specific devices, but given the state of the Windows 8 CP experience, hitting holiday 2012 with the experience Microsoft envisions and must deliver will be a tremendous challenge.  I believe it is a bridge too far and the experience will suffer at the need to hit the holiday selling season.

MWC 2012: Clear Android Differentiation and Other Trends

I suspect that each MWC will be better than the last. This show, I believe, is quickly becoming the leading industry conference for mobile smart device technologies. Therefore, Mobile World Congress will be one of the shows were we can expect to dig into the trends of our mobile computing tomorrow. On that point, this year a few things stand out.

Android Differentiation
Bloggers, journalists, some pundits, etc, mostly seem to believe the world would be a better place if Google’s OEM partners simply did not change Android and just shipped a stock OS the likes of the Nexus line of devices. Unfortunately in that reality hardware companies go out of business. Therefore differentiation is key if pure hardware players hope to stay in business.

Related Column: Dear Industry Dare to Differentiate

After seeing many of the Android device announcements from the leaders like Samsung and HTC, it is clear they are fully marching down the path of strategically differentiating from the pack. This I believe is a good thing all together.

Samsung for example is taking a stab with their Galaxy Note line of products at differentiating their device experience by pairing it with a companion pen experience. HTC did something similar with the Flyer but has seemed to have abandoned that path for now. For Samsung however, including the pen as an accessory (which is where it belongs) has opened the door to bundling exclusive and proprietary software in order to enhance the pen experience. Samsung is shipping with the Galaxy Note Phone (I refuse to support the Phablet term), and the Galaxy Note 10.1 tablet, Adobe’s touch suite of products like Photoshop and Ideas. Samsung is also including their own S Note application for note taking and other useful pen experiences. Samsung is wisely using this strategy as a key differentiator and if you watch any screen media you will see their marketing is fully committed to this direction.

HTC has also been going down this path and has now furthered their strategy even more with the new Sense 4.0 UI.

Beyond Samsung, pen accessories at large seem to be a trend around Android tablets. LG announced their Optimus VU with a pen accessory and I expect pen accessories to continue to be used as a differentiator for the time being.

It is clear at this point there will be no stock Android prioritized devices by the OEMs, thus I question the market at all for Nexus devices. Throw on top of that the fact that the stock Android devices running the latest release take over a year to roll out in any large fashion. John Gruber makes a great observation:

Best to think of today’s Ice Cream Sandwich as a developer preview of next year’s mass market Android phones.

Focus on Device Family Brands
The other trend I am noticing, which is also a positive sign, is that HTC and Samsung for example are focusing more on family lines of devices. Peter Chou of HTC during their press conference announced that HTC intends to streamline their roadmap and focus HTC innovations. HTC kicked this off by releasing a new family line of devices called the One “series.” Their flagship product is the HTC One X which sports the latest Tegra 3 chipset from NVIDIA.

Samsung also is heading this direction with the Galaxy S series, Tab family and now with the Galaxy Note. Motorola also hopefully continues this direction with the Razr family. And Nokia as well with their Lumia line of devices. This direction is needed within the industry in order to stop the absurd device naming syndrome that has plagued many OEMs. When you have dozens of devices in channel all with different names and marketing material blitzing consumers with dozens of device names etc, the landscape can look incredibly confusing.

By focusing on a family line of devices, OEMs can differentiation and then position those differentiating features within a family line of devices for their appropriate target audience.

All in all, I am seeing some positive trends coming out of MWC 2012 that encourages me about the state of healthy competition within the mobile smart devices landscape.

Why Google Must Commit To Hardware

With the Nexus One and their recent purchase of Motorola, Google has more then signaled that they will soon be in the hardware business in a big way. And the recent rumors that they are building a 120,000 square foot consumer experience testing center on their campus suggest that they will test their own hardware along with partners products in order to create and deliver devices that are truly optimized for their Android and Chrome software.

This move is of course controversial since it means that they will be in direct competition with their customers and partners who back Android and Chrome. However, I don’t think Google has any choice but to go in this direction if they have any hope of gaining ground on Apple and try to stave off an imminent threat from Microsoft via their Windows 8 cross-device Metro strategy.

One of the facts that is becoming very clear to the industry at large is that Apple’s lead in hardware, software and services is a mammoth one. They are selling over 5 million Macs per quarter. The iPhone continues to be a hot product and while Android has gained much ground in units shipped against the iPhone, Apple is taking as much as 74% of all the profit in this space. And the iPad holds well over 80% of the tablet market share and this will be the case through this year too. And many of my research colleagues predict that even in 2015, Apple will have at least 60% of the tablet market.

But the key to Apple’s success is no secret. They are where they are because they own the hardware, software and services and combined they give Apple a significant advantage over their competitors. And while that too is no secret, what is not understood well by the outside world is that they architect their devices around their services. The best example of this is with the iPod. While the hardware itself is the profit center for Apple, it was the music service that was the critical component that made the iPod take off. From a hardware perspective, they architected it around the music service, which means they designed the iPod software, user interface and hardware dials so that they were optimized to deliver a great portable music experience.

The same goes for the iPhone and the iPad. It is the services that drive the final UI and hardware designs and since Apple controls the entire eco-system, they can be assured that they deliver to their customers a unified and easy to use experience with their products.

Now consider the plight of the middleware software vendors like Google and Microsoft. What they bring to the party is a critical component of any final product via the OS. But both companies architect from the inside out, or only at the software level and then hand this off to their vendor partners who must now design their hardware around the software and hope the design can be optimized for the OS they have been handed. And from Google and Microsoft’s standpoint, they can only influence and hope so much that their hardware vendors will get it right.

Historically speaking, Microsoft has done the best job of creating strict technical guidelines that hardware vendors can follow, but Google’s approach to Android design is pretty much a moving target. Vendors have told me of all kinds of problems they have had getting strict hardware guidelines from Google for building Android devices.

Microsoft’s model worked for PC’s. But I don’t think this model will continue to work with this new world of mobile devices. What seems to be happening now is that in both the Windows and Android camps, controlling how the hardware vendors use these operating systems is much more difficult as hardware vendors strive to try and differentiate themselves in the market place. In many cases that mean’s hardware and software UI tweaks that go beyond what these companies give them in the way of an OS which then potentially delivers various forms of fragmentation.

At some point, not controlling the entire hardware, software and services delivers diminishing returns to both of them and sooner or later they will find that the old PC model of creating an OS and giving it to vendors to propagate will not work. In fact, I am seeing that understanding starting to become clear to both Google and Microsoft as they stare up at Apple running away with all of the profits. Apple’s model works. Using the old PC model will not work in this new world of mobile devices.

This is why we are seeing so much hardware activity at Google and I expect to see similar branded hardware strategies evolve at Microsoft very soon. While they can hope that their partners can utilize their software to create great hardware and services, at some point they have to realize that putting their trust in their vendor partners to deliver their vision is a crapshoot.

Indeed, they may only have a real chance to catch Apple if they take control of the hardware, software and services and the sooner they realize this, the sooner they can control their individual destiny’s.

Motorola Droid Razr Maxx Commercial–Best Droid Marketing Yet

When I met with Motorola at CES and they showed me the Droid Maxx I suspected they were on to something. What is interesting to me as an analyst about this device is that it is not just another Android device that is thrown into the sea of sameness. Motorola took a great design like the Droid Razr, a product with terrible marketing in my opinion, and packed a 3300 mAh Li Ion battery to get roughly 21 hours of talk time. This is enough of a differentiator in my opinion to generate genuine consumer interest.

