We all tend to focus on the short term issues. In the mobile industry, people do the same. For Android, most reports only look at fragmentation of market, confusion on Google’s strategy and the complex legal issues. Even when evaluating giant Apple, news of the long expected leaving of iGod can still send the stock down and up the market. Some can blame it on the same technology that is driving the industry to the need-for-speed culture we have now, but take a lesson or two to learn the Buffett analysis style can help to give a deeper insight of the market.
The real battle in the mobile industry is still the same old “stickiness” or customer loyalty. It is the same for all players in the industry, network providers want subscribers to stay on the same network, hardware makers want users to keep buying their products, software developers wants more people to use their apps, advertisers wants more people to stay on their platform.
Understanding the core business of each player or group of players in the industy can help to explain a lot about their strategy and their likelihood to be winners or losers.
Google, being an advertising company, the more Android phones out there the better. Fragmentation, confusion and legal are not main threats to their core business. Google has been part of the Open Source community for long enough to know that once Android is out, it cannot be controlled easily, certainly not buy one company. The overall stickiness to Android as the most popular free smart phone platform is great for Google.
Network providers are happy to have more smartphones on the market, even if some of the services seem to eat into their services like Whatsapp vs. SMS and Viber vs. Voice. But overall, the more engaged their users are with smartphones, the more dependant on their network. They will price accordingly to make money from data. The days of making excessive profit from SMS is over for network providers, and they have been careful in bundling text messages to their subscription for a long time. Data, 3G or faster, is finally ready to take over traditional voice services, a good decade after the 3G licences auction in 2000.
For Android partners, both hardware and software, are ones at most risk by using such an open platform. It is hard to create such stickiness when the platform encourages choice. The simple example here is to look at what happened with the PC market. IBM quit their PC business early and now HP wanting out too. When all devices are essentially the same, users can choose amongst any of them and focus just on price. Same goes with software on Android, when most of them are free, people feel less attached to their free software, they can switch from one app to another easily. The lack of good DRM at both system and app level also make it harder for software developers to make a reasonable living, hacking Android apps is much easier than iOS apps as Google is not actively locking down the system to protect revenue for its partners.
Apple makes their money from hardware and everything they do is to increase the stickiness to their ecosystem. To engage everyone, not only their customers, but also their suppliers. To achieve a true win-win for all players is more easily said than done. It took Apple 30 years to build up a loyal group of Mac users and 10 years to build up the eco-system for iPod/iPhone platform. The amount of paid music, videos, apps and hardware accessories will keep their users loyal to their platform. Not saying that loyalty is the only factor of success, but it certainly makes beautifully engineered products even more desirable. Google & Microsoft, are you learning?