The next installment of our comprehensive analysis and valuation of Google (NASDAQ:GOOG) is available for download to all paying subscribers. I have taken the liberty to excerpt a small portion to publish openly on my blog to illustrate the outrageous growth that is the Android. We will be following up with a full compendium of Google’s valuation and analysis (including an embedded, plug and play valuation model for professional and institutional subscribers) in a day or two.
The Success Story Formally Known as Android
Admob acquisition and Android’s success has helped Google to build a dominant position in the mobile advertising market. Google’s Android mobile operating system is gaining considerable traction in the smartphone market. Android is steadily and rapidly gaining ground and its dominance is a serious threat not only to RIM (RIMM) and Symbian but also to Apples’ iOS. According to research firm Gartner during Q2-10 Android captured almost 17% of the global smartphone operating market share, up from just 1.8% Q2-09 and 9.6% in the previous quarter. During Q2, Android surpassed Apple’s (NASDAQ:AAPL) iPhone OS (14% share) to become the third-most-popular OS in the world behind Nokia’s (NYSE:NOK) Symbian (41%) and RIM’s Blackberry (18%). The Android not only surpassed iOS in worldwide sales but also overtook Blackberry in the US. Also interesting to note that Android was the only operating system to witness improvement in its market share on q/q basis (+7.6%) in Q2-10 while on y/y basis only Android and iOS (far distant second) gained market share with gains of 15.4% and 1.2%, respectively.
According to the latest report released by comScore (Sep 15) for the three months period end May-July 2010 Android’s market share in the U.S smartphone operating system increased by 5.0% points to capture 17% share, up from 12% from Feb-April 2010. Although RIM and Apple’s iOS are still the dominant player within the U.S. mobile market, RIM is having a steady roller coaster ride downward in terms of share. RIM continued to lose its market share losing 1.8% in the quarter to 39.3% while Apple lost 1.3% points to record 23.8% market share.
Some pundits contend that Apple was losing market share in Q2 ahead of the iPhone4 launch, thus comparing market share gains is akin to comparing apples-to-oranges due to demand compression from launch cycle expectations. As it apparently played out, the iPhone4 did relatively little to pull users away from Android. Although Apple had sold significant number of iPhone 4s, those sales were largely within its existing customer base, while drawing relatively few users from the Android camp. It appears as if both OSs have been cannibalizing their other competitors, though.
Android shipments and market share
Change in smartphone market share by Operating System (Q2-10 vs Q1-10)
Android’s rise is even more apparent among new smartphone subscribers. According to a survey by Nielson, new smartphone U.S subscribers (last six months) for Android nosed past Apple’s iOS to grab a 27% market share of 6 month’s worth of subscribers.
Operating system, 6 months subscribers
Smartphone Operating System Market Share Forecasts
Android’s record growth has surpassed nearly all predictions, save ours at BoomBustBlog – and we are still very bullish on the operating system save any unforeseen legal difficulties. According to latest research by Gartner (Sep 2010), helped by service providers’ marketing and vendor support for Android-based smartphones, Android with 17.7% share would become the second-largest platform, following Symbian (40% share), by year-end 2010 while at the end of 2014 the number one spot will be contested by Android. Gartner predicts that by 2014, open-source platforms will dominate more than 60% of the market for smartphones and expects that single-source platforms, such as Apple’s iOS and RIM’s OS, will increase in unit terms, but their growth rate will be below market average and not enough to sustain share increase.
BoomBust forecasts were on spot with Gartner and IDC, and much earlier: The latest smart phone market share forecasts by Gartner (Sep 2010) are in line with what we at Boombustblog.com predicted more than a month ago during Research in Motion analysis (see RIMM Forensic Analysis and Valuation – Professional & Institutional and RIMM Forensic Analysis and Valuation – Retail). The table below gives market share for each of the players predicted by Boombustblog.com and Gartner.
Click to enlarge
OS market share
Source: Gartner, BoomBustBlog
Android and AdMob Revenue Forecasts
Quantcast released figures for share of mobile web usage by platform. According to Quantcast, Android’s share of the pie has increased by 17% y/y (5.5% Q/Q and 2.0% m/m while the market leader, Apple’s share in the mobile web usage has declined 11% y/y (-3.3% Q/Q and -0.3% M/M). Android is the only operating system to increase its market share while all other OS players have lost ground on mobile web usage. While Apple’s iOS is still the dominant player within the U.S. mobile market in terms of Web consumption, it is steadily losing ground while Android is gaining traction steadily. Use of mobile web and its market share is more important for Google than any other metric (OS market share) simply because Google is purely a provider of Web services and cloud applications and does not engage hardware sales whether retail or enterprise – it is an OS provider with a very focused purpose (as explained above in the monetization section). The web usage simply measures mobile web usage and users of certain mobile platforms access the web more often than others. As such, Android has been designed to enhance the web browsing experience through Google’s myriad Cloud offerings and Web services and with market share for Android forecasted to grow (BoomBustBlog, Gartner and IDC), Android’s share of web usage should increase at a even faster rate.
Even, as visually depicted below, if one were to view the most recent data available as a most granular snapshot of activity, Android is smoking its competition – stealing share from all parties involved.
According to comScore, usage of browser and apps have increased with 33.6% and 31.4% of users using the application for 3 months end July 2010 from 27.5% and 21.6%, respectively in December 2009. Increased use of mobile browsing and app downloads are major aspect of the paradigm shift, empowering search to become wireless and illustrating Google’s rationale behind the concerted push into the mobile market…
This full document (19 pages in all) can be downloaded by all paying subscribers here: An Analysis and Valuation of Google’s Android and AdMob. We will be following up with the full compendium of Google analysis, valuation and opinion withing 24 hours or so. In the mean time, for those who have not kept abreast of our research and opinion concerning the mobile computing wars, there is deep well of reading available to subscribers and non-subscribers alike…
Recent Google subscription material:
- Google Valuation Model (pro and institutional)
- Google Cloud Based Services
- Google’s VOIP and Telphony Services
- Google TV Analysis
Be sure to peruse A Quick Review of Research in Motion’s Q2 2011 Earnings Announcement and previous Research in Motion commentary:
- Quick Thought On How Research in Motion Can Maintain Their Market Share and Take Even More
- BoomBustBlog Research Opinion Hits the Mainstream Media, Sort Of…
- As I Have Anticipated, There is Absolutely No Fire in the Torch, Except for the One That’s Frying RIMM’s Share Price
- After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
- RIM Smart Phone Market Share, RIP?
- This Quarter Offers a Lot of Challenges for Smart Phone Vendors with Fruit in Their Names!
- Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion
- The BoomBustBlog Multivariate Research in Motion Valuation Model: Ready for Download
- As Research in Motion Continues Its Inevitable Downward Descent In Both Equity Value and Market Share, Investors Should Tweak Their Assumptions Accordingly
- The Blacker the Berry, the Smaller the Market Share?
Research in Motion subscription content (click here to subscribe):
- RIMM Forensic Analysis and Valuation – Professional & Institutional
- RIMM Forensic Analysis and Valuation – Retail
- RIMM Multivariate Valuation Model
- Smartphone Market Model – Blog Download Version – all paying subscribers
- Mobile Operating System Market Share Model – all paying subscribers
More on the Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars.
- There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
- The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
- An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
- Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
- This article should drive the point home: An iPhone 4 Recall Will Hurt Apple More By Opening Additional Opportunity for Android Devices Than Increased Expenses