Google’s Android Strategy Depends on Mobile Losers

by Matt Klassen on April 3, 2012

From a profitability perspective the fight for smartphone dominance has come down to two mobile pugilists, according to a study from Canaccord Genuity, with Apple and Samsung accounting for a staggering 95 percent of the American smartphone market share. The news becomes more lopsided when you realize that Apple alone holds 80 percent of that market share with its comparatively miniscule iPhone line-up.

While the report once again reinforces Apple’s smartphone dominance, it paints a grim picture of the rest of the mobile market, with most Android partners failing to set themselves apart from the mobile herd while other former heavyweights like Research in Motion, HTC, and Nokia continue to see their market share slip away.

Looking at this grim assessment of the smartphone market one might think that Google would be dismayed about Android’s struggles, but as I read the report I suddenly had an epiphany, Google’s long term viability strategy for Android depends on this exact market share, how else could it keep its partners suckling from the Android teat?

Hear me out for a moment. It was several years ago now that I collaboratively wrote a controversial piece titled, “Google Aligns Itself with Losers: Why Android Will Never Beat Apple.”  The slightly overstated point of the article was simple, Google has built its Android empire on selling its free open source mobile OS to mid-range companies like HTC, Samsung, and Motorola, companies who on their own didn’t stand a chance against the dominance of the iPhone.

Simply put, I’ve never been able to see how Android could hope to sustain its profitability and viability with Google’s quantity-over-quality long term marketing strategy. One needs only to look at the current numbers to see that among all the Android partners, a family that includes Motorola, HTC, and Samsung, only the latter has managed to eek out any significant market share, a share (at 15 percent) that is still a very distant second to Apple (at 80 percent). All the other handset markers with all the other Android phones make up the remaining 5 percent of the profits pie, a spot they occupy with RIM and Nokia as well.

I concluded in that initial bold prediction that Android would fail because its partners would achieve the requisite success they needed to strike out on their own, but what if the Android partners never achieved that sort of success?

At this point Samsung is the only Android partner to have demonstrated the requisite mobile acumen to create a handset success story. As Roger Cheng of CNET explains, “The company has used its wide distribution chain, marketing heft, and partnerships with carriers to create a flagship brand, with the Galaxy S II a particular blockbuster hit.” Now I would maintain my initial prediction that should Samsung see this sort of continued success it will inevitably strike out on its own, but that still leaves Google with a wide base of struggling partners.

But what’s in it for Google, you may ask; wouldn’t it want Android to succeed? The truth of the matter is that Android success from a profitability standpoint really doesn’t interest Google at all, since the search engine giant offers it’s mobile OS for free. Google has hinged its entire revenue stream to Android advertising, a stream well fed by the proliferation of Android devices across the market. So what if no single Android device is doing well, so long as the Android collective continues to sell ads.

While I once viewed Android as a mobile life-line, a saviour of sorts for struggling handset makers, perhaps Google  is really a wolf in sheep’s clothing, the proliferation of its mobile OS keeping these companies right where Google wants them; struggling to turn a profit and still hopelessly dependant on Android.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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