Why Apple can’t be too worried about Android 3.0 Honeycomb tablets taking away iPad sales: Part 1
February 5th, 2011
The Android platform supremacy myth
Daniel Eran Dilger
Listen to giddy Android enthusiasts and you might get the impression that the next tablet-centric version of Google’s Android platform, named 3.0 Honeycomb, is about to destroy iPad sales. They’re wrong, here’s why.
Part 1: The Android platform supremacy myth
Core to the idea that an avalanche of new Android tablets will destroy the iPad this year is the perception that a wave of Android phones buried the iPhone last year. But this isn’t even slightly true.
Apple failed to produce enough iPhones to even meet demand, with its executives anxiously admitting to analysts that, were it possible to squeeze more production out of Foxconn, they could have sold more. That doesn’t sound like a manufacturer pinched by the rival products of competitors.
Android enthusiasts like to suggest that the licensees of the platform somehow stalled growth of the iPhone, but that’s delusional, not factual. Apple could not have made more or it would have. Apple is growing as fast as it can. There are countries that don’t have iPhone 4 yet, and even regions that still officially stock iPhone 3G.
If Apple were really reeling from Android’s gains, it wouldn’t have an excess demand problem, it would have a excess supply problem like the Microsoft Zune, or HP Slate PC, or Samsung Galaxy Tab, or Google Nexus One.
Why Microsoft’s Zune is Still Failing
Apple iPad rival HP Slate sees demand fizzle
Samsung admits its iPad-rival Galaxy Tab sales were… “smooth?”
First week Google Nexus One sales disappointing
Google cancels Verizon Nexus One
Apple fills out its iPhone off season
In early 2008, back before Android was even available on a smartphone, Apple’s iPhone sales slumped in the second and third fiscal quarters (the first calendar half of the year), as customers began to anticipate the expected second generation refresh.
Sales that had peaked to 2.3 million that winter fell down to a quarterly low of less than a million, in part because Apple simply took iPhones off the shelf (graphical representation below from Wikipedia).
After Android began to become more widely available in 2009 (and was joined by other competitors then judged to be threats to the iPhone, such the BlackBerry Storm and Palm Pre), Apple barely dipped in its Q2 and rebounded in Q3, increasing quarterly sales above its previous winter quarter high of 4.3 million.
During 2010, the Year of Android, iPhone sales in the typical demand trough of the iPhone cycle were filled in, remaining within 5% of the winter high throughout the formerly snowed in first half of the year.
Apple hasn’t just driven iPhone sales to hit holiday quarter peaks of 2.3 million to 4.4 million to 8.7 million to 16.2 million with each successive generation; it’s also filled in the intermediate quarters. Apple has gone nowhere but up, and up big; that’s simply a fact.
Android steps up to bat
Android handset sales did grow dramatically in 2010, but in part that’s because relatively few sold in 2009. It’s easy to grow from nearly zero. Even the first Apple TV originally boasted hundreds of percentage points of growth over its first years’ sales.
Two years ago, Verizon was focused on selling RIM’s BlackBerry, which reportedly made up 95% of its smartphone sales. When the von Trapp family applause greeting the BlackBerry Storm turned into a listlessly polite golf clap and then a hushed murmur of incredulous disappointment that Apple’s iPhone couldn’t be sufficiently cloned by Canada’s star phone maker, Verizon turned to Android.
That served to rapidly convert about half of Verizon’s smartphone users from BlackBerry’s legitimate Java platform to Android’s almost-Java-but-not-enough-to-pay-licensing-fees-in-the-opinon-of-Google-but-not-Oracle platform within about six months. Given that Verizon is America’s largest carrier and, behind AT&T, the second largest smartphone vendor, this was a major coup for Google’s Android.
However, Android quite obviously didn’t eat market share from iPhone. AT&T didn’t even bother to offer an attractive Android model on its network, while Verizon, Sprint and T-Mobile sold Android phones on networks that couldn’t sell the iPhone. It’s hard to imagine a more clear, real world experiment in segregated markets.
Further, while Apple simply couldn’t make enough iPhones to satiate demand, it was also hamstrung in the US by being tethered to a network rated the worst overall in service coverage. This created a perfect storm backing Android, similar to Microsoft’s 2006 Vistapocolypse that flattened barriers for PC users and helped Macs begin to gain solid traction.
AppleInsider | Android’s weak sales drive Verizon toward Apple’s iPhone
Google found distributing Oracle’s Java code within Android project
How Oracle might kill Google’s Android and software patents all at once
Android lost despite ideal conditions
Android should have been clobbering the iPhone. Instead, it couldn’t even manage to push Verizon ahead of AT&T in the ratio of subscribers who opted to pay extra for smartphone data service.
In a well separated race where the primary handicap involved AT&T, iPhone won in terms of delivering results to its carrier and also in terms of delivering profits to its maker. And iPhone subscribers have consistently reported greater ownership satisfaction that Android users have.
None of these facts are controversial; they are simply impossible to argue against. Android failed in 2010 to do anything but exist in an environment devoid of any credible competition outside of the increasingly irrelevant BlackBerry OS, Windows Mobile, and Palm OS phones that Android originally set out to compete against.
