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November 14, 2012

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John Waclawsky

Status on Microsoft's decline:
http://semiaccurate.com/2012/11/14/microsoft-has-failed/

Nokia should read this.

LeeBase

Baron95 has participated on this forum for years, long before Windows Phone was at issue. His analysis has been spot on. I know the fall of Nokia must be hard for long time fans, and humiliating to see them capitulate and adopt the Windows Phone platform for those that hate Msft.

LeeBase

Those "free" iPhone 4's are only "free" on contract. They cost $450, hardly in the low ball cheap Android price range. As they are two years old, the cost to manufacture them has come down, thus Apple still makes a decent margin selling them.

What you don't see, and won't see, is Apple selling products for little or no margin in order to gain marketshare.

Tomi is right, that if Apple is to ever be the top smartphone volume unit leader, they MUST produce low end, low margin phones to compete with the likes of Huwai and ZTE.

Tomi is simply wrong in thinking Apple has any interest in doing so.

The lowly iPod Shuffle is not the product that proves his point. It costs far more than bottom end mp3 players, and it wasn't created until long after the decline of iPod's and the rise of music phones.

Out of all mp3 players that have no screen, the iPod Shuffle is much more expensive. The iPod Nano is likewise expensive for it's niche, as are all remaining iPods.

The closest thing Apple has to a low cost product is the Apple Tv, a hobby product.

Baron95

These comments that Google will win the smartphone war is very funny. So far, Google has spent about $3B acquiring and developing Android, it has spent $12B acquiring Motorola to get patents to defend Android, and an unknown amount marketing Android, including launching the Nexus line to show pure Android. So lets say $20B invested.

And Google has yet to make a cent in profit from Android.

Yes, Google has indirect profit from selling ads into Android devices. But would it be selling less ads if it had not developed Android? Hard to say. They clearly pissed off Apple to the point that they lost the ability to sell ads into the native iOS Maps app. They similarly got crowded out of Nokia devices. And Amazon devices. So it can even be argued that Android is causing Google to sell less mobile ads.

Yes, it it may work out for Google long term. Or it may not. Hard to say. Right now, Google is like China selling nuclear technology to rogue nations so they can challenge the West (Apple). It is not clear that it ultimately benefits China to do so. But it clearly benefited the likes of Pakistan (Samsung).

Now. What is the future for Android licensees. Lets take a look at HTC. They had to agreed to pay MIcrosoft in the $10/device. And now settled with Apple, likely for another $10/device. They have to pay Qualcomm $5-$10/device. (the royalties are actually percentages on sale price in some cases). So, ultimately, ZTE, Lenovo, Samsung, like HTC, once they get big enough and go through the court cases, have to start paying the US West Coast tax on every device. And on top of that, they have to fight against one another almost exclusively on price.

So - good luck being profitable in that world. Maybe Samsung who ran away on volumes can do it. But no one else can and likely even Samsung will suffer once HTC, Nokia, RIM, Moto recover from some of their stumbles.

I can tell you one thing. I would not want to be an investor in any company whose primary product is churning out Android phones.

Earendil Star

John, thanks for your insight.

An other interesting read is the following: http://semiaccurate.com/2011/03/14/microsoft-gutted-nokia-and-left-them-without-a-chance/

It provides a lots of insight in what must have gone on between MS and Nokia.

And how this could happen under the oversight of Jorma Olilla is unfathomable. Blackmailed? Who knows.

But, sad stories aside, what I see is the usual trolls trying to cover hard facts (Android supremacy) with utter nonsense.

You know what? Who cares. Given the current speed of events, we won't be hearing from them much longer.

Just wait and see what happens when MS' money dries out...!

Tester

Do you really trust that bullshit site? I prefer to get my information from less biased sources.

I clicked through 5 or 6 articles there and it's all anti-Windows rants. Not what I'd call informative. There may be a grain of truth buried under all that hate but I don't feel like digging it out from all the waste.

