Google Android Continues to Gain on Apple iOS

4 07 2010

I’ve already written a lot about the competition between Android and iOS, but this is such an important battle, that I am sure that I will be writing updates for some time to come.  Not only is this a classic battle between two different business models, but it is one that is going to have a huge impact on they way we purchase music & applications, listen to media, and communicate & interact with each other.

I have previously blogged about comScore’s numbers tracking the rapid growth of Android.  Apple growth had been slow but may be accelerating again with the delivery of the iPad and iPhone 4 which has shipped in record numbers.  Recent comScore numbers.

A recent survey by Appcelerator suggests that developers, at least Appcelerator’s developers, prefer Android and see it overtaking Apple iOS.

Appcelerator Developer Survey Results (2,733 developers)  See full article.

  • Most developers say that Apple is the #1 platform.  For now.
  • 55% say that Android has the most capabilities as an OS.  Compare to 39% who say iOS is more advanced.
  • 86% say that Android is the most open platform.
  • 54% say that Android has the best long-term outlook.

Also, Gartner recently predicted that Android would pass Apple iOS as the most popular mobile operating system by 2012.  See article.

Let’s take a more detailed and business-oriented look at Apple iOS and Google Android from a classic SWOT analysis point of view.

Apple iOS

STRENGTHS

  • Market share.  Apple leads, so developers have a trong financial incentive to port to iOS first as long as Apple is the leading smartphone platform.  (OK, Symbian is #1 but that is a different story.)
  • Apple brand.
  • iTunes strength and market acceptance.
  • Innovation.  Apple has consistently been able to deliver innovation that resonates with their target customer.
  • Control.  Apple controls their OS and their development environment.  This means better interoperation of components and a predictable, consistent platform for developers.  This issue is a lot of what the battle with Adobe about Flash is all about.
  • Tablet Computers.  Apple delivered first and got a smash hit with consumers on this one.  In the process, the re-defined the market space for their competitors.
  • Developer Support.  Apple leads in the number of current developers and the number of applications (OK, apps).
  • Applications.  The Apple App store.

WEAKNESSES

  • Openness.  Apple controls the hardware, software, development environment and which apps can ship on the platform.
  • Carriers.  Apple is tied to AT&T as a carrier.  The iPhone may be adding additional carriers soon as the exclusivity deal with AT&T ends.
  • Devices.  Only Apple devices can run iOS.
  • The perception is growing that iPhones have issues with call quality on voice calls.  Different people have different opinions about who or what is at fault but at some point this will cause problems if not corrected.

OPPORTUNITIES

  • Opening up the platform and letting other vendors design and sell devices.  Particularly devices that Apple does not offer.

THREATS

  • Google Android.
  • Google Voice will play a role in the competition over time as well.
  • The current iPhone 4 antenna problems could grow to be a problem.  See article.

Google Android

STRENGTHS

  • Widely perceived as an open platform.  Developers like it. See the Appcenter developer survey results above.
  • Faster growth for the Android OS.
  • Google Brand.  It stands for different things with end users, but it is at least as strong as Apple’s brand.  Interbrand ranked Google the #7 brand worldwide in 2009, ahead of Apple.    http://www.interbrand.com/best_global_brands.aspx
  • Device Partners.  Dozens of manufacturers are making phones and tablets such as Motorola, LG, Sony, Logitech, Toshiba.  Android is going to have more types of devices and more options for consumers.

WEAKNESSES

  • Multiple versions of Android shipping.  Each is different from a developer perspective and requires separate software porting efforts and more cost for software developers.  Google is working to bring more developer consistency to the platform by drawing a cleaner line between the platform and the services & apps that run on the platform.
  • The Android OS has not been rated as mature and stable as Apple iOS.  Recent reviews have Android closing that gap.

OPPORTUNITIES

  • Focus developer strength on a common set of APIs & Service Interfaces so that there is a single porting effort for all Android devices.

THREATS

  • Apple iOS
  • iTunes and the App Store.

In the end, the question is: Can Apple alone out-innovate their growing number of competitors, or will Google pull together its somewhat fragmented Android effort and win the volume wars by growing a winning partner ecosystem around Android?  Many people (including me) have said that this resembles the old Mac – PC wars.  It is impossible to ignore the similarity, and the consequences.