This product represents what I think the future of mobile hardware will look like. One where companies pick out segments of the market and design their hardware accordingly. In this case Motorola is specifically targeting those for whom battery life is a established problem.

You could argue that is true for every consumer but I would point out that there is a segment for whom it is a bigger problem than most. My wife for example has no problem going more than a day on her iPhone 4S on a single charge. She just isn’t a heavy user and has no perceived “battery life” problem. Many consumers are like her. My iPhone 4S, however, is below 10% by the end of the day–every day–and often doesn’t last until 9pm. Mainly because I use it extensively for my job. Battery life for me is a known issue I battle with every day. For me a device with longer battery life is an attractive feature.

When I first saw the Droid Razr Maxx commercial, my first thought was that it was the first Droid commercial I have ever seen that actually made me want the device. Most Droid marketing is trying to be overly cool or appeal to geeks and techies. Most Apple commercials appeal to the mass market because they point out features average consumers find valuable or can associate value with. This is the first Droid commercial that actually does this well.

By highlighting the shortcomings of most devices battery life, Motorola points out a problem that for many is close to heart. If you have issues with battery life you know. If you don’t have issues with battery life than this device isn’t for you–plain and simple.

That is the sign of good marketing. It is speaking to a segment. I applaud Motorola for taking this approach as the Droid Razr Maxx is the first device that I believe stands out in the sea of sameness. More importantly the commercial communicates features that a segment will associate as valuable. If a feature or feature set is valuable the product will sell itself. I wouldn’t be surprised if the Droid Razr Maxx is one of the more successful Android products.

If you haven’t seen the commercial here it is:

Google Officially Owns Motorola–Now What?

US Regulatory agencies along with the European Union approved Google’s acquisition of Motorola today. This acquisition, although initially positioned for Motorola’s patents, could very well cause quite a bit of change in the mobile landscape.

I wrote a column back in August on all the reasons why Google Should Buy Motorola. To my surprise five days later Google actually did buy Motorola Mobility, Inc. As a part of my work as an analyst we do future scenario planning and that column was a theoretical analysis of a scenario we could see playing out.

My main logic was around how difficult it is in mature consumer markets to be a hardware only company and thrive. I was convinced that over time Motorola would face financial struggles and would need to be bailed out or go out of business. Google was my logical choice to buy them in that scenario. The patents and other points were timely but icing on the cake.

There are some strategic elements of this deal that whether or not were clear to Google at the time could be very interesting. Assuming Google does not sell the hardware business at some point in time, which would be sealing Motorola’s fate, I see two directions Google can take with Motorola’s hardware business.

Attack the High End

Right now the point needs to be made that Motorola hardware is the ONLY hardware brand which is committed to Android only. Every other partner of Google with Android also ships or will ship Windows Phone and perhaps something else as well in the future. It is also no secret that the Android ecosystem is broken and fragmented and needs to be fixed. I went into depth on that last month in this column.

Because Motorola is the only handset and tablet brand that is Android only, Google could turn Motorola hardware into the flagship, premium, hardware and Android experience. Android devices need more differentiation in order to compete in the sea of sameness which is Android devices. Google could focus on heavily differentiating Motorola hardware and focus on the high-end, premium part of the market. Perhaps Motorola hardware could become the Nexus line of devices, and used as the flagship “hero” Android products.

Attack the Low End

The other thing Google can do with Motorola is attack the low-end part of the market and practically give Motorola hardware away for free. On this point it is key to note that Google is a services company. Any and all hardware that Google cares about exists only to give consumers access to Google’s services. Therefore, it is within Google’s strategic interests to get as many Android devices out there as possible. One way to do that is to give away, via heavy subsidization, handsets and tablets in order to make up lost revenue elsewhere.

As it stands today Android hardware is just one piece, and not even a big piece, of Google’s revenue stream. Google makes a lot more money elsewhere and does not necessarily need to make money on hardware. It is more important that they get that hardware to as many consumers as possible.

Motorola could become the entry-level brand with the Droid brand or some other “fighter” brand going after the lower end, entry-level, cost conscience part of the market.

Not Competing with Partners

The biggest concern many have with Google owning Motorola is that it sets Google up to compete directly with their partners. If they focus on either the high-end or the low-end, they could then focus on helping their customers compete on different playing fields.

This could perhaps work best if Google choose to go after the low-end for example. This would then give Google the ability to figure out how to help their Android partners better differentiate themselves from the sea of sameness and compete in the higher end of the market which allows for more favorable margins.

It will be fascinating to watch how this all plays out. We believe going vertical meaning single companies owning hardware, software, and services (like Apple does) is a disruptive trend. This is not easy but strategically could protect from market volatility. Now that this deal is official Google has a number of company defining decisions in front of them.

2012: The Year Google Fixes Android or Loses the War

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.

Why The Android Update Alliance Was Doomed From the Start

When Google announced the Android Update Alliance, an initiative to bring each new Android OS release to all devices in a timely manner, it was well-intentioned but doomed from the start.

Jamie Lendino over at PC Magazine had a great column called “Google’s Android Update Alliance is Already Dead.” I recommend a read of this column in order to get some more context from the handset OEMs and carrier quotes on the subject. The reality is that this alliance was flawed at a fundamental level from the beginning and was destined to failure.

There is an important element to understand about this industry and it comes down to two types of strategies to bring devices to market. The first strategy is a direct to consumer product development approach. This is the strategy most closely followed by Apple, due to the fact that they have their own retail stores and control their own retail presence. Both of those strategic points in Apple’s favor are strengths at a competitive level. In this strategy the end consumer is your customer, they are the ones you are attempting to sell directly to. When a more direct to consumer strategy is employed, a more limited product mix is possible.

The second strategy is a channel strategy. This is the strategy that many take by order of necessity. In this strategy, although devices are made for consumers, the customer is actually the channel, or the retailer and carrier. Device manufacturers actually create products specifically for the channel in the hopes that the channel can sell them to consumers. Device manufacturers are not guaranteed that the channel will sell their device or give them favorable margins on devices sold. Because of this fact, device OEMs must create a device menu in order to give many different channels the opportunity to sell different devices. The other key point in a channel strategy, is that the channel (whether it be a retailer or a carrier) is not interested in selling two products that are too similar to each other or target the same market segment. This is why we see such a heavy device mix in carrier retail for example. I empathize with companies who have to employ a channel strategy because it is very hard and very frustrating–and also very political. However, employing a channel strategy engrains in a device OEM what I call a “ship-and-forget” mentality. This is at a fundamental level why the Android Update Alliance was destined to fail.

This mindset is unfortunate but necessary to employ a successful channel strategy. Companies that make a menu of devices to sell to the channel need to move quickly to the next batch of devices and commit existing development resources to this new batch of devices.   This makes supporting legacy devices more difficult due to most of the engineering always having to move to new product development. There are fewer resources, and less priorities frankly, for legacy devices because almost all the focus is on the future not the past. This again is fed by the business model of those who are selling to the channel which yields low margins but requires high volume.

It is also partially Google’s fault because they put updating and supporting devices in the hands of the OEMs. Often this is because the OEMs have changed Android slightly in order to differentiate their handsets, therefore said OEM is responsible for the engineering to get their legacy devices up to speed. It is hard to side with one or the other on this issue. Of course if no one changed Android and left it stock, it would be easier to update quickly. The only problem with that is that there is VERY little differentiation in that world and any differentiation is limited to hardware. This is the sea of sameness I talk frequently about and in the past it led to spec battles and very little innovation.