Oh, and concerning Nokia, behold the arrogance they displayed years ago and which undoubtedly caused in no small part their eventual demise:

http://www.engadget.com/2007/11/05/symbian-nokia-microsoft-and-apple-downplay-android-relevance/

bjarneh

Baron95> Yes, it it may work out for Google long term. Or it may not. Hard to say.

70% market share and rising, it really is hard to say..


@Tester, @Earendil Star

nice articles!

LeeBase

70% market share on a product they give away. A product they have spent some $20 Billion on in order to give away. And to spend all that money to be safe from depending on Msft, Nokia or Apple in mobile, only to end up beholden to Samsung.

Yes, folks, Android is far from having been proven to be a winner for Google

John Waclawsky

@Earendil Star Don't you just love it when the trolls gang up and try support each other to defend/sell/shill etc. a utterly crappy MS windows phone. Its almost funny to read the nonsense except it is a pure waste of time. Look back over the years, every new Microsoft iteration is going to magically change the world. How many times have we heard that total nonsense with Kin, Zune, Win Mobile, WP 6.6 7, 7.5 8, ...10 I just laugh at these people LOL

Here's an insightful read that would be really powerful if someone updated it

http://www.roughlydrafted.com/RD/Q4.06/2E6D9BB2-FE1B-4556-8389-67BD581FBCCC.html

notzed

RyanZA: "While it ultimately feels a bit unfortunate that the C64 (and symbian, blackberry, etc) went out of production, it was still a really good thing long term. For devs to make really good stuff, the less platforms the better, since each platform means more code, more bugs, different UI, etc etc."

Umm, so somehow monopolies are now good economics are they?

I consider the whole of the 90's to be a complete lost decade in computing terms - it wasn't until the internet came along that intel and microsoft's stranglehold on suppressive computing was challenged. And it lead to an explosion of ideas and money making opportunities which were not possible in that oppressive environment.

Having a single system also means products are limited to the capabilities of that single system and are subject to the whims of whomever controls it. The reason an Amiga or even a C64 could do multimedia much better than a PC of the corresponding era was because it had real-time features a modern PC still lacks.

Diversity is good, it allows experimentation and the exploration of niches - and there are plenty of programmers to fill every niche possible.

Monocultures are also too fragile, they turn into expensive exercises in keeping out the competition that harms everyone.

Android may not suffer from this so much because it is free and open - we already have multiple customised versions from multiple vendors - and even individual developers. Something totally unthinkable with any version of microsoft or apple os's.

This type of thing (well, linux really, together with hardware advances) is allowing a huge proliferation of new and innovative devices because the platform has finally been commoditised. Two years in it is already a much more interesting decade than the 90s was - lets just hope the patent wars don't wreck it.

Duke

Tester the troll ....kinda rolls off your tongue. LOL At a minimum he and LeeBase seem to be Microsoft apologists

futureGEN-Z

@Duke
quote "Tester the troll ....kinda rolls off your tongue. LOL At a minimum he and LeeBase seem to be Microsoft apologists"

I think only astrosurfer will have oppinion skewed toward Microsoft.

For me,
Screw Microsoft, I hope microsoft bankrupt for all the things they did (Novel, DR-DOS, OS/2, Sendo, Nokia). Microsoft Era = Dark Ages of competition... The bankrupt of Microsoft will lead humanity into new world/technology order.

And I really hope android win, because with android/opensource competition is on a new level.

Some company... for example, samsung could found a bug in android and fix it without the need of google to fix it (microsoft always took a long time to fix bug, glad their loosing the fight, microsoft = bad).

All company that use Android can compete, yet contributing at the same time... The power of open source is THE FUTURE.... The power of MicrosoftOS = past.

foo

@Baron95 "These comments that Google will win the smartphone war is very funny."
@LeeBase "70% market share on a product they give away."

What you apparently miss is the fact that Android is bigger than Google.