Competing With Free: Mobile Apps & Games

9 06 2010

I attended another really good session from comScore.  This one was about The State of Mobile: A Fragmented Reality?  There was much to much useful content to cover in this blog, but what jumped out at me was the business model implications for mobile.

First, some big trends in the mobile market

  • Mobile is the next big business battleground.
  • Fragmentation.  There is huge and increasing fragmentation in devices, platforms, carriers, publishing, apps, and ads.
  • Mobile Internet users will pass PC users by 2014.  (Mary Meeker.  Morgan Stanley)
  • Smartphones are already leading PC usage in several key categories.
  • The leaders in mobile phones (Samsung, HG, Motorola) are not the leaders in smartphones (Apple, Android, RIM)

The business model for apps and games

  • The use of Search is much lower on mobile devices than on PCs.
  • The reason that search is lower on mobile devices is that apps are replacing search in many instances by offering a much richer experience.
  • Apps, and especially games, are increasingly offered for free.  Game revenue on mobile is declining while free games are showing huge growth.
  • Because many apps and games are free, the business model is shifting to in-app advertising.  For mobile this will be mobile advertising services such as Apple iAd and Google AddMob.
  • comScore research is finding that in-app brand advertising is effective.

Interesting Conclusions for Marketers

  • Marketers already know a lot about the demographics of mobile and smartphone users.
  • Marketers know even more about their target audience since the know which apps the users are using (and the marketers are advertising in).
  • Marketers may even know their target customers geographic location.
  • The net result is a very targeted customer audience than traditional marketing and advertising methods have ever made possible before – and at less cost.

In the final analysis this is good for all concerned.  Users will benefit from more targeted and presumably more useful advertising that is helpful rather than disruptive.  Advertisers will benefit from being able to very narrowly focus their marketing on a specific audience.

The business model implication is that this is that yet another market is moving to the free model.  The growth trends clearly favor smartphones over PCs or other feature phones.  The only thing on the horizon that might slow this trend down would be if other carriers follow AT&Ts lead and eliminate unlimited data plans.

I highly recommend these comScore webinars if you are interested in the mobile market.

ComScore mobile market share numbers





Business Models, Recessions, & Digital Piracy

28 05 2010

Yesterday, I attended the quarterly comScore State of the U.S. Online Retail Economy webinar for Q1 2010.  First the good news, after a poor 2009 the online retail business in the U.S. is rebounding nicely.

  • Q1 online U.S. retail sales were up 10% Y/Y in the first quarter.
  • This was a nice recovery from negative 2% for the full year in 2009.
  • It’s also worth noting that while online retail declined in 2009, the decline percentage was less than the overall decline in retail.

Compared to the same quarter a year ago all but two segments of the 14 online retail segments comScore covered were showing strong  or moderate growth.  The two segments that actually declined were:

  • Event tickets
  • Computer software

Clearly, these two segments are suffering from more than just the normal effects of the economic cycle.  Both of these segments also are dealing with the issue of digital piracy.  Let’s take a look at Live Events.

It’s no secret that the sales of music CDs have been declining for several years.

Recorded music sales

Source: Enders Analysis

The increase in digital sales has not offset the loss in physical sales.  In the music business, artists have been fighting back by employing new business models to offset the loss of revenue in recorded CDs.  See NYT article.

  • First, they increased ticket prices at live events.  In 1996 the average price of a Top 100 tour ticket was $26.  Today it is $63, up 140%
  • Some of this increase is straight ticket price increases.
  • Much more of this increase is due to VIP packages where fans pay more for premium seats, band collectables, and even band member access.

For a time, this approach worked.  During 2009, while revenues were down in most industries and very negative in recorded music, the live music industry actually managed to eke out a slight revenue increase.  It looks like this will not be the case in 2010. In addition to the comScore numbers we are seeing signs of weakness in other areas.  See NYT article.

  • U2 is delaying their summer tour.  They have a good excuse – Bono is recovering from back surgery.
  • Cristina Aguilers has put off 20 shows, claiming “a busy schedule.”
  • Rolling Stone reports weak sales for Tom Petty, and Lilith, Rihanna.
  • The Eagles, traditionally a big draw, have had to cancel some dates.
  • Several other sources tell of cancelled shows and re-jiggered schedules.

