Well the smartphone wars are in full swing. Let’s take a look at where we are so far and what we might expect in the future as the level of competition deepens.
Review of Round 1:
As everyone now knows, Apple cleaned everyone’s clock with the iPhone in Round 1, easily rebuffing early attempts from traditional handset OEMs like Samsung (Instinct), LG (Voyager) and RIM (Storm) to capitalized on Apple’s success with iPhone-look-a-likes. These units copied iPhone’s hardware specs but none of the software innovation, user experience polish or most importantly applications ecosystem.
At the end of that round, Apple (along with its much maligned partner AT&T) stood alone atop the bodies of its bloodied competitors, basking in the triumph of its synergistic hardware + software + apps strategy. The final count for this round is stark and impressive:
- 33.8M iPhone units sold
- $8.7B+ in iPhone revenues
- 100,000 iPhone applications, 2B downloads, representing the majority of the $1B BusinessWeek coined ‘App Economy’
- 5.7M new subscribers to AT&T because of iPhone
- 14.6M iPhone subs on AT&T in total representing some $438M monthly data revenues.
Perhaps most telling is how easily Apple has displaced incumbents to take dominant position in the smartphone OS segment. Despite years headstart in the market both Microsoft and Nokia have been scrambling to mount an effective response to Apple. At last count, Microsoft had just shipped WinMo 6.5 positioning it for lower end smartphones while Nokia was reportedly rethinking it support of the Symbian OS potentially in favor of Linux based MAEMO.
A reinvigorated Palm, with its ‘modern’ WebOs platform and well received Apple-like devices, emerged in the middle of round 1 as a potential contender but has yet to mount serious challenge to Apple. Most recently it has floundered with middling sales, a dearth of apps, no clear differentiation to iPhone, a weak exclusive partner in Sprint, and a shrewd price cut from Apple the wrecked Palm’s price-feature parity with iPhone.
Sizing Up Round 2:
We enter Round 2 of the Smartphone Wars less certain of iPhone’s continued dominance. At issue is the challenge mounted by Android-based smart phones.
In many wars, the smartphone wars is shaping up to be a replay of the PC wars with Apple’s integrated system model one on side and an ecosystem alliance led by Google in conjunction with handset oems. The case in point is the recently announced Verizon-homed, Android-base Motorola Droid phone which has been hailed as the most serious challenger to the iPhone yet. This is true, though I suspect, the degree of threat it represents to Apple has more to do with Droid’s availability on the Verizon network than its laudable hardware specs and stylish industrial design.
Verizon has done fairly well weathering the iPhone assault and in fact has grown it subscriber base some by 26M subs in years the iPhone was released by managing its business accounts, acquisition, and the perception of being a superior network but even it subs base vulnerable to the charms the iPhone.
Here are my predictions and prognostications for Round 2:
- Android will emerge as de facto mobile OS for the majority of mobile devices in the future. It’s free, there is an emerging app ecosystem behind it and it sponsored by Google. Compared to the Windows Mobile, which costs some $5 per unit and currently little in the way of apps, Android is the obvious choice.
- Nokia will abandon Symbian.
- Due to lack of strong 3rd party OEM support, eMicrosoft will offer a WinMo 7-based Zune phone in attempt to prove WinMo 7′s viability in the marketplace. It will/should push strong integration with Windows as a selling point. Unfortunately, in the age of the cloud, the desktop means much less than it used to
- Palm will eventually be acquired.
- RIM will founder with its growth leveling off. Despite its best efforts, RIM is fundamentally a hardware engineering company and has not yet mastered the competencies to offer a compelling user experience or build a strong ecosystem. It will continue to retain strength in the hardcore professional segments (i.e. financial and law) – alas this segment has been hard hit in the current economic upheaval. Expect a strategy transaction (maybe Palm?) to help it fill in the gap
- In order to close the feature function gap against iPhone, Android will need to improve its media integration. Expect Google to offer its own media management/iTunes-program, likely through acquisition.
- In order to close the applications gap, Google, perhaps acting through partners such as Verizon and Motorola will in effect ‘bribe’ iPhone Devs to port their apps over to Android, likely through the use of Marketing Development Funds.
- Motorola will stabilize as a viable handset manufacturer and continue to grow its currently developing position as high end smartphone OEM. However, it will struggle to breakout from this role and will face strong competition from the likes of HTC, DELL(!) and host of other Android-producing OEMs that will keep its pricing power in check.
- The line between smartphone and PC OEMs will continue blur. Already Dell and HP are stepping back into the smartphone space and Nokia has gone the other way offering its own notebook.
- If anything, the market power of Verizon which I gather used its clout to keep the MotoBlur skin off the Droid phone demonstrates how beholden other handset manufacturers are network operators.
- mobile applications will be even more pervasive than the current crop of desktop social media apps. Those services such as LinkedIn and Facebook that make gracefully make the transition to the mobile context will flourish as mobile becomes the de facto paradigm with which people interact with computing. Arguably, Twitter already is more of a mobile app than a traditional desk-bound web app.
- expect a continued evolution in the business model of network providers away from current monthly unlimited data plans. Kindle WhisperNet’s subsidized wireless and MiFi pay per megabyte packages are a sign of things to come.
X-Factors in Round 2 (and 3) are:
- the impact of the transition of wireless networks to LTE on handset OEMs in the 2011-2012 timeframe. Will this be incremental or disruptive?
- will the smartphones and netbooks segments converge?
- will the 700mhz spectrum, with its open access conditions, break the current wireless business model of charging users data plans per (subsidized) device?
- when will someone create the killer app for smartphone devices and will it be on iPhone or Android?
