I’ve been meaning to blog about this for quite some time, so vacation seems like the time to do it. As my Facebook friends have noticed, I’m a bit of a gadget nerd. I don’t necessarily spend lots of money on said gadgets, but I like to know about them — particularly smartphones. I’ve been rocking smartphones since I decided to switch from carrying a Palm m105 and a Sony Ericsson flip phone to a Palm Treo 755p. PDAs helped me to be on time, and it made sense to combine my phone with my PDA.
Fast-forward to today, and we’ve come a long way. Apple changed the game with their iPhone (which, it should be noted, was a copy — albeit an improved copy — of the LG Prada). And, similar to the Mac-vs-PC wars, a competitor focusing on software (Android) has overwhelmed the market and snatched away Apple’s opportunity to dominate the smartphone market the way they dominate the mobile music market.
Apple has responded to this usurpation in the c0urts by suing Android handset makers for patent infringement, There are pending lawsuits and ITC complaints filed by Apple against Samsung, Motorola, ,and HTC. Tellingly, these lawsuits weren’t filed until it became clear that Android could eclipse Apple in the smartphone arena.
And eclipse Apple Android did. In fact, Android eclipsed every smartphone OS. So how did this happen? Why was Apple unable to seize the lead in the smartphone space, despite their release of a phone and ecosystem that changed the entire market for the better and garnered them the single best-selling handset in the world today?
There are several reasons for this. First, let’s clear up a misconception held by far too many people. Apple did not invent the idea of a simple, ”high-end” smartphone with a capacitive touchscreen aimed at the top of the market. LG did, as outlined above. Their Prada won several design awards, and came out 7 months before the first iPhone. LG has gone on record to say they believe the iPhone to be a copy of the Prada, but they didn’t sue. Apple also did not include the App Store in the first iPhone: it was an add-on concept that was incorporated into the iPhone OS after it launched. The first iPhone OS did not allow users to change ringtones or notification tones. It did not allow any icon location changes, or allow users to remove unused icons. Users could not set their own background wallpaper. Third-party apps could not run at the same time as core apps, or at the same time as another third-party app. In other words, despite its market-changing innovations, the first iPhone was in some ways much more backwards than the smartphones (and some feature phones) that preceded it. But in many important ways, it was light-years ahead of most others.
Once Apple realized they had a hit on their hands, they did what they usually do: they released one phone per year that was only a slight improvement over the previous model. To this day, the iPhone hardware hasn’t changed much fundamentally since it came out. The hardware is prettier and more sophisticated, but it’s still a slab with a virtual keyboard and a 3.5-inch screen.
Android, recognizing the paradigm shift that the iPhone represented, shifted their OS development completely. They went from a RIM-style OS to a more graphical, touch-based OS to compete with Apple. However, their model was different: Google, the parent company of Android, was not a hardware company — and was not looking to become one at the time. Instead, they made the Android OS ‘open-source’ and allowed hardware manufacturers to use it for free. The OS received a major update at least once per year. Users could change or alter Android phones however they chose, even replacing stock Android apps if they so desired.
Adoption was rapid; hardware manufacturers appreciated the ability to customize Android in their own unique way. Almost overnight, big-time players like Palm and Microsoft became obsolete. RIM stayed entrenched due to its enterprise ties, but began its slow death spiral.
By contrast, Apple maintained strict control of both the software and hardware of the iPhone, focusing on simplifying and improving the user experience. No apps could be added by carriers. No third-party manufacturers could produce Apple-branded hardware. All changes, additions, and interactions to change the contents of the phone had to be made through iTunes (with the obvious exceptions of the calendar and mail apps). Users could not install unapproved third-party apps. Apple released software updates specifically designed to wreck phones that had been ‘jailbroken’ to punish users who dared to defy Apple’s terms of service by installing unapproved apps.
