Ah, yes, I see it’s time for another comScore report and another round of breathless journalism on the state of the U.S. smartphone market. But, you know, these are getting almost boring now. Once again, Android rampages over its competition like Godzilla laying the radioactive smackdown on Tokyo. And once again…everyone acts surprised?
Get with it, people. Some of us (by which, of course, I mean me) predicted this trajectory in the first months after the G-1 launch in November 2008, and have been patiently explaining Google’s grand strategy and the underlying economics ever since. By now this kind of market news should be no surprise to anyone.
Still. This round of alarums and excursions has a few piquant tidbits in it. Let us consider them together.
The top-line figure is that Android gained a full 7% of smartphone market share (to 33%) in comScore’s last reporting period, November 2010 to February 2011. RIM got brutally hammered, losing 4.6% and landing at 28.9%; this put Google at #1 for the first time on just about the schedule I had predicted at the beginning of 2010. Still, RIM managed to stay ahead of Apple, who gained 0.2% over the quarter and hung in there at 25.2%. Microsoft lost 1.3%, landing at 7.7%.
Those are the numbers. What do they mean?
To begin with, WP7′s market performance can only be described as epic fail. Microsoft had a shiny new product, plowed a shit-ton of money into marketing it, launched at the optimum time for the holiday sales peak – and lost share. Other sources indicate that their smartphone share has declined not just in relative but absolute terms; they have fewer users than they did a year ago.
Heads should roll over this, but probably won’t. Because the problem clearly starts right at the top with Steve Ballmer, who – no two ways about it – has been a disaster for the company, so enamored of the Windows franchise that he has let its weight suffocate WP7 and all their other growth prospects. The man is an incompetent buffoon. Which, considering what Microsoft was like when somebody competent was running it, is actually very good news for everyone who isn’t a Microsoft shareholder.
I think these numbers tell us that Microsoft has no hope of being a significant force in the market unless and until Nokia makes good on its end of the NoWin alliance. This is not going to materialize until 1Q2012 at the earliest, if it ever does,
Now let’s take a closer look at RIM. In a market as volatile and subject to network effects as smartphones, a 4.6% share drop looks an awful lot like the knell of doom. Is there any plausible recovery path for them, or are we watching the initial stage of a death spiral?
I think there are two possible endgames for RIM. In one, they manage to fort up around a small userbase of mainly corporate accounts, with share holding in the 5% to 9% range. In the other they just completely tank. It will take three to four quarters before we know which way things will fall, with their market share dropping at 5-7% per quarter. (It was only -4.6% in ComScore’s reporting quarter, but market collapses like this tend to accelerate in progress.)
I don’t see RIM reversing this because they don’t have any near-term prospect of shipping a product that competes well in current conditions. Choosing to replace their aging software stack with an own-brand smartphone OS built around QNX (rather than becoming an Android shop) was a bad, bad mistake; it means they got nothin’ until they can field that new OS, and once they do they’ll have to bid for the attention of app developers from a desperately weak position.
Has RIM got enough users who are held captive by inertia and transition costs to sustain the company anyway? It’s possible – that’s the optimistic scenario – but I wouldn’t bet on it. In any case both scenarios lead to the same predictions over the next three to four quarters.
Not much to say about WebOS and Palm, except that nobody should be making any long bets on them. They’re fading from minisule to microscopic; see the comScore stats for the depressing details.
Now for the big news: Apple’s failure to gain significant share (I’m not sure 0.2% isn’t within the statistical noise range). I think this needs to be interpreted in light of AT&T’s numbers last quarter. According to a theory originally suggested by A&D regular Patrick Maupin, AT&T nearly saturated the iPhone market in 2010. I think he’s right; this would explain the lackluster sales of the iPhone 4V and, now, these ComScore figures.
This leads to a prediction: Apple’s not going to see any serious iPhone share gain in 2011Q2 either. Nor in Q3 unless the delayed iPhone 5 comes out looking really spectacular. The userbase for iPhone is loyal but it’s not expanding. Or, possibly, people who would have joined it under past conditions are now buying iPads. Apple may get a point gain here or there, but the days when it could count on vacuuming up a lot of dumb-phone conversions as a matter of course are over. If the comScore figures prove nothing else, they do show that Android is now the popular choice for that.
What’s certainly not going to happen is any Apple share gains against Android’s existing userbase. If Apple couldn’t fend off the upstart back when it had a clear market and technical advantage, it’s not going to pull off a come-from-behind now that the network effects are operating in Android’s favor.
On the other hand, the brand loyalty of the remaining Apple customers means I don’t foresee Android poaching a lot of Apple’s userbase in the near term either. For the next nine months or so it’s going to be Apple and Android going head-to-head for dumbphone conversions and users bailing out of RIM, with Android winning almost all of those.
I have another reason for confidence in this scenario besides the premise that the iPhone market is near saturated. It’s the pace of device introductions. New Android hotness ships every month, creating a pull that Apple’s long release cycles don’t allow it to duplicate.
And what about the iPhone 5? Apple’s announced delay raises the stakes on that release. It has to be a killer product, otherwise Apple’s growth prospects in the smartphone market are toast. Nothing merely comparable to the best Android phones will do.
At the moment there are at least enough other players in decline that Apple and Android have room to grow without trying to hit on each others’ core customers. I think that will change towards the end of 2011 when Android starts to run out of soft targets. At that point, the minor smartphone players (Palm, WebOS, WP7) will be statistical noise or dead. RIM will be forted up or dead. And the pace of dumbphone conversions in the U.S. will be slowing, if only because most of them will have happened already.
Accordingly, events grow more difficult for me to forecast after about mid-3Q2011. Too many variables: will iPhone 5 be killer, will Nokia deliver smartphones that don’t suck, will RIM crater messily? But until then, expect a regular procession of Android-stomps-everything-in-sight stories. And try not to be surprised.