If you want to see the sea of sameness in action, go to a big box retailer who sells PCs and look at the wall of Windows machines, all running identical software thus the only difference is in hardware. Hardware differentiation alone would be a boring future.

The channel strategy that is employed by many in the industry is a simple truth about how this industry works. It has its plusses but it also has its minuses. Vendors must differentiate, but they also have to cater to the channel. The channel, and horizontal operating system solutions create this sea of sameness due to the nature of the business model.

Everyone from the OEM, to the channel (retailer and carrier), as well as the software platform (Google) have to align for the good of the ecosystem if this is to get any better. The only problem is from what I see so far they are still more dis-aligned than aligned.

So although it was well-intentioned, the channel strategy and lack of Google’s own committing of more resources to assist OEMs is what keeps the Android OS unity a pipe dream.

BlackBerry Mobile Fusion May Be RIM’s Future

The flood of iPhones, iPads, and Androids into corporate offices is destroying BlackBerry’s once dominant position in the enterprise. In a bold if-you-can-lick-them-join-them move, Research In Motion is striking back with BlackBerry Mobile fusion, a software and a back-office package that promises to bring BlackBerry-like security and manageability to competing hardware.

BlackBerry iPhoneThis may be an obvious move for RIM, but it is not an easy one. The company’s DNA–and the heart and soul of co-CEO Mike Lazaridis–is in hardware. Previous efforts to bring BackBerry functionality to  third-party hardware, such as BlackBerry Connect for Nokia and Windows Mobile, were half-hearted at best and went nowhere. But RIM today is threatened with irrelevance and needs a desperate move to get back into the game. And the may be a secret agenda behind Fusion: It could be the solution to bringing full BlackBerry services to the troubled Playbook tablet and the new generation of handsets based on RIM’s QNX operating system.

Fusion may offer an attractive solution to IT managers, especially in Microsoft Exchange shops,  bedeviled by  users demands that they be allowed to use the smartphone of their choice for business. Of the alternatives to BlackBerry, currently only iPhone comes close to providing full support for Exchange, including a wide range of security policies. There are third-party solutions for Android, such as Good Technologies BlackBerry-like server-based system or NitroDesk’s TouchDown app, which provides support for a variety of Exchange-based mobile device management systems.

The big advantage of Fusion, if it delivers on its promises when it is released next March, is that it runs on top of the existing BlackBerry Enterprise Server and gives IT managers a single platform they can use to manage a variety of devices: BlackBerrys, iPhones, iPad, and Android phones and tablets. All of the existing third-party offerings require some sort of multi-server infrastructure to support all devices.

There’s also a curious little note in the fusion announcement that may hint at a broader role for the software:

RIM has clearly been having a very difficult time making the QNX-driven PlayBook work properly with BlackBerry Enterprise Server, a fact that helps explain the crippling lack of native mail, contact, and calendar apps on the device. The Fusion language still doesn’t promise full BES support for the PlayBook, but is definitely moving in that direction. A similar solution might help RIM bring BlackBerry services to its forthcoming QNX handsets.

All of this, of course, is a double-edged sword for RIM, because the better Fusion is, the more damage it may do to the company’s  fading handset business. But long term, RIM’s only path to survival may be as a provider of managed services for enterprise mobility. That would be a sad comedown for a company that once dreamed of dominating the consumer smartphone business, but it may be all that’s left.

 

 

The iOS and Android Mobile Web Disparity

There are two interesting data points released that I think is worth asking some questions. The first comes from Net Applications and it plots out mobile web browsing OS share by platform. The full chart is below.

What strikes me in this chart is the clearly dominant iOS platform when it comes to mobile web browsing over all platforms. It needs to be pointed out that Net Applications is tracking iPhone, iPad, and iPod touch but also all Android phones and tablets. We know there are now well more than 250 million iOS devices in the market so there is a clear lead in volume over Android. However, at the same time we know that Android is growing explosively fast. Even with the Android explosive growth it seems that Android customers are still not nearly as heavy web browsers as iOS consumers.

One other point on the Net Applications chart is that since it does contain iPad, and we know iPad is rapidly climbing the charts with web browsing share on its own, then we need to also look at a similar chart without iPad. That is exactly what StatCounter provides us with.

In the chart below we see a picture of web browsing OS share with only hand-held devices, so not including tablets.

This shows a very close picture of iOS to Android hand-held only browser share but still showing iOS in the lead. Still interesting that iPhone and iPod touch account for more web browsing than all Android smartphones in the market. So again it appears that even with hand-held devices iOS consumers browse the web more than Android consumers.

I have a few observations.

First iOS is a superior web browsing experience. Having used both platforms quite a bit I can attest to this fact that the web browsing experience on iOS is better than on Android.

Android consumers are using more apps than browsing the web. This has come back true from many of our Android consumer interviews. They use more of the native apps for search, Facebook, Twitter, etc and conveyed to us that general web browsing is less of a use case for them. This again will vary between power user and average consumer, but still true in a general sense.

iPad is poised to become one of the most dominant web browsing platforms. I have not been shy in proclaiming how touch computing and the tablet form factor is the computer for the future. I’ve also stated that in my opinion web browsing is better on a tablet than on a PC. When we look at the Net Applications chart, which includes iPad, we see how wide the gap with iOS is when the iPad is counted in mobile web browsing. This is an incredibly significant trend and one that should concern Google.

Overall all Google still gets a serious chunk of revenue from iOS devices when it comes to mobile search. The fact that in iOS 5 consumer can change their search engine preference should concern Google greatly.

Every company in mobile search needs to understand this data. It demonstrates how tablets are not only more than a fad but how important they are to the mobile web of the future.

[Other Good Articles VIA BGR, Fortune, SlashGear,GigaOM]

Android and iOS: Two Very Different Philosophies

In this column, I in no way intend to say one of these platforms is superior to the other. I simply want to explore how they both represent completely different approaches to software and user experiences.

We have to start with a fundamental agreement that we live in a free world and support a free market. In this world consumer choice is the most powerful market driver. Competition brings choice and choice is very good.

Therefore, consumers are free to choose whatever products in hardware, software, and services they so desire. Companies compete in an attempt to create features that appeal to consumer segments, interests, and preferences. Certain features in hardware, software, and services will appeal differently to different people. There is nothing wrong with that, as I said it is very good.

The Android Philosophy
At this point we must point out that Google is a services company. It is for this reason that we should expect a different hardware and software philosophy. As I continually point out in our analysis of Android for clients, Google is a services company and all hardware and software is to Google is simply a front-end to access their services.

Android was created for the primary reason to help consumers access Google’s services on non-PC devices. Hardware for Google is just the physical object needed to run the software that is designed to access Google’s services.

Google starts with a services mindset and philosophy then works backwards on how best to make those services as broadly accessible as possible.

Google is also an engineering company and engineering companies historically struggle with making innovations accessible to tech lay-people.

With all of that context, what Google has done with Android is impressive. Those who get excited about technology for technology sake get very excited about Android. Google and Android engineers regularly show some very visionary and perhaps “ahead-of-their-time-technologies.”

This is not to say that tech lay-people can’t use Android. Many do, however, I would argue that those who have a tendency to tinker, customize, and tweak their hardware themselves, get the most excited about Android.

