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Summary

  • Why Google's Android has already won the smartphone war.
  • Explanation of Google's Android strategy beyond smartphones/tablets.
  • Analysis of the importance of Google's announcements behind AndroidWear, Android TV, Android Auto.
  • The importance of how Google is integrating its services to better work together.

Watching the Google (NASDAQ:GOOG) IO keynote was a bit like watching a steamroller: the stats just kept coming and Android's unstoppable march continued.

While by some measure Android's global smartphone share is near or above 80%, here were another set of jaw-dropping stats shared by Android/Chrome head +Sundar Pichai:

  • 1 billion 30 day active users on Android devices.
  • 315M devices shipped running Android in Q4 2013
  • 62% of tablets shipped in 2013 were running Android

The last stat will surprise some who thought iPad still continued to have a safe lead in tablets (though they still do in terms of tablet-specific content). When coupled with a surging number of OEMs embracing Android, the increase in computing power and the drop in customer retail prices, Android saw a particular surge in developing countries in Asia where cheap Android tablets can now be had for under $60. More importantly, Sundar shared that over $5 billion had been paid out to developers in the past 12 months -- a 2.5x increase over 2012.

Some will argue Apple (NASDAQ:AAPL) still wins where it counts: profit per device (or actually the fact that they are nearly the only OEM to be profitable, save for Samsung (OTC:SSNLF)) and the overall revenue of the App store and the fact that Apple's out payments to developers is probably 2x Android's.

So what?

Google isn't in the hardware business and -- with the exception of Nexus/Chromebooks -- never really has been. Nexus were always considered reference devices -- a signpost to OEM partners of how to best implement Android on their devices and a showcase for Google's services. Programs like Nexus were even eventually rolled out to other OEMs who developed limited edition stock Android versions of their flagship devices given how popular Nexus devices were among developers.

Android took another step forward with Android One, a Nexus-like program to standardize the experience of Android to lower-end devices in the market. A first OEM, Micromax, has already announced a sub-$100 device using One targeting developing markets. As for Chromebooks, they continue to dominate online sales of laptops (as seen on Amazon (NASDAQ:AMZN)), and as Google Docs now advance to allow for actual editing of Office docs on mobile devices (announced yesterday), they will make more inroads in schools and enterprises.

The truth is that the smartphone wars are over. Google's strategy of providing an open and free OS and rallying the Open Handset Alliance to one standard (however fragmented at times) has worked beautifully. Every subsequent generation of Android has not only been better than the last but also gained more share more quickly than its predecessor. Kit Kat (Android 4.4) now commands 13.6% share of Android devices, according to Google, while devices running Android 4.0 or higher now account for nearly 85% of all active Android devices globally. It's important to caveat here that this data doesn't include data from China since Chinese Android devices typically don't carry Google's suite of services and don't check into their servers, but still -- the reduction in fragmentation compared to two years ago has been enormous.

So where does Google go from here? They take a page from the Cola wars of the 80s-90s. Back in the days when I worked at Pepsi (NYSE:PEP), when Coke (NYSE:KO) realized they weren't going to gain much more share of the Cola market globally what did they do? They went for share of stomach. They looked for ways they could provide more of their products to users as part of their overall diet, not just in terms of their carbonated soda consumption. So if you're Android/Google, what's the strategy?

I call it Share of Time.

And Google IO scored a near perfect 10 on that note. While Google announced a slew of improvements to Android including a preview of the new OS codenamed "L" the most interesting aspects of IO today for me were two things:

1. Android's march beyond smartphones / tablets
2. The accelerating integration of Google Services - especially between Chrome and Android

