The number of Android devices spilling from manufacturers begs the question what this means for both the platform (Google), the market (manufacturers) and consumers. It seems every week you hear of another Android device being prepared for launch and in doing so are we heading towards a critical mass?
Google creates a beautiful monster
Google produces the Android operating system (OS) and licenses it to manufacturers, such as Motorola, Samsung and HTC, who in turn don’t have the costly overhead of developing their own OS – instead they can focus on getting the hardware right and other aspects to their product.
On the flipside of this, they are at the behest of Google releasing new and improved versions of Android to keep the ever hungry “next-gen” public satisfied (“Wow! This new version is great! When’s the next one coming out?”). This also creates a legacy question for manufacturers – e.g. should Google releases a new version, this might not be totally compatible with their existing or older hardware. This risk is mitigated in a number of ways, including Google working closely with those manufacturers to ensure the roadmap for their product is understood.
Manufacturers = Android + YMDB?
With so many potential vanilla Android devices, some manufactures provide “value-add” layers on top of Android to become differentiators – or Yet More Dumb Bloatware (YMDB). For example, Motorola introduced “MotoBlur” on many of their phones which aimed to provide a means of streaming your social media site conversations (e.g. Facebook, Twitter). Although this sounded useful, the reality was that many users did not like this “feature” and so Motorola now play this feature down The reality is that many additions to the already very capable software can frustrate users. Mobile carriers take note.
So what is it that drives consumers to buy these products? There are several factors, all of which interact with each other, including consumer profile, retailer conditions (price, availability) and manufacturer features. Let’s delve futher into these before we see how they interact with the mass of Android devices.
Who are the consumers?
Those buying devices today tend to fall into one of several categories:
- Budget Tech – these people tend to know their technology but want a device that’s fit for their budget; they know there will be reduced features (perhaps no camera or HDMI output), but really are looking for core capability (capacitive touch, good processor and memory). Extremely price sensitive.
- The Casual Curiosity / Novice – these folks tend to get seduced by the hype and want to dip their toes in the tablet water. They are moderately price sensitive.
- The Business User – annoyed with the thought of carrying unwieldy laptops and cables, probably hating the in-built trackpad mouse, these users want a device that lets them retrieve emails and work on documents efficiently. These folks are not extensibly price sensitive.
- The Power User – Heavily invested in all things technology, these folks will want a powerful, fast device that’s very flexible (typically they will want to “root” the device, or customize it in some way that makes it more “unique” for their purposes). These people are somewhat price sensitive but will pay premium for advanced features.
Now we have a pretty good picture of the key consumer categories, let’s look at how they interact with the market.
Keep the Consumer hooked, keep the order sheet booked.
Manufacturers tend to focus on a number of key things, including:
- How many units will I sell (what is the demand – and demand vs competition)?
- What is my price per unit vs the competition price for comparable devices?
- What’s in both mine and my competitors’ innovation pipeline (i.e. what’s next)?
- What is my market share? (How much % of the market do I have?)
What Drives Price?
There are several factors including:
- Exclusivity – how unique and desirable is my product (the more unique or exclusive products will drive their price up)
- Features – What feature set does my device have (this can drive price up or down, depending on what features are available)
- Competition – What are the competitive devices and their respective prices?
- Market Share – Low market share devices might want to set their prices aggressively to gain more consumers – or have some strategy that lures consumers to their products; products with high market share should also maintain their prices accordingly to retain that share.
- Production cost – Manufacturers need to make a profit so price their products so that a profit is determined at some point in the future.
When you put these factors together you get a very complex picture – each manufacturer is looking at all these different aspects to try and determine
Breakout of the Mobile OS Share; Source: Nielsen
Although Android commands the market share with 29% of all devices, because of its’ very accessible and successful adoption, many manufacturers are playing in this space
Android isn’t alone in this challenge; Windows Mobile – and specifically Windows 7 Mobile is starting to challenge the market – however there is still resistance to many users adopting the Microsoft platform for many reasons including dislike of Microsoft, being burned by previous Windows Mobile platforms, or just the perception of the OS.
The Difference is the Differentiator
Sounds obvious, but with perhaps little to differentiate products between manufacturers, it requires controlled innovation to succeed. Currently Motorola and Samsung are leading the charge by either producing new-to-market products (Motorola Xoom was first Android tablet) or enhanced products (Samsung offering high quality screens and dual core processors). As the market develops, these manufacturers will need to continue to develop their products to capture the market segments. This requires research & development funding which can only come from existing product sales, which in turn means they will have to charge a premium for their products. This can only be sustained so long as the brand equity is there and the consumer is prepared to pay that premium. With a glut of Android devices this may become an increasing challenge to maintain. Apple (and to some extent, RIM) face less of a challenge in this respect, yet need to keep at least in line with the Android innovations to retain their market share.
Mobile device manufacturers will face increasing challenges to maintain market share and fund / develop new products whilst retaining a unit cost which is realizable to the consumer. Additionally with network providers dropping their unlimited network plans, those devices may have to innovate in the communication space (e.g. reducing bandwidth requirements) which, especially in these increased economic sensitive times, would a differentiator that the price conscious consumer would respond to and help drive market share.
With Android as a platform being easier to adopt to a device, it begs question how will the multiple manufacturers provide relevant devices to the consumer and be different enough to gain enough market share and profit to be viable. I believe there will be three tiers that will emerge – namely, budget, mainstream and premium. Even then, those manufacturers playing in those spaces will face a great deal of competition. The difference then, is the differentiator.