Android’s challenge is to take many of these forward thinking things like, face recognition, fully customizable UI, flexible widgets, Android Beam (features found in Ice Cream Sandwich), etc, easier and compelling for every day people to use.

The iOS Philosophy
Apple on the other hand is a software company, who also cares deeply about making their own hardware. Apple is on the cusp of adding robust services to their ecosystem but unlike Google they approach everything as a hardware and software company not a services company. Services to Apple are a means where to Google services is the ends.

To Apple, making innovations accessible to the masses is the underlying theme of all their hardware, software and now services philosophies. This is why they may not always be first with certain features but it is clear that if they don’t offer something the market wants out of the gate they will certainly add it and make it simple to use.

Apple’s target with their products is those to whom technology is mostly foreign. Meaning not a core and central part of their every day lives. This is why when they release new products they only focus on certain features. The features they focus on solve tangible and every day needs and strike emotional chords with consumers.

For example, when they launched the iPhone 4, they could have touted any number of features, instead they just demoed FaceTime and that was enough. It spoke for itself and showed consumers the value of the latest feature.

Apple’s goal is to make technologists out of people who never cared about technology before. Their desire is to provide these consumers with sophisticated solutions that are extremely simple to use. I can’t stress how difficult this is but it is something Apple does extremely well.

As I stated in the beginning, these two approaches represent just that–two different approaches. To each his own is the critical point I want to make.

I am in the privileged position to get to provide opinion and analysis on all the platforms on the market. To some consumers where I influence buying cycles, like friends and family, I am comfortable recommending Android devices; to others, I recommend iOS.

Where this really gets interesting is with the generations who grow up with technology, some call them “Digital Natives.” I watch my kids, for instance, who are perfectly comfortable jumping back and forth between my iOS and my Android devices.

This next generation will grow up incredibly technical and tech savvy. Because of that, their demands and expectation of next generation personal computers will far exceed anything we can imagine today.

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Does Google Need a New Strategy with Android?

 
I believe Google is coming to a cross roads with Android. The reality is that we live in a software world. Hardware design is nice but software is what makes our devices useful.

Steve Wildstrom wrote an article asking the question about whether Android was a mistake for Google. I don’t believe Android is or was a mistake for Google, however I do believe they need a more hardware centric strategy.

Several things have happened and are continuing to happen around Android that leads me to believe a better strategy can be employed.

The first is that companies, Amazon namely, have taken what Google created as a base OS in Android and fully customized it stripping all benefit to Google.

Originally Google encouraged this idea of customization of Android for vendor differentiation. However things changed as Android began to become more popular and enginners realized scaling a truly open platform would be difficult.

At the turning point for Android, which I believe was 2.2 or Froyo, Google began to attempt to control Android more tightly thus making it harder for hardware partners to customize Android and differentiate their products. Google began to promote and encourage a non-customized version of Android to their hardware partners. Their Nexus line of devices are the evidence of what Google wants to see happen with Android hardware. Namely that the hardware is good but the software all looks the same.

Those who make Android hardware whether they be tablets or smart phones are longing for Google to help them differentiate their hardware. Because of the many restrictions Google is putting on Android devices get lost in the sea of sameness.

Because of that vendors like Amazon, or entire countries like China, have taken the basic Android code and made it their own completely separate from Google’s version of Android.

This is important because Google created Android as a software front end to their services. When a company takes the basic code but strips it from using Google’s services, the custom implemenation loses all benefit to Google.

The other market development that could impact Android is vendors seeking their own software solutions. An example of this is what Intel and Samsung are backing with Tizen. I am skeptical of Tizen however the fact that a key Android partner, like Samsung, is putting resources into a solution other than Android is not a good sign.

So What Should Google Do?
What Google needs to do, and I think they need some serious help to do this, is to figure out how they can work with their hardware partners to differentiate their Android solutions but still utilize Google services.

Now in the case of Amazon even if Google had an Android differentiation startegy I don’t think Amazon would have used it. Amazon is also a services company.

The rest of the market however would benefit from a Android strategy that allowed for differentiation but also still tightly integrated Google’s services. I don’t believe we will see this kind of solution in Ice Cream Sandwich, where Google allows for heavy customization. This is a real issue that Google needs to address with coming versions.

I’ve wrote extensively about product differentation and I will continue to but what we have right now with Android is the sea of sameness. That needs to change if companies want to stay in business.

This same problem exists for Microsoft but that is for another article.

Recommended Reading:
Dear Industry: Dare to Differentiate

Intel and Google – Who Needs Who?

Android is very popular and has made great inroads in the market in smart phones (with more than 50% share) and is beginning to pick up traction in tablets as well with a plethora of new devices due out shortly. But Android itself has not always been that good a performer, and some of the SW choices Google has made while developing the various versions have been troublesome.

It is clear Android can use some assistance in optimizing the code and user experience (one of the primary reasons Google is buying Motorola is for its engineering talent that has had a major positive impact on the design and tuning of Android). But Google needs assistance in improving future versions of Android, and has a broader vision for Android than today’s phones and tablets.

Although not well understood, Intel is one of the largest SW companies in the world (they have many thousands of SW engineers). It has a unique ability to make SW and particularly OSes run extremely well and have been doing so for many years, and not just with Windows. It is a leading provider of development and compiler technology. While Intel won’t necessarily help Android run better on ARM, it can certainly make Android run great on the Intel architecture. It is already well down this path with the Android code porting and optimization work it’s been engaged in for some time.

But Google has greater ambitions for Android than powering current mobile devices. Google ultimately wants to be a leading OS provider across the board and on many form factors, including on the x86 platform powering PC and PC-like devices, and competing with Microsoft and Apple. This is an extension of Google’s “service in the cloud” strategy with clients powered by Android and Chrome and productivity apps being “optimized” for its own environment.

So the relationship between Google and Intel is key to both their long term strategies. It’s a win-win relationship if done right. It’s quite conceivable that by the time Intel is through optimizing Android code, it will run substantially better on its chips than on ARM. But any help Intel provides Google for Android reliability and performance optimization on x86 will most likely also help it running on ARM since the efforts will be repurposed, and this ultimately helps Android on ARM as well.

The bottom line is both companies actually have a great deal to benefit from a close relationship. Intel gets to show of its upcoming devices for mobile form factors running a highly optimized (for its chips) version of Android. And Google gets a path to higher end systems and optimized code to access its services. And users get choice and a more compelling experience. So there really are no “junior partners” in this relationship. Both have much to gain.

How Google Can Learn From Microsoft

There has been some interesting commentary around how different the approach between Microsoft and Apple is as it relates to their developer conferences.

It is certainly true that these two companies approach them differently but as Steve Wildstrom points out in his article on why Microsoft’s approach is more open than Apple’s, it is because of the more complex ecosystem Microsoft has.

Microsoft has many vendors, who build a wide variety of product configurations based on their software. Because of that it is very important that Microsoft be open and clear with all in their value chain so that the appropriate plans can be made.

With that in mind and after reading Steve’s article I can’t help but think about how very different Microsoft’s developer and partner strategy is from Google’s.

With Microsoft they are out there talking to OEM and ODM partners early, actually working with them to make better products and tune their systems to work with Windows 8. And oh by the way they are doing this and have been doing this well over a year in advance of their product.

Now Microsoft and Google have almost identical partner ecosystems. They both rely on hardware companies to bring their software to market. Yet Google does not talk to their partner ecosystem until much later in their development. Unless of course you are one of the chosen few to go live with the latest Google release you are almost kept entirely in the dark.

