Apple’s iPhone was the first smartphone manufacturer to set the app wars in motion in a big way, and in doing so brought about several major changes in the competitive landscape for the smartphone market, and by extension, the tablet/iPad market as well.
The first, most obvious change has been with the market leadership. Research In Motion (RIMM) and its flagship Blackberry handheld device controlled the high end and business marketplace for many years. From 2007 to 2009, the Blackberry commanded a 50% market share in the U.S. that has since dwindledto 6.5%. Research In Motion is now almost an afterthought, and may be acquired and lose its market position as an independent company.
Another major ramification of the iPhone’s dominance has been the demise of Palm, after being acquired by Hewlett-Packard Company (HPQ), and the current status of Microsoft (MSFT) Windows Mobile being a complete afterthought.
With the advent of the Apple app store, and the follow-up by Google’s (NASDAQ:GOOG) Android as free operating system for Apple competitors, it’s going to be very difficult for alternative solutions to break into the marketplace in the future, particularly operators in old-line media.
Both Apple's store and Android have reportedly hit 500,000 apps in their respective app stores. The thousands of developers that are at the top of the most desired applications are completely consumed from a resource standpoint to keep up with these two platforms. For another, new app platform to enter the market will be a clear example of the proverbial “chicken-and-egg” problem. You can’t build market share without the apps being available, and the developers won’t allocate the resources to produce the apps without the market penetration to make their investment worthwhile.
Microsoft, with its extensive balance sheet, is reportedly contemplating helping the major app developers with the cost of porting the most important apps to its new Mobile 7 OS. At the time of this writing, this hasn’t gotten much traction, as least publicly.
So, for the time being, and almost certainly for 2012, it will largely be a competitive marketplace between Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL).
Advantages of Android and Their Smartphones/Tablets
Android has several advantages for many of the stakeholders in the marketplace.
1) Cost – Google’s position of giving away Android for free makes its adoption by both manufactures and retailers easier.
2) Flexibility – Android is available in source code, and as such, is available to be modified for an individual handset maker's specific hardware requirements. For example, fierce competitor HTC adds a graphical user interface (or GUI) layer on its Android deployments that highlights the application's strong suits, but differs from Samsung (SSNLF.PK) and other competitors.
3) Flash – Adobe’s (ADBE) streaming video is so commonplace and ubiquitous that it has become an impediment for Apple’s continued dominance. However, Apple's approach with HTML5 has gotten Adobe on board with development of tools to meet Apple's needs. This is despite Adobe's 98% penetration of the enterprise market with the Flash Player.
4) Removable storage and battery – iPhone’s and iPad’s insistence that no removable battery and only built in memory has angered many.
5) More control over widgets, including computer control. Due to the open nature of Android, many network type apps have been written that make the device almost an extension of your network, whether that be corporate or personal.
6) Marketplace growth – it is estimated that there are 550,000 Android devices activated daily vs. 450,000 for iOS.
Disadvantages of Android
The major disadvantage of the Android marketplace is a direct extension of its inherent advantage that is openness.
It is feared, with some reason, that as manufacturers make their own, custom, version of Android, the OS itself will splinter so badly that it will be difficult for the end-user to upgrade, keeping up with security needs and enhancements. Although this is certainly within the realm of possibility, it is in everyone’s common interest to combat this as inevitable.
Advantages of iOS – Apple products
1) Stability of platform – since Apple controls both the hardware and the O/S, it can regulate and control quality, consistency, and the overall experience for the enduser.
2) Revenue stream for developers – it still seems that almost 75% of all app revenue is generated from the iOS market vs. the Android market. Whether this demographically controlled, or adaptive, it still drives the news and most important apps to be developed for the Apple platform FIRST, and then Android if one has to follow the other.
3) Consistency of single source – the market has always benefited the single source that can guarantee how an O/S would work with the hardware, that being controlled. (See the many years of success for (IBM) IBM and their control over the system 34/36/38 marketplace.)
For investors, although there is no single winner likely to appear in 2012 between these two, the unassailable fact seems to be that, for the time being, they will control this most important marketplace. As more and more personal computing is coming “down” to the smartphone and tablet markets, their ability to control the inner workings as well as the market's availability to these users, will not only do much to move Google, Apple,and the various hardware manufacturers, but also those on the outside, looking in.
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