Conventional wisdom dictates that the technology device with the largest marketshare wins. No one really defines what it means to win, but it’s a common argument, and one of the ways to support it is to tout Windows vs. Mac.
For years we’ve heard– conventional wisdom, again– that Android smartphones will defeat Apple’s iPhone. Just exactly like Microsoft’s Windows defeated Apple’s Mac. The problem with conventional wisdom is that it is often wrong, which doesn’t make it wisdom at all; instead, it’s merely a perspective or opinion. That is also wrong.
Technology soothsayers are not paying close attention to what is happening inside Android-ville these days, but the place is more ghetto than theme park. It’s Apple that is popping the so-called Android bubble.
Seek, And Ye Shall Find
Conventional wisdom is often defined as an acceptable premise which is so accepted as the norm that it goes unquestioned. You know, like how Windows defeated the Mac. And Android is beating iPhone.
Here’s the problem with those so-called bits of conventional wisdom. They’re wrong. It’s Apple’s Mac which owns more than half of the PC industry’s profits. It’s worse for smartphone makers because Apple’s iPhone owns over 90-percent of the entire smartphone industry’s profits.
So much for conventional wisdom, right?
How is it that Android device manufacturers cannot make money selling Android-based phones? The key to understanding the situation is simple. Differentiation. What differentiates a PC hardware makers PC from other makers? They all run Windows so the only easy way to differentiate their PCs from other manufacturers is by price. Except that’s exactly what every manufacturer does, so they compete against one another to produce the lowest priced devices.
Apple’s strategy is different. The Mac is a premium device; solid body aluminum case, high resolution display, high end Intel CPUs. No cheap, plastic Macs. There’s also OS X which is easily differentiated from Windows by ease-of-use, security, and the option to run Windows or nearly any other operating system. The Mac is different and commands a higher price, hence Apple gets more of the industry’s profits than market share alone would dictate (in conventional wisdom).
Android device makers have exactly the same problem. Most smartphones carry Android OS and the same basic Google applications. The only way to differentiate is by, #1 lower price (which means lesser materials, and low gross margins), or, #2 premium hardware (which costs more, which also means competing against the perception that all Android devices must be inexpensive, which means lower prices, and, therefore, low gross margins).
Android’s imaginary bubble of success is being popped time and again as Apple racks up record revenue and profits every quarter while Android device manufacturers suffer at the hands of lower prices, lower margins (to the point of no profitability at all), while customers, now aware that Android is Android and a platform full of security issues and low quality, flock to Apple’s iPhones.
Those who guesstimate such things agree. News on the streets indicates that the trend across developed nations in Europe has Android smartphones losing marketshare while Apple gains. And why not? With an iPhone a customer can go to a store and get face-to-face help. Try that with a Samsung device.
Google’s Android smartphone platform may be attractive for first time smartphone buyers, but the migration isn’t from one Android maker to another. It’s from Android to iPhone. This big bubble that represents Android’s success in marketshare is in the process of being popped at the hands of Apple’s iPhone which is a clearly differentiated product.