The net of all this is that the new business models being employed by artists seem to be coming into conflict with the realities of the current recession and levels of unemployment in the U.S.  No matter how much fans want to attend these live events, they just can’t afford it.

The revenue damage will not be limited to the music business.  Similar things are happening in the other category that declined in Q1, computer software.  The next business to be hit will be Book Publishing.  Now that book content is available as bits over the Internet, they will be subject to exactly the same economic and cultural forces that are driving down revenue for music and software.  People in the book publishing industry had better be looking hard at new business models to offset the inevitable revenue declines to come.





Google Tablet Details This Week?

12 05 2010


PC World reports that Verizon will reveal more details
on a rumored Google Tablet computer later this week.  There has been speculation for some time that Google would launch a product in response to the Apple iPad and that it would run the Anroid OS, not Google Chrome.

I also just saw that Rob Enderle published a blog with his reasons he things Google should scrap Chrome OS.





HP Scraps Tablet Computer

1 05 2010

In an update to the Platform Wars discussion yesterday, HP announced that it was scrapping its newest tablet computer product and going back to the drawing board.  There are many news articles about this today, but the main reason given is that the Windows 7 OS was not competitive with products already in the market  such as Apple iPad.  The product issues include:

  • Weight
  • Performance
  • Battery life.  Nowhere near the 7-10 hour battery life of the iPad.

Note that HP does have other tablet PCs on the market today, but it is only the newest on that has been scrapped.

Tablet Market Requirements Have Totally Changed

By leveraging the iPhone and iTunes to differentiate from other eReader products, Apple has completely changed the dynamics of both the eReader and the tablet computing marketplaces.

  • eReader vendors like Amazon and Sony are competing with a product that does far more than just read electronic documents at high resolution.  The iPad is differentiated by their 185,000 apps and the power of the iTunes environment.
  • Tablet computer vendors like HP and Dell have seen the game change overnight.  Competition in the space used to be about putting a version of Windows on a small portable device.  Now, Apple has put new requirements on the industry that will be hard to respond to:
    • High resolution screen
    • Touch interface
    • Powerful online support with apps, music, podcasts
    • Long battery life
    • Quick response time (from a very lean OS)

Apple made a smart move in using the iPhone as the platform for the iPad.  Most if not all iPhone applications automatically run on the iPad.  The problem is that all of them were built to work with the small display size of the iPhone.  Apple dealt with that problem by adding a “2X” function that just doubles the display size of apps – and instantly almost all iPhone apps look bigger on an iPad.

HP Tablet Computer Options

The timing of this announcement is interesting in terms of the options before HP.  They clearly want to be a major player in the tablet computing space.  The problem is that Apple has completely  changed the market requirements for every vendor in the space.  HP’s strategic options:

  • Keep working with Windows 7 and try to get it right. HP has been a loyal strategic partner of Microsoft and going another direction might damage a very successful partnership.  However, it does not look like Windows 7 can compete in this space as it is now defined.
  • Move to Google Android.   It’s open.  It’s free to use.  They could leverage the Google application community.  This would seem to make a lot of sense except for…
  • Palm webOS.  HP just paid $1.2 Billion for Palm, so it’s hard to imagine them going in any other direction with their tablet computers.  iPhone/iPad and Android are gaining a lot of market momentum and developer support.  HP will have a lot of ground to make up in a short time.

General Observations

  • Apple has done an amazing job of disrupting the eReader business by extending the functionality of their product with iPhone/iTunes capabilities.
  • In the process, Apple has apparently also disrupted the Tablet PC market.  Two adjacent markets with one stone.  Amazing.
  • Product requirements:  Everybody building Tablet PCs was thinking in terms of smaller Wintel products until a couple of months ago.  The lesson to learn is: Listen to your customers problems, not how your customers think they should be solved.

Full disclosure: I am often critical of Apple for being proprietary, but I have to give them top ratings for innovation and strategy here.  This is an example of product strategy that will live on in MBA school case studies for a long time to come.

Other Articles on HP Scrapping their Tablet

CNN Money

Reuters








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