The Android operating system is growing at a numbingly rapid pace yet again. In the third quarter, the market share for Android grew from 72.6 percent last year to an impressive 81.9 per cent. Over 205 million Androids were added, nearly double from a year ago. By contrast, the user additions for BlackBerry declined by more than half. Apple’s iOS market share slipped 2.2 percent. What may have surprised many was the growth in Microsoft’s Windows Phone. Market share grew to 3.6 per cent , thanks to sales of 8.9 million in Q3.
Will Android continue to dominate the smartphone market? Will the decelerating rate of growth for Apple hurt its rich profits? Could Microsoft have a double-digit market share? To answer these questions, there are many things to consider.
Factors to Android’s success
Android was adopted quickly by phone makers because it was a free operating system. This made it an easy decision for manufacturers. Phone makers only needed to differentiate themselves through hardware quality and specifications. Android itself has advantages of Apple and other systems: it was open. Consumers could visit XDA forums or find a Cyanogenmod build to install a custom ROM on the phone.
More recently, Google released a Nexus 5 pure Android phone that has a 5-inch screen (1080 x 1920 pixel @ 445 ppi pixel density) and a quad core processor. By comparison, Apple’s latest iPhone 5S has a 4-inch and a 640 x 1136 pixels resolution (at around 326 ppi pixel density). The phone costs nearly twice as much and the battery lasts half as long. Google is raising the bar on hardware, which could eventually impact Apple’s bottom line as competition rises. Google’s Moto G broke the price barrier by offering a solid phone for just US$179. Prices do not dictate the success of a phone, but it will give Apple significant competition.
Android’s benefit to Google
Google’s push for Android is not driven by the need for market share. It was a defensive move whose purpose was to gain some control of the platform. This enables Google to sell services without getting locked out of the Apple ecosystem. Google searches on Apple still account for many searches on the Internet, but if Apple built its own search or promoted a rival one like Bing, Google’s traffic would be hurt. Map and location services are of strategic importance for both companies. Apple built its own in-house maps app last year. Over time, Google’s Map app on Apple could become less relevant.
Market share metric misleading
Despite the rapid rise in Android, the figures do not tell the full story. Apple continues to be more profitable than Android manufacturers. Samsung makes nearly all the profits, while other manufacturers are losing money, or breaking-even at best. Apps for Apple continue to be of strategic importance for the company. Developers primarily choose to develop for iOS because of the higher profits earned, compared to other platforms.
As it stands, Android will clearly dominate the smartphone market by market share, but competition from Microsoft and Apple will ensure consumers get innovation in new products. Specifically, Windows Phone will be the system to watch. It is set to have market share in the double digits. Microsoft succeeded in growing market share steadily for the mobile platform. Microsoft [Nasdaq: MSFT] employs a Desktop Metro interface that is similar to the desktop experience. It is also open, giving users greater choice. The recently released Lumia 1520 is a very capable phone, and is far better than the 1020 and 920 in terms of performance.
Apple [Nasdaq: APPL] could very well face a decline in profit margin, but it may boost its focus towards content (i.e. Apple TV) and grow iPad sales.
Android is likely to keep growing, but will continue to face competition from iOS and Microsoft. As both platforms cater their services and devices for the masses, they will continue to build their user base.
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