Android is open source, it can survive if Google looses interest, or even if Google falls. Can you say the same about the relationship of manufacturers with Windows Phone? No, they are hostage of Microsoft. When Microsoft says "jump" they (particularly Nokia) ask "how high". Android manufacturers can simply fork the development as Amazon did. WHY WOULD A MANUFACTURER PREFER WINDOWS PHONE TO ANDROID?

That's the reason why Android is quickly becoming the Windows of mobile.

foo

@notzed "Umm, so somehow monopolies are now good economics are they?"

It is better to have an open source monopoly, where everyone has fork, than a closed one.

Amazon forked Android. Anyone can do that.

"Diversity is good, it allows experimentation and the exploration of niches - and there are plenty of programmers to fill every niche possible."

Android allows diversity; Windows Phone doesn't. That's the reason why we see a flood of Android devices, occupying every niche imaginable. Some of them flop, some of them succeed. How can Microsoft mimic that?

Microsoft is trying to mimic Apple with a common standard for manufacturers. That's great for Microsoft, but terrible for the manufacturers, because there is so little space for differentiation.

When a company can't provide cost advantage nor differentiation, it is doomed to become a niche player.

Recommended read: http://www.quickmba.com/strategy/competitive-advantage/

RyanZA

@notzed Microsoft having an economic monopoly was a very bad thing, since they could force people to use their software, etc. Platforms having a monopoly has pros and cons

Pros of platform monopoly:
1) Lots of developers since users can buy some software and know it will run
2) Well tested software since popular software on a monopoly platform is going to be hugely used/tested
3) Room for niche software - you can't make software targeted at a small customer base and then only be able to serve a small number of customers on a small platform

Cons of closed platform monopoly (windows, apple):
1) Platform developer can outmaneuver any competitors trying to use their platform
2) Slow innovation since enhancements to the platform are driven by only 1 company
3) Platform acts as a 'tax' - everyone has to pay the platform owner a tax even if they aren't using the platform fully (having to buy windows just to copy .dlls to your linux box to run some software, etc)
...) Tons more..

You could argue either way for pros-cons of the above. Some people think Windows was really good and helped computers grow fast, at least at the start. Personally I think it was a really bad thing though, mostly because of how MS (illegally) abused the platform monopoly...

However, Android is an open monopoly and none of those cons apply. So you get only the pros. Anybody can develop a brand new platform that can still run Android apps, etc, since they can just embed the open source dalvik into their OS. (Blackberry is heading this route)
I'm running MIUI on my Samsung phone currently, and it has very nice enhancements to Android such as blocking app permissions, ability to download full themes and customize the phone, etc.


So yeah, an open platform monopoly really is a good thing.

bjarneh

LeeBase> 70% market share on a product they give away.
LeeBase> Yes, folks, Android is far from having been proven to be a winner for Google.

They also "give away" a web-search-thing, and email. They just keep on giving, never asking for anything in return, total saints!

Google are advertisers, income does not come from us, WE are their product.

LeeBase

@bjarneh - you are right about google. The question is -- was Android the wisest move for Google to monetize mobile. Consider that Google makes most all of it's money from WEB search, on a platform (Windows) that Google doesn't control. Google could have stayed partnered with Apple, and made all it's mobile advertising money without needing to spend $20 billion to develop and protect Android.

But they did so to control their destiny....initially worried about Msft dominating mobile and kicking them off the platform, and then worried that Apple or anybody else could. However, what have they ended up with? Samsung. Samsung so totally dominates the Android market that Google is just as vulnerable of being kicked off as they were from Msft or Apple.

Look at what Amazon did on tablets. Took the Android OS, thank you very much, and stripped out all the Google services and replaced them with Amazon ones. All that investment by Google, a free gift to Amazon. Samsung could do the same thing.

Baron's point wasn't that Android would fail, but that Google has failed to make any money with Android and has spent SO tens of billions developing and protecting it, that Google may well NEVER make money on Android.

Tester

If Google had wanted to make money off Android it wouldn't be an open source platform.

It's also obvious that they didn't need Android to promote their services.

So what did they need it for? The most likely answer: To prevent Msft and Apple from dominating yet another market segment.

