Is Android really winning ?

December 31, 2012 0 Comments

Over the last year Android  extended its lead over iOS and Samsung became the world’s largest smartphone maker supported by Google’s Android. And these trends boosted the confidence of both Samsung and Google executives as reflected in their recent public comments and frontal marketing attacks by Samsung. As Google Chairman Eric Schmidt said,

“This is a huge platform change; this is of the scale of 20 years ago — Microsoft versus Apple,” he said. “We’re winning that war pretty clearly now.”

But who is really winning here? Google or Samsung or Apple ?  To answer that question first we have to define what success means for each of these players. Given that Google is not a major smartphone manufacturer, at least not yet,  its success is really defined by the search and apps revenues it can generate using Android apps (Google Play)  and Mobile Ads.  But until now, we haven’t seen any strong evidence for the revenue generating capability of Android.  As last reported by AppAnnie iOS monthly revenues are four times those of Google Play. On the other hand, Mobile Ad space is wide open for Facebook, Apple and Google. No winner there yet.

For Samsung, all the profits are in hardware sales. Given the weakness of non-Apple players, Nokia, HTC, RIM, Samsung became major Android player. But with the introduction of Windows Mobile OS and phone supported by the largest marketing budgets of Microsoft things could change quickly. If ever Nokia can pull itself and bring back some competition to the low-end smartphone market, it could hurt Samsung more than Apple.  On the other hand, Apple enjoys hefty margins compared to Samsung.

The strategic mistake of both Google and Samsung can be summarized  as follows. First of all they pitch their  at cost devices  to the price sensitive customers and then they wonder why they can’t generate app and ad revenue from these customers.  Of course, the price sensitive customers aren’t going to pay for pricey apps or click ads. And this is exactly where Apple wins.  And exactly for this reason Google rushed to develop the maps app for iOS, as it can’t loose or ignore it’s paying customers.

Google’s strategy is good for Google’s search business but not for the smart phone manufacturers. Soon or later the open source nature of the Android OS is going to drive price based competition in the Android hardware market and that is not good for any of the Android phone manufactures.  If I can borrow Eric Schmidt’s comparison thoughts here, Samsung and HTC are like Nokia of yesterday.

For Apple, the success is defined by its share of profit pie rather than market share pie. Though Apple is going to have very tough time ahead in 2013 to sustain its lead and margins, it is more likely to survive because of its “rich experience” smartphones supported by iTunes ecosystem.  As reported by Guardian blogger  here, Apple customers are more likely to pay for apps than Android users are.  And for the same reason, apps will be more and so does the number of iOS users.  In 2013, because of the increased competition, Apple app and store sales growth will decrease but not slow enough for Android to take over, not at least in year 2013.

So it’s difficult to say Android is really winning at this time as the battle just started. Let me know what you think ? Leave your comments below.