There are two reasons why Apple and Google are decimating Nokia, BlackBerry, Microsoft and Palm in the mobile business: price and applications.
I forecast that by 2013, Apple’s iPhone and Google’s Android will have 90 percent combined USA market share for smart phone operating systems. According to comScore, as of February 2010, they have a combined 34 percent—with 25 percent for Apple and 9 percent for Google. Google’s share has tripled in three months and may pass Apple’s in a few years due to its lower price and more open approach to application developers. There will be pain, suffering and perhaps death for the mobile phone divisions of giants such as Microsoft, Nokia and RIM (the company behind the BlackBerry device). On April 22, Nokia’s stock fell over 10 percent due to a poor earnings report driven by loss of market share to iPhone.
A typical mobile startup today builds its iPhone app first, its Android app second and nothing else third. Going forward, users will buy only devices with rich app offerings. Only two companies have demonstrated an ability to corral a large community of mobile app developers: Apple and Google. According to research firm Broadpoint AmTech, BlackBerry App World has 6,000 apps versus Apple at 185,000-plus and Android at 38,000-plus. The mobile innovation community has completely written off Blackberry, Nokia, Microsoft and Palm. In a few years, we will remember the Blackberry fondly, as an antique.
Google’s Android operating system is free for handset makers, so Motorola, Samsung et al, are in the process of consolidating all smart phone development around Android. The mobile device world is segmenting into two classes: premium Apple-based and cheap Android-based.
Why would a handset maker ever pay Microsoft a fee to build a smart-phone when it could build a better device on Android and pay Google nothing? Answer: they shouldn’t, and increasingly they aren’t.
Why are applications so important? For the same reason Willie Sutton robbed banks: That is where the money is. The locus of mobile has moved from voice calling, to text messaging and e-mail, to Web surfing, to applications.
Hundreds of billions of annual revenue from mobile device sales and voice-and-data packages are moving to those vendors whose phones have world-class applications. This is why Apple’s stock price is outperforming Nokia’s, RIM’s and Palm’s.