
Why Apple can’t beat Android - kingsidharth
http://venturebeat.com/2010/11/05/why-apple-cant-beat-android/
======
gabrielroth
The problem is the word 'beat' in the title. Markets aren't zero-sum. Apple
has thrived over the past decade by focussing on rich margins and on expanding
markets, rather than by competing for a bigger sliced of a fixed-size pie.

There's no reason Apple and Android can't both "win" in the phone market. But
we'd need to define "win." For Apple it would mean selling a lot of devices
and making a good profit on each device. For Google it would mean, uh, some
kind of complicated bank shot where more people click on AdSense ads from
their phone. (It's hard to see how they'd even know if they won.)

But note that Google would be fine with a future in which the iPhone is still
very popular, as long as it doesn't completely dominate the market. (People do
a lot of Google searches from their iPhones.) And Apple would be fine with a
future in which Android owns the low end of the phone market, i.e. the low-
margin commodity devices that are given away free or very cheap with low-end
plans.

But of course, stories like "It's X versus Y in a cage match to the death!"
are very appealing, even when they're wrong.

~~~
Andrewski
There is a cage match, and it is for developer mindshare. Google's java clone
environment vs. Apple's Obj-c solution.

This was the whole thrust of his article. Code for Android because pretty soon
they will be dropping them from blimps for free.

The crucial bit for a developer is how do you make any money on a platform
where cheap is the prime consideration. There are more Android units out there
than iOS devices, yet iOS devices yield something like 92% of the dollar sales
of applications. This is the most important figure to a developer who wants to
eat, and yet in his analysis it is strangely absent.

~~~
gabrielroth
_There is a cage match, and it is for developer mindshare._

But that too is non-zero-sum. The number of hours spent on phone software
development is increasing rapidly. If Apple continues to sell a substantial
number of iPhones, and Android users start buying apps for their devices too,
there's no reason there can't be two viable markets for phone-app developers.
(I'm not saying it's inevitable that Android will become a viable platform—I'm
just saying that, even if it does, its growth won't necessarily come out of
Apple's hide.)

~~~
Andrewski
I am not optimistic about the success of droid phone store solutions. Much
money can be had by individuals coding for app stores on their own, and most
individuals will not target both platforms (in my opinion) so they go where
the money is.

The fact of the matter is that droid users do NOT buy apps for the most part.
Some do, but most do not.

There is also a desire to own the iPhone as a status symbol / fashion
accessory. Nobody buys an iPhone clone running Android because it is cool,
they get one thrown in for free with their contract.

~~~
NickPollard
Considering the number of my co-workers who have been raving about their HTC
Desires for the last 6 months, I think you should be careful with your
generalizations.

------
gvb
_Apple will always be the Maserati of smartphones — leading-edge, trendy,
stylish, downright awesome._

I understand this is hyperbole, but I would have said BMW or Mercedes rather
than Maserati. BMWs and Mercedes are know for being classy, solid, expensive,
comfortable cars. While there aren't as many on the road as Fords, they are
definitely "daily drivers."

Where I live, Maserati is nowhere near even 5% of the market.

------
protomyth
This highlander, zero-sum-game view of the smartphone market is good for page
views but horrible for real thoughtful analysis. Microsoft seems to be betting
its Windows Phone 7 strategy on converting feature phone users to WP7 smart
phones. It is going to be a long time before smart phones are zero-sum.

What would be interesting is how tough it is going to be for different app
types to switch between devices and what the store situation is going to look
like in the next couple of years. Those are more interesting questions when
considering what a developer is going to do.

For example, OpenGL ES is standard on iOS and Android, but I believe it is not
on WP7. This might be a big hurdle for smaller companies and not allow the
development of WP7 versions of some games.

"Apple will always be the Maserati of smartphones — leading-edge, trendy,
stylish, downright awesome."

I have a tough time believing any article that takes the Apple Mac strategy
and assumes it is the same for iPhones or iPads. It ignores the iPod pricing.
It also ignores what the current management team has done with a new device
entering a new market. I think the big lie about this type of comparison can
be found in the lack of iPad competitors with the same features at a lower
price point. The days of Apple not being able to get the best component prices
ended in the iPod era.