Do they have to fear Samsung? I doubt it. Samsung's revenues come from selling hardware mostly. They would ultimately risk more by walling themselves off.

Amazon is a bad comparison. Their main business is to sell content - and to promote that business they have to shut out Google and its services.

RyanZA

@LeeBase

Problem for Samsung is that they need to have Google Apps / Google Market. To get those, they must play by Google's rules. Sure they can go ahead and make their own store and maps and everything, but Samsung has tried to do that before and failed (and even Apple has failed on the mapping side...). So Samsung can't easily push Google out of the picture without heavily annoying customers and pushing them to competitors. LG has hardware just as good as Samsung's. Samsung is thriving because their product is the best currently. If they drop Google, they no longer have the best product.

Long term they may need to drop Google, but this 'long term' is 5+ years and completely out of anybodies ability to predict right now...

darwinphish

Tomi:

Do you have any national or regional numbers for smartphone sales and platform adoption? I ask because I believe the world wide numbers are hiding what is happening in specific markets. For example, I believe China and India together represent over 1/3rd of the smartphone market and in those countries Android absolutely dominates, with some recent reports stating over 90% of sales. Obviously if China and India so heavily favour Android then Android's dominance in other countries/regions is less than the worldwide average. I know, for example, Android does not out sell iOS 2-to-1 in the US.

All that said, I have had a hard time finding exact numbers for China and India so I am hesitant to draw any strong conclusions. If you have and can share any of this data it would be greatly appreciated.

LeeBase

Google spends billions upon billions and doesn't expect to make money from it? That's some charity they have going.

Amazon isn't a comparison, it's a reality. Monetizing open source is risky business. Android isn't "open" in the traditional sense of open source. No one but Google develops Android, it is not a community process like linux et. al.

Google controls, or attempts to control, Android by making essential pieces NOT open: Google Maps, Google Play (the Android Store) and the like. Sure, you can wait for Google to release the source code, and then fork Android, but only at the cost of not having the very services people look to Android for.

However, ambitious and well financed companies can create their own services...as Amazon has done. The number one selling Android tablet is the Kindle Fire...and Google doesn't get a penny in advertising revenue as Amazon replaced all of the Google money making services and replaced them with Amazon services.

Ambitious...well financed company...sounds like Samsung to me. We can see in both the Bada OS and the apps Samsung has developed for it's Galaxy Note Android devices that Samsung is not seeing itself as merely a hardware provider.

Everyone is looking at Apple's results and seeing the power of integrating software and hardware. Samsung who copies so blatantly from Apple already, even to creating stores that are exact copies of Apple stores...complete with blue shirted employes and the like....can surely not have missed the way Apple is printing money in mobile.

It's entirely likely that Samsung will fork Android and take Google off. Samsung HAS to be worried that Google bought Motorola. It didn't keep Samsung from losing a billion dollar verdict against Apple. So Google will be preparing to be betrayed by Samsung as Samsung worries about being betrayed by Google. They HAVE to, it would be bad business to NOT be making contingency plans.

To date Samsung is the company to have benefitted most from Android. Samsung is very ambitious, has resources like few other companies. If Google ventured into Android for fear of Msft and then Apple, there is no way Google is failing to fear Samsung.

bjarneh

@LeeBase

true, they can be ripped off, but not much.. this stuff is GPL, if it was BSD; it would be plain madness.

Samsungs alternative (Bada/Tizen or whatever it's called) is also Linux based, as we know it's usually just a matter of time before stuff that works on one Linux platform, works on all other Linux platforms as well. Even the tiny Meego community has started building a compatibility layer for Android apps (with no funding):

http://wiki.maemo.org/Apkenv/Game_Compatibility

for now it's mostly Angry Birds, but this is destined to change. If you had some money to put behind it, it would be a matter of time, before Android apps ran fine on Meego/Tizen/Bada etc. and vice versa.


