In an interview with Bloomberg, Google’s former CEO and current chairman Eric Schmidt talked about the company’s Android mobile operating system especially in comparison with its main competitor, Apple’s iOS, a rival that Google is apparently “clearly” beating.
Sure, Android has the lion’s share of the overall smartphone market when it comes to device activations – which are still at 1.3 million per day – but does this mean everyone else is losing the battle, especially Apple?
Under normal conditions, we’d take Schmidt’s statements as regular top exec talk, but considering that the former CEO did make some pretty controversial similar commentaries in the recent past regarding Google products, Android included, let’s dismantle the bullshit from his current statements.
What Schmidt said…
Talking to Bloomberg, he basically said that Google is crushing Apple in the smartphone business in a similar manner Microsoft did with the same competitor in the PC business 20 years ago:
Booming demand for Android-based smartphones is helping Google add share at the expense of other software providers, Schmidt said yesterday in an interview at Bloomberg’s headquarters in New York. Android snared 72 percent of the market in the third quarter, while Apple had 14 percent, according to Gartner Inc. Customers are activating more than 1.3 million Android devices a day, Schmidt said.
“This is a huge platform change; this is of the scale of 20 years ago — Microsoft versus Apple,” he said. “We’re winning that war pretty clearly now.”
[…] “The core strategy is to make a bigger pie,” he said. “We will end up with a not perfectly controlled and not perfectly managed bigger pie by virtue of open systems.”
According to Schmidt, Android is winning “clearly” even if Google had to make some sacrifices when it comes to some aspects of the overall ecosystem.
But is Google really winning the battle? Is Apple about to surrender the mobile business to Google? What about the other players?
While we cover everything Android-related here, I don’t think we have reached a point in this continuously evolving mobile environment where we can say that Android has won and iOS, Windows Phone, BlackBerry, and other competing mobile operating systems were defeated.
Removing the bullshit…
Yes, Android is winning when it comes to overall market share, but it’s winning in a competition where Apple is not really an active player.
Google’s mobile business strategy
Google went into the mobile business with one clear goal in mind (among other objectives): to setup the playground for the future. Realizing that the future of computing will not contain “heavy” machinery like desktops and laptops, Google skated to where the puck was going when it comes to Internet browsing and Internet consumption – heavy smartphone and tablet use – to make sure its Search business, or the only way Google is making money right now, will still be making money when the hordes of Internet users will choose portable devices to get their web browsing fix.
Google had to make sure it has a foot in the door in the “post-PC” world, and that it’s one step ahead of its competitors when it comes to mobile search, considering what mobile search will mean for its bottom line. There’s nothing wrong with that, and you can’t blame Google for doing whatever it can to stay ahead of its Search rivals.
That’s why Google had to make its mobile OS open source so that OEMs will be able to easily adopt it, modify it and build interesting devices around it, from low- to high-end, so that any potential buyer could afford one such smart device and use it, among other things, to browse the web, click on ads, make money for Google.
And Google isn’t making any money off of Android sales – or better said, it’s yet to make any serious money considering that its most recent devices are sold at cost – but Schmidt isn’t saying anything about that.
And then there’s the Motorola $12.5 billion purchase, which is yet to offer Google any advantages in the mobile business, whether we’re talking about patent wars or Android device sales. We’re not even going to go in Motorola Nexus handsets and tablets on this ones.
Apple’s mobile business strategy
Apple, on the other hand, has a different business model. The company is first a hardware company that also builds its own software for the devices it makes, smartphones and tablets included.
Apple wants to make money off of device sales, and its iPhone and iPad are currently its best-selling products, devices that are responsible for a large chunk of its revenue, and devices that did not exist 5 years ago – whereas Google’s Search is rather old.
Therefore, Apple is not competing in the mobile market share game, which Google is winning clearly, but in the profit share game, which Apple is winning clearly. And where Samsung is also winning clearly, at least compared to Google.
