Prediction season has started early this year. Fortune, Techcrunch, Scoble, Louis Gray, and others are already picking winners in the Smartphone market, which most see as a two horse race between iPhone and Android. My prediction? Both will win because they are playing different games. Android will win the market share battle, but Apple will generate bigger profits.
Open and Choice always win - Android is open, iPhone is not. Android provides choice from LOTS of manufacturers and many wireless carriers. iPhone does not. Choice drives competition which always benefits the consumer. Competition drives innovation, more choices, and lower prices. Android will win the market share battle by a wide margin over time.
Apple has a completely different strategy, similar to the Mac, iPod and iPad strategies. Apple develops and controls the hardware and software on all their devices. The Mac has never had more than 10% market share, but has been extremely profitable for Apple. Apple goes for the high end of the market where they can charge high prices and enjoy great profit margins. Apple has been successful with this strategy multiple times, and will do it again with iPhone.
Google has a very different strategy with Android. Google provides software (Android) for free, and makes Google search, Google Voice, Gmail, Contacts, Maps, Places, and other services work seamlessly with Android. Mobile search and advertising are the revenue streams for Google. The advertising revenues are certainly lower versus selling hardware, but the profit margins are very good.
Others will argue features, functions, technical merits, number of apps available, etc. Those are all important points, and Android does very well by any measure. Apple, Google, Microsoft, and others are competing very hard to win market share and profits. But the thing to remember is that Apple and Google are playing two very different games. Both companies will do very well. Consumers are the real winners.
Mobile is the battle ground for the next paradigm shift over the coming decade. More about this in my annual predictions post coming soon.
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