Google have already made their money back; they are now in so many pockets, and have access to location/email etc. that this is paid for ages ago. This is the real revenue, when Google knew nothing about users, their ads was worth 5 cents, now it's 5 dollars. The value of all that information can easily be seen by Google's attempts at buying/building facebook alternatives (orkut/googleplus).

A fishing-pole ad is pretty useless to someone who never fishes, but when you only show it to people who live places where they do a lot of fishing, and you know the person has called/emailed fishing-gear-stores etc, it's money..

RyanZA

@bjarneh

No, it's not GPL. It is Apache (same as BSD). Samsung can very easily strip out all Google stuff and replace it all with their own stuff. Nothing stops them at all if they want to do that.

@LeeBase

But Samsung is definitely not going to do this in the short term. Feel free to speculate on it if you want, but it is very much guaranteed that Samsung will be sticking with Google Apps for at least the next 5 years. (For Non-China markets only, though - for China, they may very well strip out everything Google if the cost of Google services exceeds the cost of doing that customization.)
Customers buying Android want all of their existing paid apps to carry across. They want their gmail to carry across. People would move to LG in a heartbeat to get access to Google services at present.

Tomi T Ahonen

Hi gang

Nice discussion, keep it going.

First to regular visitors, I have hoped I would not need to make this comment, but here goes.. obviously its no longer possible to even try to respond to all comments. I love it that we get so many commments so often on the blog, but apparently the popularity of this blog is now so big, we get often so many comments, with what time I have, I won't have the chance to respond to everybody. I will still do my best. Trust me, I read every comment and take it in.

I will comment now more generally on a few themes that came out. Early in the comments was the debate about size of reach vs how easy is it to make money on the platform. Baron95 gave an often-repeated line by those who don't have the biggest platform, that their system allows easier chances to make money. Yes, that will be relevant to some, and even a winning argument to few, but as many pointed out in the comments like bjarneh - the most common interest, by developers, is whose platform reaches the widest. I trust even you Baron95 will begrudgingly admit, that it is often the clinching argument at developers - whatever your personal preference of what it SHOULD be might be - and that the biggest platform over time always gets the most developers. That is what history has shown, that makes economic commercial sense. But it does not mean, that for some the argument is not valid, where can we make easiest money or most money.

And with that, I would add, Blackberry is the lest not-dead of the small platforms, for that very reason, the big corporations are very reluctant to throw out their Blackberry OS investment, they take long time to decide and the platform is thus far more viable and can sustain short-term problems, and still survive. A consumer-oriented platform, if hit by sudden loss in popularity (witness Symbian, Palm) cannot recover..

Tomi Ahonen :-)

LeeBase

This is all talk about the risks involved. How "Android having 75% marketshare" doesn't translate into "Google is winning"...necessarily. Clearly, Samsung is winning at the moment, but that's not necessarily the same thing as Google is winning.

For Google, it would be far better to see a variety of manufacturers somewhat evenly splitting the Android market. As it is, they find themselves in the same "beholden" position they were trying to get out of by acquiring Android in the first place.

And Google most assuredly NOT gotten it's investment back yet. Google and Facebook are both struggling to monetize mobile....all the while mobile canabalizes their profitable web businesses.

Folks talk about maps as if the default map app is the only one that matters. The Apple map fiasco didn't bother me because I use TeleNav on my iPhone. It would be NICE if the Apple directions were better, and they'll get better, but in the mean time there are Tom Tom apps, Garmin Apps, oodles of choices.

Nokia is making a play with Here, to take it's mapping apps everywhere. Samsung has a variety of choices it could go to to replace Google maps. Everything that Samsung is doing to build up it's Bada/Tizen ecosystems....it's Galaxy Note apps...it's skin on Android....are all efforts that can build for Samsung it's own ecosystem freeing it from Google.

I'm not predicting it will happen in the short term, but clearly the right moves are being made to make it possible. And since that's true, Google HAS to be making preparations of it's own. How long will they let Motorola flounder? They bought Motorola for patent protection but what followed? A billion dollar verdict against Samsung and a 10 year cross licensing deal between HTC and Apple.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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