That may be entirely fine for Google but that puts your hardware partners in very difficult positions because they plan their hardware and make design plans with the ODM’s at a minimum of 8 month’s out.

I can’t tell you how often I hear from OEM and ODM vendors who express their frustration with Google on how they work with their hardware “partners” around Android.

Because of this and because Microsoft takes a much more partner centric strategy with their software, I am hearing a great deal of excitement from around the industry for this next release of Windows. It appears that the vast majority of those who make PC’s and tablets are going to rally around Microsoft for this next release.

That of course does not ensure its success, my only point is that by working with partners early in the cycle it gives them a more confident feeling and approach to supporting the Microsoft ecosystem.

The level of secrecy that Google employs around Android literally makes zero sense. It would be one thing if Android was light years ahead of anything on the market in terms of an OS but the reality is it is not. I’m sure we can debate this all day but I see no value in Google keeping hardware partners in the dark as they do, and all it does is rub key partners the wrong way.

Google should learn from Microsoft on how to take a true partner centric approach to their development of Android and treat all who desire to ship Android as partners and not keep them in the dark until the last possible minute.

Android Hardware Is Too Saturated For Its Own Good

The plethora of Android devices on the market was added to in a variety of ways today with news from IFA.

My friend Evan Selleck asks a good question over at PhoneDog. Is the market being saturated with Android smartphones?

The answer is yes. Resoundingly and overwhelmingly yes. There is a difference between choice and too much choice. I believe there is a paradox at play with regard to the strategies of Android hardware makers. They believe the more devices the better. I actually believe the opposite is true.

I read a book a while back called “The Paradox of Consumer Choice: Why More is Less” by Barry Schwartz. His main premise of the book is that too much choice actually makes it harder for consumers to make decisions. If you are interested in this I highly recommend reading the book.

If I were to put myself in a consumers shoes, something I do often, and I were genuinely shopping for an Android phone I would find it difficult. There are simply too many choices. You also have the added bonus of knowing something better is just around the corner because Android vendors release new phones as often as rabbits have babies.

Furthermore a saturated landscape of devices is even harder to justify in a market that is in the process of maturing like the smart phone and tablet segment. Most consumers are still buying their first smart phones. Therefore they are still exploring what they want in a smart phone.

So the paradox is that Android vendors believe more is better when in fact while this market matures more is less. Android vendors should be making it easier for consumers to choose their products not more difficult.

The impact is that this saturation and overwhelming amount of choice with Android devices will most likely lead consumers to go with the safe bet, which is the iPhone. All the reviews of the iPhone are positive, consumers hear from their friends how much they love the iPhone, etc etc.

When you add all that up you can see why I stated that the iPhone 5 would be Apple’s biggest launch yet.

The bottom line is this saturation in the Android space makes it easy to conclude that the iPhone’s dominance is no where near being threatened. Apple is the #1 smart phone manufacturer and it doesn’t appear that will change anytime soon.

If you look at the history of the technology industry, the most iconic products stand apart. Take the Palm V(5) for example, arguably one of the most iconic products in our industries history. Palm didn’t release five Palm products that year. They just made one the Palm V and it was the most desirable PDA by far. Apple’s strategy has been the same.

While this market is maturing the right strategy for Android vendors would be to pour all their resources into creating one amazing device per cycle. Unfortunately they are falling into the trap of thinking the more devices the marrier. Thus saturating the market and making it hard for consumers to choose.

You may say this sounds silly since Android has been growing at alarming rates with vendors employing this strategy. To that I say let’s re-evaluate Android market share at the end of the year.

Why non- iPad Tablets Aren’t Selling Well is Fundamental

So why aren’t non-iPad tablets selling as well as the iPad? I read a very interesting article Wednesday from James Kendrick at ZDNet. His contention is that one of the biggest issues is competing with Apple’s “consistent marketing experience”. I agree that’s a big issue, but I think there’s an even more basic core issue here and it starts with consumer risk, the considered purchase process, the influencers and the product experience.

Tablets are a Risky and “Considered” Consumer Purchase

Consumers, regardless of demographics and psychographics, share some common behaviors. When they are posed with a risky, considered purchase, they are looking for reasons to reject products and not look past their warts. And tablets are a risky, considered purchase. For a time, tablets started at $499, well above the starting prices of a notebook, desktop, or smartphone. Tablets don’t run programs or content like the PC that consumers are familiar with. And they are very fragile when compared to other devices.

Consumers Research to Mitigate Risk

As I said above, when posed with an expensive, risky purchase, it is “considered”, meaning they will research it or find a brand which “buffers” the risk. By researching it, I don’t mean doing a master’s thesis. I mean doing a few web searches, going to a recommended tech site, asking a few “geek” friends and tossing a few questions out on Twitter or Facebook. What consumers heard back were some positive and some negative things about non-iPads. Even more importantly though, is that very few if any negatives ever came back from their iPad research. Worst thing you might hear back about the iPad is that it doesn’t run Flash, it doesn’t have SD memory upgrade, and it’s expensive.

So was it some conspiracy that the negative things were being said or were they just the facts of what actually shipped at launch? The fact is, the clear majority of non-iPad tablets at their launch suffered from many issues as it related to the iPad, which established the bar of a successful tablet.

Tablets Lacked Convenient, Paid Content at Launch

Many media tablets launched without a whole lot of media:

  • Lack of video services like Netflix, Hulu, movie rental, or movie purchase capabilities
  • Lack of music services like Pandora, Spotify, or music purchase capabilities
  • Lack of book services like Kindle or BN Reader

This issue is being slowly solved, but the damage had been done at launch.

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Tablets Lacked Stability and Responsiveness at Launch

Many tablets launched with multiple application crashes, hangs and were intermittently unresponsive. When apps would become unresponsive, the users would get a message asking them what they want to do, similar to the way Windows alerts the user. The iPad 2 launch experience was responsive and stable. Yes, the iPad 2 does still experience some app crashes, but it’s less frequent and when it does, it just closes the app.

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This issue has been solved for all non-iPad tablets with OS updates, but again, the damage was done at launch.

Tablets Lacked Premier Applications at Launch

I don’t believe consumers are fanatical about the 100’s of thousands of apps that should be on a tablet. I do believe that they want to have the most popular applications that they care about, though. Most non-iPad tablets launched without premier apps, like premier news, sports, and social media apps. One tablet even shipped without a built-in email and calendar client and research shows that email is the #1 tablet application. Android tablets shipped at launch without a Twitter app.

Only Android 3.2 tablets have addressed this issue so far, but again, the perceptual damage was done.

Tablets Shipped at Launch with Hardware Challenges

Not only were there software issues at launch, but hardware as well. Tablets shipped with inoperable SD card slots and USB ports that didn’t work properly. Even competing with the physical iPad 2 design was a challenge. Some tablets were nearly twice as thick as the iPad, used plastic design versus aluminum, and one tablet even shipped with a case that blocked major ports like power, USB and HDMI.

Some of these issues have been addressed, but the damage was done.

Should Everyone Else Just Quit?

With all of these issues at launch and challenging sales so far, should everyone except Apple just quit and concede to Apple? Absolutely not! This is the first inning in a nine inning game, and the game hasn’t been lost. In short order, every tablet will be thin and light enough and power efficient enough until it’s inconsequential. Most apps will move to web apps virtually eliminating the app barrier, and everyone will have the right paid content. Apple obviously won’t stand still and I agree with Ben Bajarin when he says, “success will only come to those who want to compete with the iPad by thinking fresh and taking bold and innovative risks.” I have had the honor to work for companies who slayed goliath and I have been slayed myself, so I have seen both sides. It takes courage and conviction and I believe the tech industry can and will do that.