------
GHFigs
_For the better part of 20 years, Mac lovers fumed in frustration as Apple
languished in sub-5% PC market share territory._

That's the very first sentence. Take a wild guess at where he's going from
there.

~~~
raganwald
Agreed! And, I'm disappointed at where he _didn't_ go, namely he didn't
mention that during Jobs' exile, Apple's strategy was to make more and more
money off fewer and fewer customers, by selling weak products at high prices.

Jobs has brought back an emphasis on building strong products and expanding
their market share, in part by relentlessly driving prices down even when
anyone with a spreadsheet can see that they could capture more revenue today
by keeping prices high and selling fewer units.

The OP really didn't address the fact that while Android will be ubiquitous,
hardware manufacturers will not get a free pass to compete with Apple on price
as PC manufacturers did during the exile.

Also, the author missed the biggest point of comparison: Mac market share is
still insignificant. But Apple's share of the profit is reputed to be larger
than the top three PC manufacturers _combined_.

Will this play out again in the handset business?

~~~
GHFigs
_hardware manufacturers will not get a free pass to compete with Apple on
price as PC manufacturers did during the exile_

Good point. It reminds me of one of the things Jobs said about 7" tablets not
being able to to meet the larger iPad on price. It sounded daft at the time,
as the screen is surely the most expensive component, but then here comes the
5" Dell Streak at $550 and the 7" Galaxy Tab at $400 _with contract_.

~~~
ZeroGravitas
A 3.5 inch iPhone 4 with 8GB costs less than a 10 inch iPad with 16GB and no
3G or GPS.

This says something, though I'm not exactly sure what, but at the very least
it suggests that _big screen = big price_ is too simplistic.

~~~
protomyth
Technically only with subsidy: $499 (iPhone 3GS 8GB), $599 (iPhone 4 16GB), or
$699 (iPhone 4 32GB). Still not sure if that means as much as it should.

~~~
ZeroGravitas
In the UK, the iPhone is only £10 cheaper. Probably they set the prices to
meet the US magical prices that end in 99 but translate for foreign markets
before rounding.

I meant to put the actual (small) difference in my original post, but forgot
to back and edit it, so it actually seems like I'm arguing the opposite of
what I intended.

------
melling
Why would consumers want either brand to "win?"

Three or four really good smartphone options will keep prices down and
innovation high.

~~~
mortenjorck
This winner-takes-all view of the market, perpetuated by the cliché of
referring to an upstart as a "[market-leading product]-killer" is pervasive as
it is unhealthy. No one's product has to kill anyone else's product for a
market to evolve.

~~~
glhaynes
I tend to think this paranoia and view of the world as winner-take-all traces
back to Windows' (and Office's) utter domination, which seems to me quite
anomalous in this industry. Most areas of the industry are full of good
competitors that each have relative plusses and minuses.

------
smallegan
I think the term "beat" is used loosely...Will there be more Android devices
than iPhone's....certainly...but there are more Kia's on the road than Lexus'
and I'd hardly say that Kia won the car battle...

~~~
GiraffeNecktie
That's not really a useful comparison, for several reaons. Toyota and Nissan
were, at one time, the "Kia" of their day. Up until recently, Hyundai was
known for nothing more than producing worthless junk and today they're
producing a very well received (and relatively inexpensive) luxury car. The
world changes. I just bought a Samsung Captivate which is not quite an iPhone4
but I'm quite happy with the minor downside for the ability to swap in
batteries, avoid iTunes, be free from censorship etc.

------
Andrewski
The thing about articles like this is that the authors are not interested in a
real analysis of the situation. It is just unvarnished cheerleading.

"Android" is always going to sell more units than Apple's phones, because
Android phones are much cheaper for the cell phone stores to buy and sell.
They are to the phone store as the Promaster lens is to the camera store.
Comparing meaningless graphs like percentage of market share is deceptive, and
it is clear from his analysis that he doesn't actually want the people who
skim his little blurbs to actually understand what they are seeing. If he did,
he'd show a graph of the dollar turnover of the various app stores.

Short version: you can roll into any phone store in the world and pick up an
iPhone clone, and it will be cheaper for you, and more profitable to the phone
store.