In simpler terms, the battle is not over by a long shot mainly because Google has the market share, and Apple has the billions. The former can further cement its lead and turn Android users into faithful followers, while the latter has all the money in the world to create whatever products it wants and even contest Google’s strong overall mobile market share. Imagine only what a Nexus-like cheap iPhone would do to that market share in case Apple decides to go that way. But we’ll cross that bridge when we get there.
The Google-Microsoft comparison…
Microsoft is clearly – no pun intended – one of the tech giants of our recent past, present and upcoming future, but maybe Google should steer away from comparing Android to Windows. Because Microsoft is having a tougher time adapting to the “post-PC” era, some 20 years after it emerged victorious over Apple. Google doesn’t want to follow in Microsoft’s footsteps, does it? This is not to say that Microsoft is in a bad place right now, only that it failed to live up to our expectations in recent years when it comes to smart mobile devices.
Getting back to the Microsoft vs Apple element, we’ll remind you that Windows was not open source and wasn’t offered free of charge like Android. Microsoft wanted to make money off of its computer OS and the accompanying software it created for PC use – just like Apple wants with its hardware/software bundle. And Microsoft did not create Windows as a means to deliver an advantage in a future battle – mobile search in Google’s case with Android – but as a cheaper alternative to Apple’s computer and OS.
Microsoft’s OEMs partners and/or customers had to buy Windows, and other software made for the OS, and the more people joined in the fun, the higher the profits and market share for Microsoft.
At the same time, Apple did not manage to remain competitive, and lost market share to Bill Gates & Co. But at the time it was losing the market share battle Apple didn’t have the same cash reserves it has now either. Hence, it was losing the profits battle also. Apple was nearing bankruptcy and it took several years for the company to get back into shape, so it couldn’t really stop the Microsoft expansion. Whereas now it can just fight Google for quite a few more years before approaching bankruptcy, because those billions in the bank can always be invested in more R&D and new products.
And then Microsoft must have taken everything for granted, failing to foresee that the next battle that needed to be fought was in mobile.
“Clearly winning” and end-users…
From a different point of view, we don’t want any mobile OS to come out as the clear winner – which, in this writer’s view would mean having a firm grip on profits and market share. Because once we get there, competition will dwindle, and without proper competition, we can’t have innovation and even better products. We don’t want a single company to be the ultimate provider of a certain service or products. We want choice, competition and better products.
That can’t really happen once one company would be in a “clearly winning” position. Microsoft was almost there in the PC business, but it failed to eliminate rivals and look into the future.
On the same note, if we were to look only at the Android ecosystem, we’d find Samsung in such a position. The South Korean giant is selling the most Android handsets and is making most of the profits. And those numbers are growing quarter after quarter. That’s definitely laudable when looking at Samsung alone, but not necessarily good for Android. Rivals like HTC, LG, Google (Motorola) and others really need to step it up and steal both market share and profits from Samsung, so that never along the road, will Android be confound with Samsung.
Other Schmidt statements…
Finally, and the main reason we’re taking Schmidt’s recent statements with a grain of salt is the fact that this isn’t the first time Google’s former CEO comes out with such talk that can turn against him later down the road.
He did say a few years back that the Nexus One was a one time thing for the company, but we all know what followed soon after that: the Nexus S, or the second Nexus handset. Then came the Galaxy Nexus and now we’re looking at the fourth Nexus-branded smartphone, the Nexus 4 and hopefully not the last.
About a year ago he did say that Android Ice Cream Sandwich will become the OS of choice for developers instead of iOS. That did not happen, and ICS is yet to get the main slice of the Android pie.
Then he prophesized that Google TV will be one of the main players in the TV business, with the majority of TV owners having it on their TVs by mid-2012. Google TV is still a product that’s yet to find its way, and while we don’t have exact numbers for Google TV deployment at this time, it’s clearly not where Google would like it to be.
So when he says now that Google is clearly winning the battle with Apple in a Microsoft-like fashion, let’s doubt it for now, as the battle is far from over. What’s happening though is that Android devices are overall selling better than the iPhone. But since not all Android OEMs are profiting from the Android revolution, market share alone is not enough to win the battle.