Pat Moorhead is Corporate Vice President and Corporate Marketing Fellow and a Member of the Office of Strategy at AMD. His postings are his own opinions and may not represent AMD’s positions, strategies or opinions. Links to third party sites, and references to third party trademarks, are provided for convenience and illustrative purposes only. Unless explicitly stated, AMD is not responsible for the contents of such links, and no third party endorsement of AMD or any of its products is implied.

See Pat’s bio here or past blogs here.

Follow @PatrickMoorhead on Twitter and on Google+.

Android is Finally Ready for the Tablet Market

Over the last few weeks, Android for Tablets (aka Honeycomb) 3.2 started rolling out to tablets like the Asus Transformer and the Motorola Xoom. While the announcement of Android 3.1 was met with great fanfare at Google I/O 2011, Android 3.2 didn’t receive a lot of attention as it started actually rolling out to systems. Ironically, I believe that with the rollout of Android 3.2, the operating system is finally ready for tablet prime-time.

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Background

Android 3.X, aka “Honeycomb”, is Google’s operating system for tablets. It was first shown at CES 2011 and the first product it rolled out on was the Motorola Xoom. After its launch, the firestorm ensued and Honeycomb was viewed as having significant issues:

  • Sluggish performance even while having superior hardware specs.
  • Lack of stability and reliability as evidenced through repeated application crashes.
  • Lack of apps. Even as of July 1, 2011, NY Times David Pogue reported that at the most, 232 apps were optimized for Honeycomb. The iPad had 90,000 optimized apps. To make matters worse, Android phone apps ran in a tiny window.
  • Lack of external SD card support. Just do a few Google searches on “SD card” and “Xoom” and you will know what I am talking about.
  • Limited USB connectivity. Keyboards, mice, digital cameras, card readers either didn’t work at all or were very inconsistent.

Needless to say, this didn’t exactly equate to a very good experience, as I have personally experienced on three separate 10” Android Honeycomb tablets.

Improved Performance, Stability and Reliability

Between Android 3.0 and 3.2, my Honeycomb experience is like night and day. Single-tasking responsiveness is close to the iPad 2, although the iPad 2 is still faster. Honeycomb does outperform iPad 2 on multitasking though.

When I use a tablet, I use it as a primary device. I load around 20-30 apps, and I do set up the background tasks and widgets as they are differentiated features versus the iPad. Where I previously experienced between 10-20 application crashes a day, with Android 3.2, I may get one a day. This is a huge breakthrough. And yes, I do get application crashes on the iPad 2. iPad 2 crashes are less pronounced and “hidden” as the app just dies and you are taken to the home screen. In Android, a dialogue box pops up on the screen and you are given the choice to wait, kill, or report the crash.

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Improved Application Support

Android 3.2 added the capability for users to better tap into the library of approximately 300-400K applications. Applications come in three forms that are somewhat transparent to the user:

  1. Tablet optimized apps: Resolution, layout, fonts, content are optimized for the tablet.
  2. Stretched phone apps: Phone applications are stretched to tablet dimensions keeping phone layout, fonts, and content. In some apps this is automatic; in others it requires the user to toggle a menu icon in the apps bar.
  3. Zoomed phone apps: Fixed-size phone applications are zoomed in like the iPad phone apps. In some apps this is automatic; in others it requires the user to toggle a menu icon in the apps bar.

If a user runs across a a manually scaled-app, they are given the option to stretch or zoom. Many of the apps, though, were automatic and stretched properly into place.

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Here is how some of the top Android phone apps look on Android Honeycomb 3.2 tablet.

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As you can see, some of the phone apps look really good and others could be improved. The net-net is that Android Honeycomb tablet buyers just got 300K-400K more apps to run on their tablets.

Conclusion

Like the first Android phone OS, the Android tablet OS has quickly undergone a massive overhaul and improvement in a mere 6 months. The most recent improvements in Android Honeycomb 3.2 were virtually unnoticed by many in the press, but ironically, the update improved the experience to the point that Android is finally ready for prime-time.

So does a massively improved experience guarantee success? Of course not. Android still has to deal with its IP challenges, fragmentation, spotty paid video services, and some “me-too” hardware designs, BUT, if you don’t first have a responsive, reliable experience with lots of apps, you have nothing. And Android finally has that for tablets.

Have your say in the comments section below.


Why Google Should Buy Motorola

Article Disclaimer: This is all theory and purely speculative. This is simply a thought exercise.

Motorola has been an interesting company to watch over the past 10 years. They have been a driving force in bringing the cellular industry into fruition and recently Motorola spun out their mobile business and created Motorola Mobility. I find an intruiguing scenario to play out to be one where Google buys Motorola Mobility.

One particular reason this is interetsing is because Motorola Mobility is deeply committed to Android. In fact as of now it appears that the company is solely basing its future on Android. Recent reports indicate an interest in Windows Phone 7 and possibly 8 by Motorola but it doesn’t appear actual product plans exist.

Motorola’s challenge is that they are attempting something that is becoming increasingly difficult in the industry today, namely to make money on hardware alone. To make matters even more challenging they have decided to bet their future on a company who is less interested in helping companies make money on hardware and more interested in free.

In fact I am convinced that Google and the Android team in particular would prefer that Android handsets cost less rather than more.

All of that leads to the first major reason I think Google would benefit greatly from buying Motorola Mobility.

Google Could Practically Give The Hardware Away
Google has already demonstrated an interesting model regarding Chrome that basically presents a hardware as a service model. In this model Google is offering Chrome OS hardware to the business and IT community for $28 a month and to educational institutions for $20 a month. There we have it, a hardware as a service model and Google is already going down this path.

So why not consider this same approach with Android handsets? This is not feasible currently because a company like Motorola needs to make money on the hardware since they don’t get to participate on the services financial upside like a carrier and Google. However if Google bought Motorola they could sell the hardware at a loss and make it up with their backend services.

A strategy very similar to what we think Amazon intends to do with their tablet.

Google needs as many Android devices on the market as possible. And yes they aren’t faring to poorly currently but if they subsidized the cost of the handset with their own longer term services revenue, which Google could do, I believe the market would accelerate even faster. Making the point again, Google cares about the services revenue not the hardware revenue. It behooves them to seed as much of the market with Android devices as possible.

Imagine if you could get one of the latest Android smart phones fully featured for less than $99. The price barrier to high end smart phones would be gone and Google would have even more demand for Android.

The second major reason is patents.

Google Needs Patents
Patent lawsuit frenzy is sweeping the technology industry. The media, analysts, pundits and more have now made it glaringly clear that Google is on the weaker end of the spectrum when it comes to patents.

It is for this reason they attempted to purchase the Nortel patents. Based on recent actions it can be concluded that Google knows they need to secure a more robust patent portfolio. More specifically they need a patent portfolio around mobile devices to help protect Android.

Motorola has an incredibly robust patent portfolio. In fact they have nearly three times as many patents as Nortel. Some have alluded that Motorola’s patent portfolio is possibly the strongest in the mobile field. It could be debated but its possible that Motorola has the best patent defense against Apple’s in this field.

