The news comes to us today that in 1Q 2010 Android phones outsold Apple’s iPhone by a significant 7%. As it said on the gunslinger’s gravestone, “I was expecting this, but not so soon.”
Business Week and the Wall Street Journal are on the story, but the most interesting version is from the story they’re apparently deriving from at All Things Digital, because it includes a graph showing recent market share trends that conveys a lot more information than the present-time numbers.
I’ve written before that I think Google has been running a long game aimed against the telecomms carriers’ preferred strategy of customer lock-in, and executing on that game very well. Against the iPhone, its strategy has been a classic example of what the economist Clayton Christensen called “disruption from below” in his classic The Innovator’s Dilemma. With the G-1, Google initially competed on price, winning customers who didn’t want to pay Apple/AT&T’s premium and were willing to trade away Apple’s perceived superiority in “user experience” for a better price. Just as importantly, Android offered a near-irresistible deal to the carriers: months, even years slashed off time-to-market for a state-of-the-art cellphone; a huge advantage in licensing costs; and the illusion (now disintegrating) that said carriers would be able to retain enough control of Android-powered devices to practice their habitual screw-the-customer tactics.
In Christensen’s model, a market being disrupted from below features two products, sustaining and disrupter, both improving over time but with the disruptor at a lower price point and lesser capabilities. Typically, the sustaining company will be focused on control of its customers and business partners to extract maximum margins; on the other hand, the disruptor will be playing a ubiquity game, sacrificing margin to gain share. The sustaining company will gold-plate its product in order to chase high-end price-insensitive customers; the disruptor will seek out price-sensitive low-end customers.
The trap for the sustaining company/product is that as it chases high-end customers, it will ship marques that are more and more gold-plated – overdesigned, overengineered, and overpriced relative to what most customers actually want. The break in the market occurs when the disruptor reaches the level of capability that customers actually want to pay for, at which point they switch over en masse and the bottom falls out of the sustainers’ market share. If it’s very lucky, it holds onto an eroding fortress at the high end of the market for a while. A short while. Lots of historical examples of this pattern can be found at the Wikipedia article.
In the smartphone market I have been expecting a disruptive break that would body-slam Apple’s market share, but I expected it to be several quarters in the future and with a really fast drop-off when it happened. Instead, it looks like Apple took a bruising in 4Q 2009 and has failed to regain share in 1Q 2010 while Android sales continued to rocket. Android hammered market-leader Blackberry just as badly, a fact which has gotten far less play than it probably should because the trade-press loves the drama of the Apple-vs.-Google catfight so much.
What actually seems to be going on here is that Android is successfully disrupting both Apple and Blackberry from below; together they’ve lost about 25% of market share, not enough to put Android on top but close enough that another quarter like the last will certainly do that. What does this tell us?
First, that Google’s slow-ball launch of Android and its attempt to advance on a broad front by co-opting a lot of vendors has worked spectacularly well, recent fallings-out with Sprint and Verizon over the Nexus One notwithstanding. The Motorola Droid and lower-end Android phones have to be selling like crazy for NPD’s numbers to look like they do, and I believe that because I’ve been tripping over new Droid users a lot lately. I predicted that the ubiquity game would beat the control game, so I get to do a bit of a fist-pump about this.
Second…several articles of conventional wisdom need to be re-examined. One is the attractive power of the app store. Apple’s supposed advantage here isn’t doing them any obvious good at all. How can we tell? Like this: Apple and Blackberry have experienced very similar drops in unit share, about 7% each in the last two quarters.
One has an app store, the other doesn’t. [I was wrong about this; Blackberry has one, but Apple's is universally conceded to be far better.] If that’s made any, difference, it’s not one that’s showing in the numbers. The least hypothesis is that the app store doesn’t matter.
My best guess is that mass-market smartphone users are already overserved by even Android’s app store, let alone Apple’s allegedly richer one. Who could build any kind of mental model of what’s there without it being a full-time job? Hard-core geek that I am, I’d be one of those most rationally expected to dive in and turn my phone into an app-enabled superwidget…but the truth is, I’ve only ever grabbed a dozen or so, and most of those were games, and the only two I use regularly are games I could do without. I might as well be on a Blackberry.
Onboard apps just don’t look like they’re that important. We developers and maybe-someday developers need to face the disturbing possibility that, basically, users don’t care about them. That they’re buying (um) phones, not the Superwidget of the Future, and all the hype about apps was mostly just sustainer gold-plating.
Third: it doesn’t look offhand like anything about the iPhone is saving it from bleeding unit share right in parallel with Blackberry. This includes Apple’s vaunted superiority at UI and physical product design. All the arguments about how far Android is or is not behind the iPhone on this level begin to look to me like irrelevant, elaborate ways of missing the point – because nobody thinks Blackberry competes well in UI polish with Apple, and that lack doesn’t seem to make a damn bit of difference to the velocity at which they’re both losing share to Android.
Time out for a moment while I laugh and point at the Apple fanboys. In your fantasies, mass-market smartphone customers were just pullulating with eagerness to plight their troth to Apple’s unsurpassed UI like so many architecture students swooning over Barcelona chairs. You overlooked the fact that the same advantages never pulled Apple’s computer market share over 10% and they’ve been hard-pressed there as well; in January they dropped to fifth place in the U.S. Steve Jobs’s pitch to everybody’s inner art fag is beginning to look a little threadbare.
I suppose about the only good news for anti-Androiders is that WinMobile, the only contender many of them love to hate more, got the living snot beaten out of it sooner than the iPhone and Blackberry did. It’s dropped about 10% unit share since 1Q 2009, only 3% or so of which was in the last two quarters. In fact, as I look at that graph, Android is the only smartphone contender to post a net rise in unit share since mid-2009!
Apple, Blackberry, WinMobile, Palm…that graph says Android is eating everybody’s lunch. And not slowly, either, but even more rapidly than I predicted it would. This is going to have knock-on effects. I will leave as an example exercise for the reader the question of what it does to the future of the iPad.