Keys to the first point were Androidwear, Android TV and Android Auto. But it's not the fact that three of these initiatives were launched in one day that matters. It's the way they were launched. In the valley, one of the jokes among start-ups pitching VCs for money is to say: "Don't pitch a product, pitch a platform. If it has the word 'platform' in it they're much more likely to invest." This is exactly what Google did this week. As opposed to Apple, Google's focus continues to be launching platforms at scale and all three of these initiatives reflected that. Google's strategy for Wear, TV and Auto is essentially the same as it was for Android for smartphones: build an open, free platform for developers and form an Open Alliance of global partners to help drive the marketing of these services. More importantly, since all these platforms run on Android, the development of applications and/or extending applications using APIs to run from one environment to another is becoming increasingly easy. Take for example Androidwear. Google announced that if you have both a wearable and Android smartphone that when you download an app that has a wearable equivalent for your watch, this app will automatically be downloaded to your wearable device. Better still, it will be automatically updated each time the app receives a new update from the developer.

What really matters, though, is the fact you'll be using a whole lot more of Google than you did before. How often have you had a text message only not to be able to make that call or send an email due to lack of battery? Or how often have you avoided checking your smartphone in a meeting for fear of being rude? Now you can use your watch (and be a bit less rude). On the car side, how many of us have hammered our steering wheel at the frustration of expensive but poorly designed in-car GPS systems (my hands remain bruised to this day)? How often have you wished you could just ask your car to play the same playlist that you have on your phone or computer? Or check what movies are playing at a nearby movie theater, buy tickets and navigate to the theater? With Android Auto, now you'll be able to do just that.

Which brings me to my second point: the acceleration of integration of Google services across Android. Nowhere was this more apparent than with Google Now. Nearly every demo during the IO keynote showed a contextual use of Google Now across each of Google's platforms. In the case of Android TV, the user made a voice search looking for Oscar-nominated movies from 2002 to have a list pop up on the big screen with a list of movies available for purchase through Google play. In the case of Android Auto, the demo featured the user asking for the opening hours of a museum and then navigating to it. Google's strategy here is clear: Google Now is becoming the center of the user's universe to find the information they need while other Google services enable them to act on that search result. In the meantime, as Google increases the number of touch points it has with us in our daily lives, it learns more about our needs and provides ever better search results and more refined targeting for advertisers based on context.

But Google's integration didn't end with Google Now. As expected, Android TV will now integrate Chrome's "casting" technology so that users with an Android TV can seamlessly cast the content of their devices directly to their TVs without the need for an external dongle. Nowhere will this be more interesting than for games. As the demo showed, not only does your device become a portable console, but you can even play multi-player games with others across devices. If you combine this with the sky-rocketing cost of console game development and the fact that the new generation of consoles is still nascent, Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE) and Nintendo (OTCPK:NTDOY) have cause to worry.

When I was at Google and +Sundar Pichai took over as head of Android/Chrome, one of the things I was most excited about was better integration and cooperation between the two teams. We began to see the fruits of that collaboration in earnest yesterday. In L for example, Google showed how open tabs on Android devices now appear more as "cards" along with open apps on the device so that users can more easily flip through their tabs without having to return to the Chrome browser each time. More importantly, Sundar also showed a demo of Android apps now running on Chromebooks. This was a natural progression that reflects the reality of app usage. Users are spending more time on their phones than on their PCs (Chrome usage grew 10x in the past year to over 300M mobile monthly users), and even on phones, app usage officially passed mobile web usage in terms of time spent earlier this year.

So in conclusion, Google is really after Share of Time. They are leveraging their success and formula for Android to move beyond phones/desktops to the other areas of our lives where we spend a significant amount of time: our cars and our living rooms. By tightly integrating multiple services across ever more daily touch points, they are going to be able to understand more about us and provide us more contextual and immediate services while providing advertisers with more precise targeting data. Even the most ardent critic would be hard pressed not to acknowledge what Google pulled off at IO. They have the vision for how to use technology to make the world's information more universally accessible. More importantly, they're executing on it.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: At Google IO, The Smartphone Wars Are Over: The War For Share Of Time Has Begun

Additional disclosure: I am the former marketing director for Google Play -- part of Google Inc.