The mobile world is abuzz around new data from Nielsen that has headline streaming across newsreaders using phrases like “..Close The Gap On Android… ” Has Android lost some share? Sure it has, but let’s not place the laurel on Apple’s head quite yet. The company has been playing “catch up” in features against Android, and the field of other players is ratcheting up the game for Cupertino. If they don’t start to innovate faster, their honeymoon as mobile darling will end soon. Those 4 million first weekend iPhone buyers greatly increased the percentage of new activations from iOS devices, a good thing for Apple.
Right now, for Apple, it’s good to be king. Heck, their valuation rose this week higher than the GDP of Greece… yes, the country. iOS still shows amazing appeal, but Apple was shortsighted in its early deal-making. Exclusivity resulted in a very long tail of carrier relationship growth. Who knows what their device volumes would look like had they pushed for a larger number of early relationships and quickly ramped the number of Phone carriers in market. Add to that the fact that they’ve owned the market due to novelty, in terms of trendsetting product design and a winning approach to expanding device function, the app store. These are not long-term, sustainable differentiators.
At a certain point, Apple playing “us too” on hardware features is going to burn users being asked to pay a premium for devices.
Those are all great cards to have in hand, but I started thinking about Apple’s future after I spent time with various device vendors at CES this year. Why? Users are quickly seeing features and tools become common on all devices except Apple’s iPhone. Take RIM, whose BlackBerry devices make up a progressively smaller chunk of the smartphone market with every quarter – largely due to their perceived lack of innovation but hold that thought; NFC and touch will be available in every new Bold device and many Curve devices RIM offers from here on out. Contact exchange via NFC is standard in blackBerry OS 7. RIM is no longer a player in this game, you say? OK, Google’s flagship Galaxy Nexus is pushing face unlock – albeit a novel and quite buggy tool – NFC, and voice interaction into the hands of users; other Android handsets will be quick to follow. Windows Mobile is also making use of voice and interaction with devices like the XBox that you can use today. NFC from Apple? Coming soon. Interaction between iOS and your TV, well, some of it is there with Apple TV today but Siri’s rumored features in development are the real story.
At a certain point, Apple playing “us too” on hardware features is going to burn users being asked to pay a premium for devices. Adding to that, while leaving novel software innovations and use cases to iOS developers via the app store was a great way to kickstart innovation, it adds a hurdle to discovery for users. Sheer volume will drive developers to replicate these tools and features for other platforms, at some point perhaps even leading them to debut elsewhere. Leaving innovation to the third party software vendor paired with glacial additions of platform-native features (at least compared to Google’s Android iteration speed) as a long-term strategy will fatigue buyers and the balance of power will shift. Will RIM reclaim the throne it once occupied in the smartphone space? Probably not in the US, but the world is a big place and it, Windows Phone 7 and Android are upping the ante in defining what features define “smart” in smartphone. What innovation do you think will turn the tide?
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Chris,
I have to disagree on two points:
1. Apple as a “Me too”: I think you’re falling for the hardware specs game marketing that Samsung, Moto and LG play. NFC is more a curiosity than anything at this point. There is very little real use of the technology at this point so its hard to say that an iPhone user is missing anything of consequence today. I will give you that LTE support is a bigger miss, but at the same time, LTE is still a battery’s worst enemy (says a Thunderbolt owner), but admittedly its omission was one thing I was disappointed at with the 4S. But Apple still leads in other hardware areas such as the Retina Display. When I look at my wife’s (@tgruber) iPhone4 I am jealous even though she has a smaller screen. But moreover Apple tries to differentiate based on software and user experience which I believe to be a better platform for long-term differentiation than hardware. The Apple UX is almost unanimously viewed as superior and I think the overall OS build quality and stability is better than Android (again as an owner of a Thunderbolt and iPad2).
2. Apple’s Mistake Regarding Carrier Distribution: In retrospect, when you look at the last quarter’s amazing results (reportedly 70% of all AT&T & Verizon activations), yes, Apple would have been better off having AT&T, Verizon and Sprint from the get-go from a volume perspective. But making the exclusivity deal with AT&T allowed them to break carrier control of the device, which I think long-term is a much better position for Apple (more profits by not having to make 19 different configurations for different carriers) and consumers (not having pre-loaded crapware). Android and Microsoft and all their OEMs are still carrying the carrier burdens. Even with this ‘strategic error’ Apple is the number 2 smartphone manufacturer in the world and own > 50% of industry profits.
Thoughts?
You raise two solid points here, though the first centers on features and functions that – I agree – may or may not be in Apple’s best interest, though I’m going to insist that Apple has not been the technology (not feature, we’re talking inclusion of who ecosystems of tech here, like NFC) leader on mobile as it was on the desktop and portable side. There was a time not too long ago in my analyst life where I was covering WiFi technology and repeatedly hearing from IT folks and some users that it was just a “nice to have” technology. Hard to believe given the rise of devices – and their runaway popularity – like tablets would have taken place with no WiFi.
On the carrier negotiation side, I think that Apple did make the right move in sticking to its guns to get the right device into the market. It was a complete departure from what we’d known and their freedom in design avoided a repeat of past gaffes – Moto Rokr with iTunes, anyone? – in the handset space. I would have liked to see a shorter term agreement with AT&T here in the US, though, as I think a short time on market would have shifted the balance of power to Apple, allowing them to push forward with even more revolutionary offerings across a wider spectrum of customers.
All of that said, hindsight is rarely worse than 20/20.
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