T-Mobile USA began selling the G1 in October 2008. The G1, manufactured by HTC, was the first commercially-available phone powered by Google’s Android operating system. The T-Mobile G1 was made available in the UK in November, and will be in Germany, Austria, Czech Republic and the Netherlands some time in this first quarter of 2009. In October 2008, Symbian was the global smartphone market share leader, with 62 percent of the smartphone platform market.
But, due to Nokia’s less-than-stellar penetration of the United States market, Symbian is a distant fourth: RIM (34 percent), Microsoft (29 percent), Apple (9 percent) and Symbian (8 percent). While Palm had approximately 13 percent share of the smartphone device market, Palm licenses both Windows Mobile and Access, so the share for the Palm operating system is lower than the Palm device market share. Apple has approximately tripled market share in the United States year-to-date.
With all these major smartphone platform players jockeying for position, and with the geometric growth of the smartphone market, ample opportunity remains for existing competitors as well as new entrants such as Google to gain market share.
What factors will have the greatest influence in determining the relative success of the mobile platform? I am persuaded that, ultimately, the key to success will be the ability of the operating system and its core applications and services to facilitate integration and interoperation with other applications and services.
In the case of the iPhone, the elegant design, the introduction of a powerful new man-machine-interface (multi-touch), the full-HTML browser, and the iconic brand helped spur such feverish adoption initially. But I believe that the most important factor in the success of the iPhone has been the ability of iTunes to sync applications such as e-mail, contacts, calendar, music and video content. It is estimated that there have been 600 million downloads of iTunes, thus making it one of the most successful applications in history. And with MobileMe, Apple extends syncing to both the Internet and to the iPhone wirelessly.
Subsequently, when Apple added support for Microsoft ActiveSync, it built a bridge to tens of millions of enterprise users so they could receive their Exchange e-mail. The launch of the App Store and the cultivation of the developer community reinforce the role that the iPhone fills as hub of users’ digital lifestyle. The proof is in the numbers: Apple recently reported that over 100 million applications have been downloaded from the AppStore site.
If my thesis holds true, then Microsoft should exploit the installed base of Office users, which should enable Windows Mobile to gain market share globally. Microsoft has other assets including Windows Media Player, Xbox and the assets from acquiring Danger. Microsoft should leverage the interoperation and integration with those assets. The promise of Windows Mobile-based smartphones should be seamless interoperation with the Office desktop environment and the Xbox gaming environment.
Apple’s competitive advantage gives the firm a uniquely addressable market about digital lifestyles. Office and other Microsoft assets give Microsoft a competitive advantage in enterprise and gaming markets. What should be the basis of Google’s competitive advantage with the Android platform? The answer is providing a unique and positive mobile Internet experience. Here’s why.
Clearly, Google is assembling assets to create a superior Internet experience, including Maps, YouTube and Chrome. For example, Google should add mobile resources into Chrome and integrate it into Android. The browser needs to be incorporated throughout the Android platform to include tight integration with the Android address book, calendar and other applications. Users should be able to perform application, device and Web search in one integrated operation. The nexus of Chrome and Android is where Google can build unique value relative to the mobile Internet experience. Google needs to build and sustain their competitive advantage around the mobile Internet experience.
The G1 is designed to be a consumer device in the low-mid price tier. This low end of the smartphone market is precisely where Android should gain traction, where “free” is a compelling price for the operating system. Because of the power of the Android operating system and the attraction to third-party application developers, consumers will get good value with low-end products.
The T-Mobile G1 offers a “sneak preview” of the kind of value that consumers will get in this low-mid price tier. G1 users can sync e-mail, calendar and contacts from Gmail, as well as most other POP3 or IMAP e-mail services. In essence, Google has built in and made free services that Apple provides separately via MobileMe for $99 per year.
The G1 will include a full HTML-capable Internet browser. Glu Mobile and Namco Networks have announced games for the platform. EA Mobile may support Android but The Sims and other popular EA titles won’t be made available without a better content billing solution. The Amazon digital music store will come preloaded on the G1, offering DRM-free MP3s compatible with virtually all devices.
Google management has declared that mobile is critically important to the future of the company. Again, the numbers explain why: Google monetizes search on approximately 200 million desktop PCs and Macs. Since there are close to two billion phones sold each year, Google has an opportunity to monetize search in a market that is 10 times greater than their current market. They will continue to promote their cross-platform resources such as mobile search and maps.
But, Google contends that Android is important to lead the charge in providing a truly open, mobile Internet experience that approximates the desktop Internet experience. Google hosts MarketPlace where Android application developers can distribute applications-which is similar to Apple’s AppStore but is completely open so anyone can develop an Android application and have it operate on any Android device and on any wireless network. You don’t have to go to Google to get them to approve your application.
Within two or three years, Android should become one of the top four mobile operating environments. Fortunately for Google and for all mobile users, independent of Google’s ultimate market penetration or longevity in the market, Google’s impact will certainly be to move the market more toward openness, and to greatly enhance the mobile Internet experience.
As the mobile Internet experience becomes open so that mobile users can search and browse the same Internet that desktop users currently browse and search (thus shifting away from mobile walled gardens and WAP sites), Google’s addressable market will explode.
During Pete’s hiatus from Frost & Sullivan, he was also a General Partner in Startup Venture Group, a private equity firm. There, Pete managed early-stage investments in the consumer media and telecom sector. He rejoined Frost & Sullivan in 2007. Pete has been widely cited in the press and has been a frequent public speaker. In addition to domain knowledge in media and telecommunications, Pete has a strong international profile, and academic concentrations in economics and finance. Pete has a B.A. from the University of California at Berkeley, and an MBA from Pepperdine University. He can be reached at [email protected]
Disclosure Statement: Pete Dailey has a direct beneficial ownership position in Apple (AAPL).