Geoff Anderson for another round on the Technology Marketing Center Leader's Blog. This month we look at the smartphone market, and the phenomenon that is Apple in this space. There is no question that Apple has built up a formidable product offering, combining a strong ecosystem of accessories and compatible third party components, leveraged their strength in the Music sales with their iTunes Music Store, expanded this into a vibrant marketplace for applications and other items that provide value to their users (books, video, audio books).
Their model has been mostly walled garden, where their oversight and management of the user experience has been to keep users within their space. There is only one or two phones available (augmented with the iPod Touch, and most recently the iPad) concurrently, and often not the latest and greatest features. One example is the two camera idea, where there is a camera on the back of the phone for snapping stills, and a camera on the front of the phone for video conferencing. Other devises have had this for years. The first I saw was on the DoCoMo network in Japan in 2006.
Still, they build solid, reliable, and most importantly, easy to use devices. And the market has rewarded Apple accordingly with over 120 million iOS devices shipped to date, and their recent launch of the 4th generation iPhone being the most successful in their history, the pattern seems to be working very well for them.
It is useful to go into the wayback machine and remember the PC wars of the 80's. As the smaller makers were shaken out, there were really two principal players in the mainstream of the late '80s, Apple and their Macintosh computers and the growing ubiquitous IBM PC Compatible systems. The Apple Mac's were closed systems, as in Apple made all the hardware, and had an iron fist control over the UI, the programming interfaces, and how you would create programs and hardware that worked with their computers. The IBM PC was the exact opposite. Built on spec, they outsourced the OS and the programming interfaces, and assumed that their secret sauce, the BIOS would be their differentiation. That lasted about 18 months, and then the market was flooded with clones and derivative products. The PC became the dominant player and the Mac became the niche player, and many wondered whether Apple would disappear completely.
Fast forward to today. Apple has taken an early lead in the smart phones (as usual, they didn't innovate, but followed Palm and RIM), and built an impressive market following. Now there is an open upstart, the Android based phones. For those who have been on a desert island for the last two years, Android is a smartphone OS developed by Google (one of their acquisitions to be exact), that allows handset makers to customize it for their hardware, as well as allowing the carriers to customize the interface, and user experience. It is growing like wildfire, and due to the fact that it is available on multiple carriers, as well as multiple handset makers, it is actually overtaking the Apple iPhone in units sold. One of its great (theoretical) advantages is that Google has taken a more Laissez Faire attitude towards their applications store. There is much less qualification (read: Approval) and fewer guidelines as to how to develop and deploy apps, hence their application store is a bit more old western free for all. Furthermore, (at least in the US) many of the carriers try to corral their users into their closed ecosystem of applications and ringtones, a huge moneymaker for them before the Smartphone came on the market, and a threat to the open-ness of the system.
One can find tales of iPhone users who have switched to Android, whether due to the greater hardware selection, or the perception of less restrictions on how they can use their device, and also of stories of Android users who switched to the iPhone due to the chaos and fragmentation of the market. Clearly the saga has not played out in the market.
Why am I blogging about this? For Apple, this time the evolution of the market is different. Apple has been building their sphere of influence for a long time, starting with the original iPod, then into the iPhone, and now the iPad, users have a selection of hardware with a consistent look and feel among them. Also, at more than 225,000 titles, the application store really has reached critical mass, and it appears that the pricing is pretty well dialed in. Most apps are in that impulse price range (free to $2.99, or about what T-Mobile used to charge for a ringtone), and in general, the quality is good. While Apple has been criticized by making some arbitrary rejection decisions in the past, in general their store format works. Lastly, if you are a highly technical user, or you want to move to a different carrier than AT&T, you can "jailbreak" your iPhone, and access a world of unsupported, but also high quality applications from many other sources. Apple has turned a blind eye to this user driven experimentation.
Dings against the Android system is that the plethora of handsets, carrier tie-ins, and a lack of interest by Google to apply some top level control, means that the user experience is widely variable in the Android world. Not necessarily a bad thing, but going from an HTC device on T-Mobile to a Motorola Droid-X device on Verizon, there is a vast difference in the user experience, what is bundled, and how tightly the handset is locked down. With freedom comes responsibility, and many handset owners don't want to quibble over what OS version they are running and which vendor/carrier restrictions exist. A walled garden that "does enough very well" is an attractive proposition to many consumers.
While the jury is still out, whether Apple continues to maintain their position, or will Android sweep the categories, it is clear that consumers will win. From a strategic marketing concepts perspective, the whole product can be either an open ecosystem with little centralized controls in place, or a very tightly controlled walled garden, as long as you have the appropriate whole product, and suitable differentiation, you can have a successful product in your lineup.
Till next time, happy marketing!
Hate to comment on my own posting, but recently I did a little comparison shopping to seriously consider trading in my iPhone for an Android device. Two reasons, the data plan from AT&T is ridiculously expensive, and a recent trip to the east coast reminded me why AT&T has the lowest customer satisfaction of all the carriers (in DC it was almost impossible to make a call or get data access)
There are a shedload of Android based options, but I have to admit, the selection of options that are comparable to the iPhone are limited, and even the new Google Nexus-S (made by Samsung), while it looks great, has some clunkiness in the user interface compared to the iPhone.
It is no wonder why Android is outselling iPhone, as there are dozens of models based on it, but there is also a lot of variation in what it does, and how capable the offerings from the other carriers are.
Apple is probably not worried about losing the technical lead from Android, and continues to provide a better user experience.
Posted by: Geoff Anderson | January 01, 2011 at 05:12 AM