Though Android was clunkier and not as smooth to use as iOS, Android quickly caught up to and surpassed iOS in features. Palm threw a Hail Mary by developing webOS, which in some ways also surpassed iOS in features (wireless syncing, multitasking, synergy) and was just as simple (if not more simple) to use. Unfortunately, Palm did not have the resources to compete with the tech giants: their lack of apps and lack of cash doomed them to failure and an eventual purchase by Hewlett-Packard (who proceeded to flush both webOS and their #1 computer business down the toilet in a series of horrible business decisions). Microsoft, recognizing that Windows Mobile was no longer competitive in the consumer space, withdrew and returned with Windows Phone 7. Though the core OS seems promising, it has thus far failed to gain traction in the market. Nokia eventually threw in the MeeGo and Symbian towels to partner with Microsoft. Though WP7 has not yet taken off, many analysts predict the Microsoft-Nokia team will eventually garner the #2 spot behind Android.
Android soon surpassed RIM as the #1 operating system for smartphones worldwide. Apple grew tremendously, eventually passing RIM at #2 — but ultimately failed to keep pace with Android growth worldwide in spite of the fact that the iPhone 4 has long been the world’s best-selling single phone. Eventually, Android’s runaway growth began to hurt Apple’s market share. Today, Android OS phones make up 48% of the smartphone market, while Apple is second with about 19%.
There are several reasons for this, but first I’ll debunk some persistent and inaccurate theories. First, there’s the notion that the iPhone’s exclusivity on one carrier held them back from surpassing Android (and RIM). That might well be true in the United States. However, there are many countries worldwide where the iPhone is available on multiple carriers. Android-based phones outsell the iPhone 3Gs and iPhone 4 on almost every network in the world where both are offered, which accounts for Android’s substantial lead worldwide. This also ignores the fact that when the iPhone was offered on Verzion and AT&T, the iPhone soon became the best-selling phone on America’s largest carrier…yet Android’s market share in the United States actually GREW during that timeframe. These data points lead to the indisputable conclusion that people are in fact choosing Android phones instead of iPhones when offered a choice.
Another theory is that Android phones are simply grabbing the low end of the cellphone market, while Apple only seeks the high end; thus, Android’s lead is due to the millions of phone users who want the cheapest phones they can buy. Again, this notion ignores some inconvenient truths, particularly in the United States (but also overseas). Apple sells a cheaper iPhone (the 3GS). In the United States, that phone can be had for as little as $50 on a 2-year contract. So Apple does have a presence in the bargain-hunter market, at least for postpaid subscribers. Apple currently does not offer prepaid iPhones, but that is their choice. They could if they wanted to, and I have little doubt that they will in the future — but they do not today.
Additionally, the two biggest U.S. carriers are pushing Android phones because they are available with 4G connectivity and they have some exclusives to offer. Since the iPhone is not an exclusive, Verizon and AT&T have less incentive to push them heavily. Moreover, Samsung has sold millions of high-end Android phones. Their Galaxy S and Galaxy S II phones have broken sales records in some countries, and the GS2 has been hailed by many reviewers as the world’s greatest smartphone – even besting the iPhone 4. The GS2 is selling even faster than the original Galaxy phones did, and Samsung’s smartphone sales have increased by 421% over the past 12 months. Since the Galaxy phones are Samsung’s most popular devices, and because 4G and other heavily-pushed Android phones are as expensive (if not more expensive) than the iPhone 4, the “low-end market” theory simply doesn’t hold up to scrutiny. Apple’s pricing is competitive, so other forces must be driving sales of competing products.
