Android is kicking butt in smartphones passing the unbeatable iPhone in total volume of phones shipped but in Tablets it has taken a belly flop selling very few. Chrome OS is coming and it is likely to hit a similar wall to what happened with Android 3.0 and the iPad but with Windows if Google doesn’t significantly up their game. Let’s talk about why Google is so successful with the phones but likely to fail with their other platforms unless they significantly improve their approach to the related markets.
What makes the Smartphone market that Google is doing so well in different from the similar PC and tablet markets is that you have carriers, a powerful mediator, in the middle that evens the playing field. The carriers don’t like Apple because that company wants too much profit and takes too much control over the user experience. By doing this Apple enjoys higher profits and the customers are more loyal to Apple then they are the carriers and we are seeing this play out as large groups of customers shift from AT&T to Verizon even though most are still waiting for the launch of the iPhone 5 (expected between June and September of 2011) to make their change.
The carriers act as super customers both pushing the vendors to complete their offerings and penalizing those that don’t and assuring that their stores are at least as stocked with Android accessories and that the Android phones use similar accessories so that the breadth of products work more like a product family. Verizon even swaps Motorola and HTC phones under their Droid company brand.
The in store incentives appear to favor Android phones and the sales reps in the carrier stores appear to know and use the Android phones themselves. Finally, two of the 4 carriers in the US don’t even sell iPhones and while Apple makes up for some of this in their own stores, they clearly can’t make up for all of it. Outside of the US Apple is generally overmatched by local manufactures that better cover the marketplace and more attractive prices with regionalized offerings. Though, even there, Apple is still the only vendor who regularly gets lines to buy their products.
Tablets with 3G turned on only account for about 10 percent of those sold and that pretty much takes the carrier out of this mix. This means the iPad hits without the huge carrier disadvantage and competes on its merits against the Android offerings. Honeycomb, the tablet version of Android, is still in its early phases and does not yet have many compelling applications developed to run native on it and it was rushed to market with advantages like Flash support not yet complete.
The vendors building Android products have either had to use outdated versions of the platform to create a more polished user experience or the comparatively raw 3.0 version providing them with an ugly choice between outdated software and poor user experience. In addition, Apple locked up so much of the parts inventory used for tablets, particularly the display, in supply deals that the Android vendors are complaining they simply can’t be competitive at iPad price points and have to either not make as much with the tablets or price significantly more than Apple. Finally, Apple currently outspends thanks to hugely successful and profitable sales of the iPad, everyone else with the possible exception of the Motorola Xoom, on demand generation marketing and has one of the most aggressive seeding programs in the industry which is currently unmatched.
In short the tablets coming to market are overmatched by Apple and there is no carrier in the middle forcing the gap closed. As a result buyers prefer the iPad by a massive margin.
Could be because PCs are still about 75 percent bought by companies and not individuals and these IT organizations are tied more tightly to Microsoft. Google has one big reference account for IT at the moment but that account, the city of LA, appears to be getting ready to sue them so, as reference accounts go this isn’t a great one. This appears like the balance is on the wrong side for Google on the PC market with the folks at critical decision points more likely to stay with the status quo than promote Google over Microsoft particularly if it looks like other Google advocates are thinking of suing the company.
Google has two approaches, mirror Microsoft and get IBM, HP, Dell or one or more other enterprise vendors to front for them or come in on the consumer side with a tablet. Well the tablet thing certainly isn’t working and most of the existing enterprise vendors are already tied at the hip to Microsoft. It should also be pointed out that Microsoft shares a percentage of their sales with partners and, so far, as Google only supplies their products cheap or for free, they don’t share as much in the income. HP is likely the most flexible but they have their own WebOS platform, and Oracle might be interesting but they are suing Google at the moment as well. This leaves IBM but somehow I doubt IBM would get along any better with Google than they did with Microsoft. Google has become kind of a suite magnet and that undoubtedly works against them in a number of areas.
Microsoft sold around 350M copies of Windows 7 over the last 18 months suggesting Google needs some massive traction but I don’t see it here.
President and Principal Analyst, Enderle Group
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