Do Androids dream of electric Apples?

Few things incite as much passion among technophiles as their choice of smartphone. In the 1990s phones were merely functional or fashionable. Now they have now been elevated to a quasi-religious status.
So the news that Android is “crushing” Blackberry and Apple is bound to spark off a holy war between devotees.

Of course “crushing” is a relative term, particularly when it comes to the hyperbolic technology press. Comscore, a market research firm, released figures that suggest that Research in Motion, or “RIM” (which makes the Blackberry), lost nearly 5% of its United States market share between January and April this year.

And so, while the rest of the market was recruiting millions of new customers in a growing smartphone market, RIM was effectively standing still. As a result RIM missed out on at least 3.5-million potential new customers—obviously a serious cause for concern. But its biggest worry isn’t the market share itself so much as who it is losing it to. Android, the mobile platform owned by Google, sucked up over 5% more customers over the same period.

Google gives Android to mobile phone manufacturers for free as long as their devices meet certain criteria. In doing so it not only creates a standard for the manufacturers to rely on but also connects them to a huge community of developers who have created a galaxy of additional software applications (“apps”) for the platform. And then there’s the huge cost saving in not having to worry about software, an area in which players like Samsung and LG were never particularly adept in the first place.

Apple’s acolytes are quick to point out that Android borrowed the concept of apps from the iPhone, which still has the biggest app development community on the planet. But, despite the head start, Android is quickly catching Apple. In April 2011 the Apple marketplace had just over 400 000 apps (including those made for the iPad), while Android had over 200 000—a surge of 16% in a single month.

Blackberry, on the other hand, has nowhere near the same traction, with only 26 000 applications available. It’s true that RIM started its app programme much later than either of its main competitors, and that its app numbers are growing faster than either of theirs’ (by 21% in March 2011 alone), but the Comscore report speaks volumes about RIM’s loss of momentum in its most important market.

South Africans are still generally besotted with their Blackberrys, but this has more to do with the subsidised data packages and free messaging than the phones themselves. That’s a very narrow competitive advantage on which to rest a whole business. As bandwidth prices begin to decline, the shift to Android or Apple devices seems inevitable.

Android fans like to argue that Apple is also on the decline. The Comscore numbers do show Apple’s growth slowing to just 1.3% between January and April of this year, where previously it had enjoyed double digit growth. The reason this gives Android lovers so much pleasure is because it confirms, for them, that their most beloved doctrine is winning out.

While Android is free and “open source”, Apple’s technologies are closed and proprietary. Developers must pay Apple to use its tools and systems, while Android developers only pay Google a small cut of their sales.

The problem with this theory is that idealism does not equal good business. Developers on Apple’s platform generally earn far more than on Android, and Apple itself makes more money as well. A closed platform is restrictive, but it also ensures a much higher quality of apps (and a complete absence of viruses—unlike with Android). Because of Apple’s autocracy over billing and distribution, payment is much simpler for developers even though they give up a bigger cut of their pie.

This dynamic is echoed in the profits of the mobile phone market. In 2010 Apple captured over half of the entire global mobile phone industry’s profits. That’s right, with just 5% of the planet’s market share in cellphones, Apple made as much pure profit as the rest of the industry combined.

This phenomenon has helped make Apple the largest technology company in the world, and one of the most profitable. And it explains why Apple is not particularly flustered about the slowing growth in its market share. It has never intended or pretended to be a mass market brand. It leaves that to Nokia—currently cranking out handsets by the billion for steadily diminishing profits. All Apple needs to do is stay in its cosy niche and rake in the cash.

So, which platform will win? Both none of them and all of them. RIM will rally around its original core of business users. Apple will level off once it has converted all the planet’s hipsters into iPhone users, but continue to print money. And Android will vacuum up everyone else who isn’t credulous enough to buy a Windows-powered Nokia. Tech pundits like to draw this as a war already won, but I suspect it’s merely the first skirmish in the battle of the century.

Follow Alistair on Twitter at @afairweather

Alistair Fairweather

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