There are some consumer-oriented reasons for Android’s dominance as well. Android’s OS has become more advanced than iOS in some important ways. Heck, even webOS and WP7 are (or were) more advanced. All other iOS competitors have offered a PC-free experience for years: there is no need to sync non-iOS phones directly to a PC to use them. The iPhone will finally offer this with iOS 5, due next month. Android and webOS offer an unobtrusive notification system, something that Apple will again finally offer with iOS 5. Both competing platforms offer multitasking; Apple introduced a limited, clunky multitasking function with iOS 4, and will improve on it with iOS 5. At this point, the only truly clear advantage iOS offers is the quality and breath of its App Store. Anyone who cites Apple’s “ecosystem” as superior is referring to the App Store. They certainly cannot be referring to iTunes, which has been a crappy piece of bloated inefficiency for years. Thus, the previous iOS4 update and the next iOS5 update both pitched new features that catch up to the competition rather than surpassing them.
Consumers also gain something else by not choosing iOS: control over both hardware and software. Android, WP7 and webOS software can be easily manipulated to improve functionality, and the software makers encourage this. Apple actively tries to prevent such changes, and punishes users who engage in them. Other platforms allow apps in their markets that are superior to the stock offerings. Apple denies such apps, then incorporates developers’ ideas into their own core updates.
Much like Windows, Android does everything well enough (and in some cases, better) compared to iOS that people are willing to sacrifice a bit of hardware inconsistency and take a few more chances in exchange for extra flexibility. It might not be quite as seamless and smooth as Apple’s OS, but it gets the job done and has become user-friendly enough for most people.
But this isn’t as big a deal to the average user as hardware choice is. Apple sells 4 different iPods: the Touch, the Nano, the Shuffle, and the Classic. all are different sizes, have slightly different interfaces, and are completely different hardware packages. Inexplicably, they only sell two iPhones: the current one and the old one. Why? Who knows? All I know is that it makes little sense if maximizing market share is a goal. The company can certainly afford to make multiple iPhones for different users with different needs, just as they do the iPod. Today, you can buy the following devices with Android installed: slates, touchscreen-only, tablets, phones with slide-out landscape keyboards, phones with portrait keyboards, phones with multiple touchscreens, phones with flip-out keyboards, phones with small screens, phones with large screens, phones with massive screens…the list is practically endless. By contrast, Apple tries to push the same form factor to everyone, insisting it is the best choice for the most people. Perhaps this is why we’ve heard so many rumors about what the next iPhone will look like, and why the rumors have varied so wildly (an iPhone with a keyboard? Two new iPhones? A bigger screen? Etc). In the face of brutal competition, Apple needed additional time to determine what tweaks to make to their overall hardware/software/market strategy to stem the Android tide.
A big problem Apple faces today is that they cannot (or will not) release hardware as quickly as all the Android handset manufacturers can — particularly Samsung. Samsung’s product turnaround is so fast that they scrapped a planned iPad competitor tablet when the iPad 2 came out, then released a new tablet only a few months later that was thinner, lighter, and had a nicer display than the iPad 2.
Apple simply cannot match that pace — and reacted to that chain of events by suing Samsung in as many places as they could in an attempt to block the release of the Samsung products that threaten Apple’s own offerings in both features and quality. Most of the patent claims have no merit, but some clearly are aimed not at the manufacturers but at Android itself. Even if just a few of them stick, Apple can at the very least position themselves to collect licensing fees from Android manufacturers. The problem for consumers is that Apple appears to want much more than that: they seem to want the products blocked from the marketplace entirely. I am not confident they will succeed everywhere in their efforts, but it does show that Apple fears the Android juggernaut will relegate them to the same level in the mobile space that they occupy in the PC space.
Actually, given the current market numbers, that destiny might have already come to pass. That’s why I cannot wait to see what Apple does in October, when both the next iPhone and iOS 5 are scheduled to be released. This might be the most important release for Apple since the original iPhone came out. It may provide us with a sense of whether Apple can manage the continuous expectation of releasing amazing, mind-blowing and eye-popping new products in the space that has become the company’s lifeblood. If the next iPhone is sufficiently impressive, perhaps they will begin to ascend the marketshare ranks again. If not…well, they’ll still make craploads of money and be very successful.