Refute if you can.

On the edit: typing this on my iPad and yes, a soft keyboard, while pretty
good, still isn't good if you a re a touch typist. Corrected for spelling
errors.

~~~
Andrewski
By the way, this is about the millionth blog post I have seen like this. They
could be machine generated for all I know.

"Android will take over because they sell more phones, therefore one should
code for an Android app store and platform."

Something to ponder: Are the people who get Android phones (with the exception
of a few Java or Linux geeks), because they are cheaper or "free" with the
contract, the kind of people you want to target as your customer? Cheap people
aren't flashing their cash.

Another point to ponder: Oracle is targeting Google's Java (ok Dalvik, but it
if quacks like a duck...) that has been thrown onto every iPhone and iPad
clone out there. And Oracle will win their lawsuit, because a jury will simply
say, if it walks like a duck...

Is this a safe platform to code for? Maybe, but it is a gamble. Apple is
facing a whole horde of jackals and vultures who want a scrap of meat, but
they are much more vertically integrated and this includes the development
environment, the language, the processor cores, you name it.

~~~
gte910h
I _really_ want current numbers. As of April, 90% of the app sales were in
Apple although android had 40% of the phones.

------
alextgordon
_The smartphone segment suddenly had exploded — up to 50% of all new shipments
were now smartphones, and in another year it will be closer to 100%.

You may laugh at that last statement, but it is more likely to happen than
not, and all because of Android. I realized this when I saw the LG Optimus, an
Android smartphone now on T-Mobile for $30. Thirty bucks for a smartphone._

That's like saying Mercedes are going to take over the world because the first
instalment is only £500...

The LG Optimus costs £175 without a contract. That's very much a mid-range
phone. Show me a smartphone that _actually_ costs $30 and I'll take that
prediction seriously.

~~~
dazzla
The cost of the phone is almost becoming irrelevant. The cost of the data plan
is the real barrier to entry as it dwarfs the cost of the phone.

~~~
kjksf
But you pay for the plan the same regardless of the phone you use so it's not
a basis for choosing a phone.

The price of the phone, on the other hand, is a factor in choosing a phone.

~~~
dazzla
Assuming you've made the choice to get a smartphone. If you haven't then the
difference between a regular and smart phone is really the plan cost.

------
mattmaroon
In the PC world, it's a mistake to argue whether or not Apple can beat Windows
because it doesn't try to. Apple competes with Dell, HP, etc., not Microsoft.
Apple can't beat them all combined but it can definitely beat many, maybe all,
of them individually in terms of profits.

It's the exact same with phones. Apple doesn't need to sell 95% of the smart
phones out there. It can and will make a bundle just selling 10%.

~~~
kjksf
Apple (OS X) can't beat Windows (Microsoft) but it's not because Apple is
not/was not trying.

Apple does compete with Microsoft and would love to be the dominant OS. If
they were, their profits and market share would be stratospheric. They're
doing extremely well selling just 5% of PCs but can you imagine how well they
would be doing if they were selling 95% of them?

The same applies to phones. You're right that they would do well selling just
10% of phones but the goal of every company is to get 100% marketshare.