Google copied Apple’s search results, oops I mean smartphone strategy and design, to make Android a more capable competitor to the old guard of smartphone platforms that the appearance of the iPhone in 2007 had already made look long in the tooth. However, Android has done little to cohesively band together the former users (and makers) of BlackBerry, Windows Mobile, Palm and Symbian smartphones into a force to take on iPhone.
Instead, iPhone continues to eat up as much of those same platforms as Apple can consume without gagging on production hurdles. Google may be stealing some of Apple’s ideas, but it’s not stealing any of Apple’s speed or growth by any metric, unless one finds it useful to use “Android” as a brand-name proxy for “every other smartphone maker apart from RIM and Nokia,” just to argue that Apple isn’t selling more phones than everyone else in the world, combined.
Why Gartner changed its tune
That effort in “market share voodoo,” being propagated by Garner and other corporate data flack firms, desperately attempts to hide the failure of actual Android licensees, from Samsung’s disappointing profits to the shaky position of Motorola and Sony Ericsson.
Add up all the losers and you can create a composite monster that looks big, bad and powerful in charts, a seemingly effective strategy if all you have are losers and and you want to make the winner look less successful.
Incidentally, Gartner never compared Windows Mobile against “all phones from all makers licensing JavaME,” back in the days when it was trying to make the case that Microsoft was going to rule the smartphone world (back when it had less share than iPhone does now), indicating that its numbers are framed to generate profits from partners, not for general edification.
Gartner’s presumptuous coronation of Android as the Windows of smartphones
No market for cheap Androids
In reality, the offerings of all the Android licensees are still not matching Apple in performance, quality and price, while the platform itself, despite its reported size, is not resulting in a viable software market, nor even any blockbuster app development stories.
Unlike Windows in the PC world, Android isn’t even offering users a significantly cheaper point of entry via shoddy hardware, because the apparent prices of smartphones are glossed over by carrier subsidies.
While consumers see $1000 MacBooks competing against $300 PC netbooks in the computer world, among smartphones they see the $199 iPhone 4 and a $49 iPhone 3GS, leaving no real opportunity for lowballing by hardware makers. Even BOGO free phones don’t seem like a great savings when the customer knows that they will be paying just as much a month for phone service.
Two sides of the same coined phrase
Google simply blew the Year of Android in smartphones, leaving Apple to not only accelerate its pace with iPhone 4, but allowing it, in the same year, to also launch the world’s first wildly successful tablet. And while Android enthusiasts hope that Honeycomb tablets will take off and add to Android’s footprint, they’re loathe to count iPod touch and iPad sales as part of iOS today, because there are no successful examples of either in among Android licensees.
Android enthusiasts like to say that Google is an underdog fighting to catch up with Apple’s head start on the iPhone with one side of their mouth, while the other side proclaims Google the dominant player in the market with the most market share in web use, unit sales, and so on. But neither claim is really true.
Google didn’t come from behind with Android. It began its smartphone project with the acquired (and already gestating) Android startup around the same time Apple began work on iPhone in 2005. Google just took longer to release its first reference designs, in part because Apple’s product was so much better than Google was originally hoping to achieve that it had to start over with an iPhone-like second draft.
Google also had just as much time to cultivate an iPod touch or iPad, it just hasn’t had the vision to plant the seeds of either because it’s been focusing on collecting Apple’s pollen and watching how Cupertino farms its iOS garden with an eye to duplicating its algorithms of success in Mountain View.
Why is Google so hysterically hypocritical about Bing using its public data?
Dysfunctional Android attacks Google
At the same time, Google is not dominating anything. It isn’t turning a profit from Android. It isn’t even selling Android. Google makes as much from Android as it makes from iPhone. To suggest that Google is “dominating” Apple by releasing free smartphone software is absolutely backwards! Google hoped to kill the goose laying it golden eggs by creating a robot goose that could print golden ads. The problem is that Android can be subverted to produce its gold for Google’s competitors.
And it is. Verizon is already selling Android models that exclusively link to Microsoft’s rival Bing service, while the majority of Android phones (which happen to be in China) are wired to Chinese search, maps, and other services instead of benefitting Google. So no, while Android isn’t (yet) doing anything to hurt Apple, it very clearly is creating a mechanized army that is already biting Google in the ass.
There is a somewhat scary prospect (for the West) that Google’s shortsighted efforts to backstab its once bosom buddy Apple will at some point empower China and other emerging nations to take away the smartphone business invented in America (and arguably, Europe), just as Japan and other Asian car makers pulled the auto industry out from under the feet of US manufacturers. However, this might be giving China too much credit. The industrial power has had a decade to copy the much simpler iPod, for example, and hasn’t been able to really deliver a compelling alternative of its own, despite having the Linux and PlaysForSure to do so.