One interesting point from Morgan Stanley analyst Ehud Gelblum who wrote in a research note last month:

“It is interesting to note that Motorola asserted 18 patents against Apple, and sued Apple first, whereas Apple has asserted just six patents against Motorola.”

Scott Moritz from the street remarks:

“Not only does Motorola have far more patents than its nearest competitors, it appears to have more of the key patents that may help the Android camp in a battle against Apple.”

The Big Picture
Although this is interesting to think about I doubt it will happen. A result of Google buying Motorola would be that their other partners like HTC, Samsung, LG and more would become competitors. I doubt Google’s partners would appreciate that and could potentially dump Android in the process. Also as far as I know Motorola Mobility is not for sale.

This patent issue however is a real one and one that if not dealt with tactfully by Google and the Android partners could prove fatal.

What’s more likely to happen, which The Street article points out, is that those in the Android camp band more closely together and leverage each others patent portfolios to protect Android.

Motorola however needs to continue to post solid financial results as they did for the most part last quarter. As I stated earlier making money on hardware alone is going to prove very difficult but Moto can and should continue to invest in innovations that differentiate their hardware allowing them a chance to profit from hardware. It would be wise of them to get more into the services game but not much is being shown there yet.

Why iPhone Competitors Should Release Less Products

The Next Web asks an interesting question in this article titled “As Apple’s smartphone sales boom, should its rivals release fewer handsets?”

As I pointed out in my article “Why it matters that Apple is the number 1 smart phone maker,” Apple only needs one product each year to dominate the smart phone market. They are the only company that takes this approach. Every other smart phone manufacturer releases a plethora of handsets each year, many of them based on Android.

Arguably this massive amount of handset choice is one of the leading reasons Android has such a large market share. The interesting question TNW brings up is whether or not Apple’s strategy of one handset each year is a better strategy for each manufacturer.

For Apple they focus all their research, design, engineering, hardware, software, and services teams on just one product. The result is the single best selling handset year after year.

There are rumors that Apple may fragment the iPhone line and offer different priced options but for that we will have to wait and see. Even if Apple did that it would still be the iPhone brand.

The challenge Android has, which TNW brings up, is the Android brand – more specifically the Droid brand. This brand did wonders for Android in the very beginning as Motorola and Verizon spent millions of dollars marketing the Droid brand. Now however it is unclear to the end consumer what devices are “Droids” and which ones aren’t.

On top of the Droid brand we have manufacturers launching products with random names all the time. The Bionic, Sensation, Revoluion, Captivate, Status, Thrill, Photon, Triumph, and XPRT to name a few of the most recent. You have to be a gadget freak or gadget blogger to know what the difference between all those devices I just listed are and those are only half of the Android devices released since January of this year.

Putting yourself in the consumers shoes and trying to research and make a decision on which Android phone to buy could be daunting. I pointed out in a column I wrote for SlashGear earlier in the year that too much choice can be paralyzing for many consumers.

This is why the iPhone strategy has been so brilliant. It simplifies the decision making progress but is also arguably the best handset on the market as evidenced by huge sales. Apple’s less complicated product strategy and laser focus on making THE best handset is paying off.

The biggest benefit I can see for iPhone competitors to release less handsets each year would be that those competitors could pour more resources into fewer designs. The result I would assume would be better smart phones.

Personally I would love to see what a company like HTC, Motorola or Samsung could do if they poured all of their resources into one single device to try and take on the iPhone.

The problem is I don’t think they will do it.

Why Google Hates Patents

In a rather testy blog yesterday, Google’s Chief Legal Council David Drummond lamented the fact that Android is under attack from competitors who are using a patent war to thwart Androids growth.

Mr. Drummond calls these patents that attack Android “bogus” and suggests that Apple, Microsoft, Oracle and others are ganging up to keep Android from being competitive and impacting its growth.

He especially calls out Apple and Microsoft’s purchase of Nortel’s patents and suggests that while normally Apple and Microsoft are at “each others throats” he believes that something sinister is going on. But Mr. Drummond does not know Apple and Microsoft’s history. In 1997, Apple and Microsoft entered a major cross licensing deal that spans a great deal of technologies, especially user interface issues. And over the years, behind the scenes, they’ve expanded their cross licensing deals with an eye on making sure that they kept up with the changing technologies that were behind their original deal. Although the Nortel patents were a high profile case, many of these patents actually were very much in line with their quest to keep their original cross licensing deals up-to-date.

Ironically, Microsoft actually asked Google to bid with them and they refused.

I also found it interesting that Mr. Drummond was pleased that federal regulators are “ looking into” whether Microsoft and Apple acquired the Nortel patents for anti-competitive means.” Given what I stated above, Apple and Microsoft will just show them the history of their cross licensing deals and this point will be mute. By the way, if I were Google I would keep as far away from prodding federal regulators on any issue given the fact that they are also under major federal anti-trust scrutiny

Also if Google is so opposed to patents, then why did they shell out $100 million for patents from IBM? This seems contradictory to their view that patents are bogus. An interesting aside here is that none of these patents from IBM will help them ward off Apple. These IBM patents are mostly related to semiconductors and servers and Apple already has license to most of these from their original IBM/PPC partnership created during the mid 1990’s.

Now, I understand that Drummond’s is just doing his job. In fact, Google’s management has a fiduciary responsibility to defend Android just as Steve Jobs and team have a similar responsibility for defending their patents. However, I believe there is really more of an ideological issue in play and represents Google’s more Open Source approach to life that feels that all technology should be free for use by all. Versus Apple’s strong view that their IP is the result of serious investment and hard work and needs to be protected through the legal patent process to, as Steve Jobs has said, “keep people from stealing” their creative innovations.

I like what Daring Fireball’s John Gruber asks in his post on the subject:

“How is Google’s argument here different than simply demanding that Apple, Microsoft, Oracle, et al should simply sit back and let Google do whatever it wants with Android, regardless of the patents they hold?”

The other thing in play is that Google has always touted the fact that Android is free. But it is clear that if Oracle wins their suit against Google and Android’s use of Java , Oracle plans to charge each Android vendor $15.00 per license. And Microsoft has already gotten HTC to pony up at least $5.00 per HTC device that uses Android to cover Microsoft’s patents used in Android. In Apple’s case, if they win, they won’t even consider licensing that piece of the technology to anyone. So that part of Android that would be in violation of any of Apple’s patents would mean that Google and their licensee’s would have to find a work around and that could be costly to Google and every Android licensee.

And this takes a big bite out of Google’s argument that Android is free and would make any future licensee’s think hard about using Android if there are potentially sliding costs involved to cover any other patent claims that could pop up over time. No wonder they are bashing patents. They fear their impact on what has to be one of their big cash cows where Android is given out freely and they get the add revenues tied to it.

We have suggested to our clients that license Android from Google to begin factoring in at least $20.00 for a possible upcoming Android license fee in any future products. And we have warned them that if Oracle wins, they could try and collect that $15.00 for any Android device already shipped. This is obviously still a legal issue and we don’t know for sure how it will play out. But it would be foolish for any Android licensee not to be prepared for what they have to view as a worst case scenario if the legal battle goes in favor of Oracle and others challenging Androids use of their patents.

And don’t think that Apple, Oracle or Microsoft will back down on this issue. They know the stakes are high and will keep pressure on Google through the legal channels until it is resolved one way or another. It will be great theater watching these tech giants go after each other in the coming months.

Android Is at A Critical Junction

I believe that the next six month’s will be the defining point in the future for Google’s Android platform. Whether this future is bright or gloomy will depend on the next six month’s.