Clearly, that's not going to happen but let's not fool ourselves: Apple and
Google are in a cut-throat race to be the dominant phone OS (in marketshare
terms) because the number one is more handsomely rewarded than number 2, in
any market, and both companies desperately want to be number one.

~~~
mattmaroon
If Apple were trying to make OSX the OS with the highest market share they
would license it out. They are clearly not pursuing that strategy. If they
wanted to sell the most computers in total, they'd lower prices to compete
with Dell, HP, etc. They do neither.

I'm sure they'd like to see their market share rise, but their business plan
in computers is to own a small but high markup slice of the market, knowing
that in doing so they will not be the volume leaders.

------
jdietrich
If it's a battle between manufacturers, Apple have already won.

Out there in the grown-up business world where CEOs don't wear trainers to
board meetings, they have a saying - "sales are vanity, profit is sanity". The
dot-com delusion of losing money on each sale and making it up on volume
remains to this day.

While the margin on an android handset is low and falling, some analysts are
suggesting that the per-unit profit on an iPhone is actually increasing.
Android manufacturers have very little opportunity to defend their margins,
because they have so little room for differentiation other than price and
performance. That is one reason why we're seeing things like HTC Sense and
MotoBlur.

HTC are very profitable at the moment, which is the best evidence for why you
don't want to manufacture Android handsets. Remember where HTC started -
making cheap, generic WinMob devices that were house-branded by networks. They
broke the back of other WinMob manufacturers by viciously competing on price.
They are now facing competition in the Android market from the likes of ZTE
who are employing exactly the same strategy.

Here in the UK, you can buy a ZTE Blade for £99 ($160), prepaid with no
contract. It's a handset with an 800x480 OLED display, a capacitive
touchscreen and Android 2.1, upgradable to 2.2. Great news for consumers,
terrible news for manufacturers. I have absolutely no idea how an Android
manufacturer could defend against that.

I read an NPD report recently that stated that although Apple had less than a
10% share of the PC market, they had over 90% of sales over $1000. The average
Windows PC price was $515, versus $1400 for the average Mac sale. I know which
business I'd rather be in.

~~~
ergo98
Are you on the board of Apple? Are you a shareholder?

 _Then why do you care?_

Seriously, why does Apple's profit margin have any relevance to you, a
_consumer_? I would really like to know.

See, I care about relative marketshares as a developer and as a user because
that decides application reach, and application availability.

Profit margin of vendors....why would I care? Seriously, why, aside from some
pathetic flag waving?

Some of the Android makers make low margins because they are essentially
recovering from collapse, at least in the smartphone market. Motorola, SE,
LG...was there some proprietary scenario where they would be rolling in loot
right now on a proprietary platform? Seriously, do you think that? Is anyone
stupid enough to think that?

If Motorola didn't adopt the Android last minute rescue, they would have been
done. LG...SE...what option was there for them, given the entrenchment of the
iPhone and the network lock in effect of the app market that was quickly
becoming unipolar.

And delusions that Apple is immune to competitive forces is the sign of
fervent blindness. Even Apple is warning that their margins are completely
unsustainable, because no longer do you pay whatever it costs because that's
the platform with the Facebook app and the Twitter app and the Foursquare
app...but now you actually have options.

~~~
apinstein
_Why should a consumer care if a vendor is profitable?_

Because profitable vendors offer many advantages to consumers: 1) better
support, 2) more R&D for future innovation, 3) better product (result of
better r&d, better parts, etc).

I've been buying Apple products for about 25 years. They tend to hold up well,
have good support, and continue to offer me great new innovations.

Have you ever tried getting help from a vendor that you know is selling
something at 5% margins? Good luck to you...

The customers of our startup(s) also want us to be profitable, because they
buy into our vision and want us to succeed, and if a company isn't profitable,
it dies, and everyone involved (customers, owners, employees) loses.

~~~
ergo98
>Have you ever tried getting help from a vendor that you know is selling
something at 5% margins? Good luck to you..

Dell has incredibly good support (and if you want wipe your arse support, you
can pay for it and get it). Their products are also shockingly well built.
Seriously, Dell servers are just brilliantly put together.

They manage to combine small margins with a decent product. Everyone wins.

On the R&D front, Apple is a marginal investor in R&D. The iPhone 4 software
is great, but the hardware -- it's a collection of off the shelf products. The
same stuff that goes in that 2% margin no name device.

Which of course is true for Apple desktops as well. Apple once tried to do
their own thing, and it didn't turn out so well. So now it's the same
commodity parts that you would find in every discount bin white box brand.

------
amanuel
I'm afraid he is misreading what is happening. Apple was never going to own
the cellular market like it does the portable music market.

The real story is how Android is destroying Windows Mobile, Blackberry and et.
al.

But alas writing such a story isn't as sensational as "Apple Loses Again!!"