Additionally, even Android’s growth in China hasn’t really come at the expense of Apple, which had very little presence there so far thanks to the incompatibility of the country’s (and the world’s) largest carrier’s network technology. China’s three carriers are like a giant Verizon (China Mobile, with 500 million subscribers on TD-SCDMA), a much smaller AT&T (China Unicom, 156 million, mostly GSM), and a third, smaller Verizon (China Telecom, nearly as big as the US Verizon with 75 million subscribers on regular CDMA).
Apple had no hope of selling millions of phones in China because, like Verizon in the US, they simply couldn’t work there outside of the one carrier it can partner with, but which, like AT&T, doesn’t offer great 3G coverage across the country. So even there, Android wasn’t competing against the iPhone, but rather against the Linux phones Motorola had been selling before Android became an option.
Repeating the test with competition in place
Among smartphones, 2011 will finally mix up the test tube to see how well Android fares when directly competing against iPhone, at least among the two largest US carriers. Apple may also bring its CDMA iPhone 4 to other markets in China and India, but the US market will provide the most clear before and after picture of what consumers want, because AT&T is scrambling to shore up its smartphone lineup with more attractive Android options, while Verizon will now be carrying both Droid and the iPhone.
Verizon has already released a preliminary peek at what we can expect: in just two hours, iPhone 4 preorders exceeded the similarly hyped launches of the Storm and Droid on its network. That tidbit was release by the carrier itself, somewhat surprisingly.
There’s also evidence that as much as half of Verizon’s existing smartphone users on both major platforms are planning to jump to iPhone. If that happens, 25% of the US installed base of Android will simply vanish. That’s not going do anything to help sustain impressive growth numbers for Android this year.
The problem for Android isn’t just that iPhones are magically more attractive to consumers. Google also isn’t struggling to sell its phones against a monopolist monoculture dominated by iOS in the way Apple railed against Windows ubiquity for two decades. If anything, Google is in the position of Microsoft, except that it doesn’t have to sell hardware makers on buying its OS; Android is free.
How is a free OS, paired with the communal wisdom of the crowds of manufacturers in a free market failing to decisively take over the smartphone market from Apple’s iOS? Why is Android Market so unappealing to developers and users that Google itself is leading the discussion about how “unhappy” it is with the performance of Android apps? And how is it that Android, with so many apparent advantages over iOS (from broader US carrier support to major hardware maker backing to unrestricted app availability), is not only failing to stomp out growth of the iPhone but is also completely AWOL in the tablet and media player segments represented by iPad and the iPod touch?
Hard questions for Android enthusiasts
These are puzzles Android backers would prefer not to think about, just as Tea Party advocates don’t like to give much thought to why they don’t protest when the deficit-creating president is a white Republican. It’s a core meme of reality that, simply by uttering out loud, causes ones’ erection for a cherished ideology to retract back into a tiny little sad wrinkly bit of embarrassment.
In rather stark contrast, iPhone owners don’t seem to have any problem in complaining about its most troubling aspects, from its frustrating connection to AT&T’s abysmal coverage or glacial addition of support for tethering and MMS, to needling little annoyances ranging from its simplistic notification queuing to its sometimes maddeningly arbitrary rules for developers’ apps.
Anything and everything that can be imagined to be a slight in Apple’s iOS world is disseminated and critically examined with a bias toward finding fault and assuming the worst: problems that will never get fixed, issues that are the fault of the petty dictates of executives, and the general evil of the corporation. Despite all this gloom and doom and crisis of the week baited to incite outrage, Apple continues to plough new ground and sell iPhones as fast as it can make them.
We’ll know Android has legs when it begins walking on its own
Google has been getting a free pass in these regards, with its acolytes dismissing and ignoring everything from its usability problems and general ugliness to the swiss cheese of its software platform to the inconsistency of its hardware quality between makers. But as biology and commerce provide infinite examples of, such protected babying does not result in competitive strength.
Google’s Android is almost always tacked on to the rear of flattering comments about Apple’s business, with references to the iPad now apparently obligated to include “and tablets running Android!” to every statement made about its success. When Android really begins to matter, this polite, tailgating inclusion won’t be necessary.
When Android begins to be challenged by one “crisis-gate” blog assault after the next, and the general media begins to ask tough questions about its greatest weaknesses rather than just glossing over everything apart from its ideological advantages, that’s when we’ll know that this new platform has legs and might begin kicking its competition. We’re certainly not there yet.
Android is still playing the role of the dropout idealist goth kid, hunkered down in his parent’s basement dropping acid and talking about how unimportant his twin sibling’s accomplishments in academics and business and sports are, and how it makes so little sense (and offers so little relevance, really) given that the two share so many genes.
Android needs to walk, not just talk about how it’s giving it away for free.
I’ve been talking a lot about smartphones here because the Year of Android didn’t deliver any real tablets. That, Android’s proponents insist, will change dramatically once a new crop of 3.0 Honeycomb tablets arrive later this year. Part 2 will explain why they’re wrong about that, too.
Why Apple can’t be too worried about Android 3.0 Honeycomb tablets taking away iPad sales: Part 2
Why Apple can’t be too worried about Android 3.0 Honeycomb tablets taking away iPad sales: Part 3