The smartphone world has gone through some major changes in the past year. Apple lost its spot as the number-one smartphone manufacturer (and sued everyone on its way down) and Samsung helped the Android OS rise to the top — rather meteorically.
To date, Google Android smartphones account for 75 percent of the smartphones sold in the world today. That’s a large, intimidating chunk of the market. And the tactics it uses to keep that market share may be driving other OS’ out of the market.
From a business standpoint, it’s hard to criticize Android for anything it does. Google was able to take Android from a relatively unknown OS to category-dominating software in a little over a year by offering a product that was unarguably better.
Samsung may have avoided the high road by disseminating these ads (and lets be fair, Apple sued them first):
But they worked because they were true. Apple may have had the best product at one time but that’s no longer true. Android phones and tablets outpace their Apple counterparts with each new generation.
Plus, they’re cheaper to boot — and that may be part of the problem.
Customers flocked to Android not only because they had a better product but because they were able to offer it at a fraction of the cost of Apple’s products. And that’s a winning combination that is just impossible to beat.
But Android’s low prices have cost phone manufacturers a lot. And it has to do with the way Android partners with the phone manufacturers that agree to carry it.
The Android OS comes to phone manufacturers for free. Initially, that seems like a great deal for phone manufacturers. When they pair their phone with the most popular OS, they are going to move more units.
But while that model may have worked a few years ago, today the real money isn’t in phones — which are getting cheaper all the time — it’s in apps. And that’s where Google Android makes billions. When you buy an app or watch an ad attached to a free app, that revenue goes straight into Android’s pocket completely bypassing the phone manufacturers that it depends on to survive.
And while all is fair in business and war (is that redundant?) that’s not a viable model. Phone manufacturers know that they’re missing out on a big piece of the revenue pie when they pair with Google. And some may not be willing to do it anymore.
That should worry Google because they’ve got somewhere to go: to Microsoft. Apple and BlackBerry OS’ may be tied to their own handsets, but Windows Phones are free agents. And they’re doing pretty well.
Everyone made fun of Nokia when it made the seemingly nonsensical move to bet all of its chips on Microsoft. But that bet seems to be paying off. Right now the Nokia Lumia 920 is the phone with the best specs available at a reasonable price and with an OS that is at least as user-friendly as Androids with a few additional exclusive perks. And unlocked, it’s cheaper than the now aging Samsung Galaxy SIII (at GSM Nation, the only US retailer currently selling it).
This success should make Android very nervous. Most analysts like Forbes’ Ewan Spence predict that Android’s prowess and monopolistic tendencies will drive it to be the dominant — and perhaps only — OS in the market as Apple’s share continues to fall and Microsoft’s lack of apps relegates it to nothing more than a “curiosity for the majority of manufacturers”.
But I disagree. If Windows Phone can find a way to let manufacturers in on the revenue stream, they can woo a lot of customers away from Android. And once that happens, it will be easy to lure app developers to give Windows Phone the power it needs to become a major player in the market.
But until then, things are looking really for Google. They may just choke out the other OS’ in the competition. And as phone manufacturers vie to create cheaper and cheaper handsets to outcompete their rivals, we’re going to benefit from great reasonably priced technology. And we’ll all have Google to thank for it.