*Sigh

------
kgutteridge
Two things worth bearing in mind. 1. Google had acquired the Android team
before the iPhone became popular 2. Mobile phones will sell whether they are
smartphones or not, just because a user has a phone capable of utilising a
function might not mean they use it, especially if they are purchasing bargain
price phones just for making calls and sending texts

------
ugh
I (as a consumer) don’t care who “wins” as long as nobody dominates the
market. I even think that’s a distinct possibility but I don’t really know
whether my prediction for a fragmented market (kind of like the car market)
with no clear winner is merely wishful thinking. As is I (as a consumer) would
be slightly less intimidated by an Android dominated market. (Which is funny
because if I needed a smartphone I would buy an iPhone.) It’s harder for three
players (Google, handset makers, carriers) to be evil than for two (Apple,
carriers).

I don’t expect the market to develop very analogous to the PC market at all
and I especially think that you can’t just point at that and say it will
happen again.

------
Tycho
The web is such a massive leveller for different platforms these days, I don't
think a comparison to Mac vs PC days works too well. It used to be all you
could do with a home computer was buy more software for it from shops, and
Windows held a massive advantage in that area; nowadays I wonder how many PC
users _ever_ buy new software, except Office. Just get your wifi sorted out
and start surfing. Upgrade to new hardware when websites start running slowly.

------
Mazer23
The author seems to think that because there will be 20 or 50 viable androids
they will somehow dominate. It seems to me that this is much more a
branding/marketing problem for android.

Categories like this tend to support just two or three brands at the top of
consumer mineshare. Think coke vs pepsi or BMW vs mercedes. The problem with
android is it's not really a choice for a consumer. By picking android they
really need to make a much more complex choice of which actual phone to get.
The real choice the consumer is making is iPhone vs droid incredible or some
other specific phone. In the end all the manufacturers under the android
umbrella are competing with each other as well as the iPhone for mindshare.

I definitely agree that android will have more units out there than iPhone
eventually, but I think the iPhone will easily be the brand with the much
stronger mindshare in the category. Normal consumers will still see it as
iPhone vs all those other phones. Apple will also have the biggest profit in
the smart phone category as a result.

Remember, google is selling eyeballs to advertisers, not phones to consumers.
They're playing a different game than apple.

~~~
aphexairlines
> Categories like this tend to support just two or three brands at the top of
> consumer mineshare.

The consumer electronics market seems a lot more varied than two or three
brands holding mindshare. Walk into a store to buy a TV and you'll see at
least 7 brands you recognize (Sony, Toshiba, Sharp, Samsung, LG, Panasonic,
Mitsubishi). And those are just the asian ones.

~~~
Mazer23
Sure, but ask any consumer what they think the best brand of tv is and it will
probably fall between two or three brands that they can think of. I'm not
saying a particular category can't be big enough to support a lot of brands.
I'm saying in the consumers mind there are usually just 2 or three they think
of.

------
todayiamme
As the Zen master would say, we'll see.

~~~
tomjen3
No, thats a copout. If you don't have an educated guess, thats fine, but don't
pretend thats especially wise, there is value in predicting the future, even
if you are sometimes wrong.

~~~
chadp
Actually it is not in this case. It doesn't really matter.

Isn't it generally accepted that both will be hugely successful and in the top
5 of all mobile phones sold?

And who benefits anyway? Apple gets more plump AND Google + manufacturers make
more money at the same time.

All mobile developers should be developing for both at this stage anyway so it
doesn't even affect them who "wins".

Both have already won. The actual title is just a pissing / ego contest by
users and bloggers.

~~~
Andrewski
The point is NOT to sell the biggest number of phones, as individual units.
The point is to make the most _profit_ and a race to the bottom in a market
already saturated with what amounts to 50 identical wannabe iPhone clones will
not be very profitable in the long run.

The point that the author of the original blog post was laboring over, was
that as Android will have a larger installed user base at some point in the
future, and therefore he thinks the smart money is in making Android apps.
He's wrong, of course, but he is entitled to his opinion. As I detailed above,
hardly anybody actually buys an Android phone, it is rolled into their
contract. It is a me-too product that, while being functional, is nowhere near
the iPhone in several important categories, namely user satisfaction, App
developer profit, and per-unit phone profit.

------
zbruhnke
I wrote an article about this kind of article yesterday ... its simply not the
same thing, and comparisons just aren't fair.

<http://www.zachbruhnke.com/androidvsiphone>