It seems right now like Android is riding the big wave reaping in success left and right. The reality is however that there is truth to the Android success but there are also walls still standing in the way.

The report from Nielsen relased yesterday that I opined on shows the meteoric rise of Android in such a short time to garner 39% of US smart phone OS market share. This is truly remarkable success in such a short time. However the question that we have to investigate is how defendable Android is as a platform or is it vulberable at a fundamental level.

If we conclude that Google plays their cards right and builds the right “moats” around the Android castle then it is strong at a fundamental level. However if we conclude that their “moats” are not that strong or deep then it could be vulnerable at a fundamental level. If the former is true Android remains a viable force in the market. If the later is true Android could encounter market volatility and market share could sweep back and forth.

Google’s Hardware Partners
At this stage of the game Google depends on hardware partners to develop devices that take advantage of their software and services. This is a strength as long as your hardware partners stay commited and loyal to you.

There are challenges however with hardware partners. First off there are other companies competing for their business. In the case of smart phones and tablets, Microsoft is Android’s competition. If HP ever wised up and licensed Web OS then there would be three very good options for hardware partners to build products upon.

Android is still the obvoius choice for OEM’s looking to bring a smart phone or tablet to market. Consumers understand the value proposition and there is a large enough app ecosystem in their market place to appease the market.

The question is six month’s or even one year from now will Android still be the obvious choice? I know many people will quickly say yes but I still have concerns. One major reason is the now over 50 law suits facing Android in some capacity. Right now Android is free for most OEM’s to take and implement. However if some of the key lawsuits go against Google we could see license fees from between 15-30 dollars depending on the OEM.

If this happens Android is no longer free. I wonder if that happens whether manufacturers would re-consider their commitement to Android.

App Store Economics
Now you may argue that no other licensable or free platform has the developer ecosystem that Android does. This of course is true but again continuing to develop and maintain that ecosystem will be key.

App developers want to get paid. And as BlueStacks CEO Rosen Sharma pointed out in his column on “How the App Store Money Flows;” there are still issues facing the economics of the Android market that many developers we talk to do not want to deal with. Believe it or not among the larger app developers and as well as some of the more savvy ones, there is heavy consideration still for Windows Phone and for WebOS.

Google must continue to develop a robust economic system that works for everyone who wants to write software for the Android platform. If developers see no economic growth or ROI of their allocation of precious resources to Android they will go elsewhere.

There is a lot I like about Android and I want to see it continue to develop and flourish. Google however will have to navigate and maneuver the waters of the next 6-12 month’s extremely strategically in order to preserve the moats around their castle. Android @Home for example has a great deal of potential I believe and could add real value to the Android platform and ecosystem if done right. Chrome OS is another strength that can be leveraged and assets can be shared across Chrome OS and Android.

As Tim pointed out this morning Amazon could come in and change the game. There are a lot of un-answered questions around Amazon’s tablet strategy from pricing model, to proprietary app development etc, but so long as Android is the underlying platform i’m assuming Google will benefit still in some way.

Android is still behind in tablets and this is another weakness that needs to be addressed. Tablet sales of Honeycomb devices have been less than lackluster. If the Android Honeycomb activation dashboard is any indicator there are between 1.2 and 1.5 million Honeycomb tablets in consumers hands. Motorola released that the XOOM sold 440,000 units; we are yet to see Samsung’s Galaxy Tab sales, Acer’s Iconia sales and Asus Transformer sales.

What we need is a truly break out Android tablet that can excite the mass market. From what I know is possible with hardware and from what I am seeing from the semiconductor companies I know it is possible, i’m just not sure when or who will deliver it to the market.

We will have to wait and see but I have to say I am extremely excited about the next 12 month’s.

How Amazon Could Own the Android Tablet Market

One of the first marketing classes I had in college discussed the concept of razors and razor blades. Sell the razors cheap and then sell men blades over and over. The profit would be in the blades, not the razors. In our tech world, we have our own version of this. It is called printers and printer cartridges. The printer companies sell their printers at a very low price, perhaps even under cost, knowing full well that they will sell users expensive ink cartridges over and over. The profit is never in the printer. It all comes from the ink cartridges and companies like HP and Epson make billions of dollars a year from their ink business.

With this in mind, if I were Jeff Bezos, CEO of Amazon, I would really go to school on this concept and see if it could be applied to tablets. This model would never work for the PC vendors at this stage of the PC game. Although their PC’s are getting cheaper, they are not tied to an eco-system of software and services in which they could derive additional revenue tied to the PC and earn recurring revenue this way.

But I believe that the tablet is the first PC like device where this could be possible. So, Jeff, if you are listening, here is my suggestion to you. Sell your tablet at a price that is really cheap. Perhaps you sell it for 20-25% below cost. I know this sounds crazy and radical, but you actually have the recurring revenue ecosystem to potentially pull this off. It would take some serious guts to do this but if any one could do it, Amazon could.

In this model, think of the tablet as the razor. And in Amazon’s specific case, their Android Store, UnBox movie service and music service would be part of the “blades” they sell to users over and over again. And add to that the profit they could get through their Kindle bookstore as well as items you might buy from the Amazon store. And then add any Amazon cloud service revenue tied to the device that could also be part of an amortized profit pool over perhaps a two-year accounting period.

With info I have on components from my contacts in Taiwan, I was able to do some back of the envelope calculations to see how this could work. Bill of material costs along with manufacturing costs, shipping and tariffs most likely would put the device cost around $300 depending on its specs. For sake of argument, let’s use this as the baseline. But let’s say Amazon discounts this by $51,00 and sells it for $249.

Now, they do some research and determine that over a two year period, a person who has that tablet would buy or rent 15 movies, stream or download 50 songs, could buy 18 books and might pays $5.00 a month for cloud storage from Amazon. And, they purchase let’s say five items through the tablet’s Amazon store that can be counted against a 2 year amortized profit curve. And lets throw in some advertising in this mix as well. Although the prices of the books, video, music, etc would vary, by my guestimates, they would make back the lost “cost” of that $51.00 within six months and realize a profit of anywhere from 20-35% on the tablet over the last 18 months of the devices accounting period.

Amazon already has the trust of over 200 million users as well as their credit cards. And their “one click” buying model would make it quite easy for an Amazon tablet user to buy often through both the Android store and the Amazon store in general. Of course there are a lot of variables in this model, but you get the idea. The tablet is the razor and all of these apps and services are the blades.

Now imagine how this could affect the other Android vendors making tablets. Amazon would provide a product that if sold under cost with the goal of making up the rest of the cost and profit from apps, services and even advertising, it could give all of the other Android vendors a serious run for their money. And, given their deep eco system, other Android vendors would find it very difficult to compete with them. This could make Amazon, measured by units shipped, the king of Android tablets very quickly. In fact, I would go as far as say that they could “own” the Android tablet market.

For Apple, this would be a competitive threat but they have a pretty big lead and their own rich echo system of apps and services that could continue to keep them a market leader in tablets. And given their history of riding down prices of the iPod once it gets to scale, you can imagine that Apple will also be more aggressive with the iPads pricing over time and, as they are today, use their apps, services and the upcoming iCloud to deliver high margins for a long time.

But as radical as this idea might sound, it could make a lot of sense for Amazon to go to market with their tablet with this business model. As I stated earlier, it would take guts, but the impact on the market for tablets could be significant if they did this right and the consumers bought into their version of the old razor/razor blade school of marketing.