smartphones

4 Reasons the Android vs iPhone Deathmatch Will Never Be

A colleague recently asked me who I thought would win the mobile phone wars: Apple or Google. He suggested that Android is a better horse to bet on because Google has virtually unlimited resources to spend until Android dominates the mobile phone market. From reading around the Internet, this seems to be a common misconception.

The expectation of an emerging dominant platform for smart phones comes from general experience with the PC industry, where there has been virtually a single platform for decades. However, the cell phone business is very different from the PC business: while market forces pushed the latter towards platform consolidation, there are several factors keeping mobile platforms distinct. Factor in Google’s self-stated motivation for entering this market in the first place and it becomes clear that the current fragmentation of smart phone platforms isn’t going to go away any time soon.


1: Cell Carriers Discourage Platform Consolidation

Partially by design and partially by nature, it’s plain impossible for a single platform to become dominant today. Cellular companies make exclusive deals with handset manufacturers, keeping phones out of the hands of consumers who would otherwise purchase them in a heartbeat. The exclusive AT&T and Apple deal comes to mind, but cell companies have been in this practice long before there was an iPhone. Hip devices draw new customers, and the manufacturer receives generous financial kickbacks to keep things exclusive. Additionally, some carriers use different radio technologies, which means that device manufacturer must develop different hardware to support all the different radio technologies around the world, adding expense and slowing hardware rollouts. This isn’t a factor which will go away soon.

2: The Market Has Legs

In 2009 a smart phone sales exploded. According to Gartner, there were sales of 172 million smart phones in 2009, a 24% increase from 2008, and that growth is expected to continue. This means that every company in the market can sell more units than the previous year without competing directly for customers. As long as this continues to be the case there is plenty of room in the market for multiple platforms. For some context, the ceiling for this growth is high. If all cell phones sold were smart phones (not an unreasonable long-term perspective) there would be 1.2 billion every year, so there’s quite a bit of room to grow.

3: Consumers Aren’t Sticky

In stark contrast to the PC market, smart phones are relatively simple to operate. Since the learning curve is lower, consumers are less likely to be afraid of switching to a different platform. Other factors gain relative importance. For example, consumers don’t put a high value on the shape and color of their desktop PC or laptop (beyond the basic form factor), but industrial design plays a more important role with smart phones. In part this is because OS tie-in is less important.

Consumers are also likely to switch between cell carriers every year or two, and when they do they are more likely to purchase the most cost-effective smart phone available with the new carrier. Statistically, this depends mostly on the promotions running at the time, if the same platform is even available. Apple’s exclusive AT&T contract, and Microsoft’s major revision to Windows Mobile are cases where users may not even be able to stick with the same platform if they wanted to.

4. Google Isn’t in the Mobile Phone Business

Surprise. Here’s a quick recap from Eric Schmidt from when Android was first announced:

The fundamental problem with most phones today is they don’t have full-power browsers. We’ve been taking our mobile services and use specialized engineering to get them on other devices. No longer … Imagine not just one Gphone, but a thousand Gphones as a result of the partnerships … I’m a very happy iPhone user. It’s important to say that there will be many, many mobile experiences, and Android will be used on many other kinds of devices…

Remember that when Android first came out, there was really no viable mobile web browser aside from Safari on the iPhone. Google makes their money on web search. Lots of people had phones, but couldn’t realistically use them to search, and Google therefore couldn’t make money from them. Google solved the problem by giving away a smart phone OS to any device manufacturer who wanted it.

So, while Google does have a bottomless wallet, there’s no reason for them to spend significantly more on cell phone development. Android simply has to be “good enough” to motivate smart phone competitors to improve the browsers on their phone. Google makes the money whether a user searches via an Android phone, an iPhone, a Symbian phone, or potentially even a Windows Mobile phone (should mobile IE ever become a reasonable browser). That’s why the pace of Android development has slowed as its uptake has accelerated. Google doesn’t need to dominate the market, because they don’t care which phone or browser you use, as long as you use one. To put it another way, Android is a stick they can use to herd the cell phone market in the direction Google wants.

Conclusions

The public likes competition, and the Internet will never stop pitting different platforms against each other. At first glance, Android and iPhone OS look like they compete against each other. However, the motivations behind their development are very different: Apple wants to sell hardware, while Google wants to spur users to browse the web from their phones. These goals aren’t mutually exclusive, which is why Eric Schmidt sat on the Apple board of directors until well after Android was released. Because of their respective philosophies, Google and Apple will never compete in the mobile phone space — Apple will never license their OS to other device manufacturers, and Google will never shift their revenue base to hardware sales (The Nexus One is another stick to hit device manufacturers with, not an attempt to make a profit for Google).

So, to answer my friend’s question, “who will win the mobile phone wars: Apple or Google?” I don’t think either will win, because there isn’t really a war – at least not between those two. Palm, Microsoft, Nokia, and Research in Motion are different stories altogether. Until the market hits the ceiling though, none of them are going to achieve market dominance anytime soon. It has become a game of staying power, and the only platform in any real danger is Palm.

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