Edward Harrison

Can Apple Stop the Android?

Another great point, Mart. The scenario IS indeed flipped in that regard. Apple is the Wintel of digital media/smart phones if you will, as I said in the post. That is why I pointed out the software-hardware tie-in. To me, this is crucial in keeping the advantages you mention. And, again, this is why the Android threat is significant.

The Apple stores you mentioned are another sign that Apple is a great consumer products company whereas its competitors are technology companies and that works to Apple's advantage.

I agree, you can't write off Apple. They face a threat but they are in the driver's seat now. I hope my article reflects that point of view.

On Nov 22 10:28 AM Martin Hill wrote:

> Edward,
> Everyone seems to focus on the software and media part of Apple's
> ecosystem but the story is even more compelling than that.
>
> This is the challenge for all iPhone competitors: Joe Public walks
> into their local Electronics store and what do they see? Row after
> row of iPhone compatible iPod dock equipped clock radios, stereo
> and speaker systems, cases etc and then when they get to the checkout
> counter rows of iTunes Gift cards (which can be used to buy iPhone
> apps just as easily as music or movies). Then they jump in their
> car and 70% of the time they’ll find an iPod dock connector option
> with steering wheel integration etc. Heck if they jump on a plane,
> chances are their seat will even have an iPod dock.
>
> Then they sit down in front of their TV and what do they see, dozens
> of ads from banks, fast food companies, etc all proudly showing their
> iPhone apps and of course hammering home the point that it is only
> on iPhone that you’ll find an app for just about everything. Then
> of course, they go to play their music on their PC and again 70-80%
> of the time, it will be iTunes that they fire up – all ready to sync
> with that new iPhone they’ve been lusting after.
>
> You were actually right when you said it is looking like the 1990s
> all over again, but this time it is Apple not Microsoft that has
> the overwhelming majority share of software and hardware peripherals
> (and profits) and Android and Microsoft and Nokia and RIM and the
> rest are the ones fighting with each other to get developers to create
> for their platforms. It is not enough to have good phone hardware
> anymore – Apple has proved that it is the ecosystem that wins the
> game in the long run.
>
> I’m not saying that Android won’t prove to be good competition, but
> I am saying that you’d be foolish to write Apple off at this point
> in the game.
>
> -Mart

Can Apple Stop the Android?

Those are fair comments. So, I would agree with that, yes - in particular because it is still early days for Android.

One thing you didn't mention in your comments - so I'm curious to hear your thoughts - is the belief that Apple's competitive advantage lies in large part due to network effects and the tie-in between the iPod (Touch)/iPhone and iTunes/AppStore. If the average consumer owns an iPod or iPhone, she is hard-pressed to use anything but iTunes(/Apple App Store). This is by design - not just to control quality, but also to exert control and prevent competition and garner the profits from network effects.

This is one reason why Apple upgrades software with the express intention of breaking tie-ins for phones like the Palm Pre. This is also a reason that Apple exerts tight control over the AppStore and will not allow other AppStores to flourish.

If Apple can maintain the overwhelming market share (in Music downloads and Digital media Players/Smartphones), it gets huge network effects. This is the source of a lot of their profits.

The real threat to Apple's profits from any competitor - Android included - lies in reducing Apple's share significantly enough in either hardware or software so that the network effects inherent in the harware-software tie diminish.

Google's strategy in breaking Apple's stranglehold is to present a platform to a bevvy of manufacturers who were starved of one to compete successfully in the Smartphone race. The reason we have seen such an uptake of Android is that all of these manufacturers want a piece of the hardware profits that Apple is getting. The potential network effects (cross-manufacturer Apps common to the Android platform) from a large installed base make Android an obvious choice. This is a principal reason that the potential splintering of Android is something of concern.

Moreover, many of these same manufacturers also are in related markets (Tablet PCs, Portable Media Players, Netbooks, PCs, etc). The concept that they can use the same platform across all of their markets has to be enticing from a cost perspective - and again in terms of network effects.

On Nov 22 08:04 AM Martin Hill wrote:

> Edward, we'd appreciate it if you held off on the "Apple fanatics"
> slurs. It would be nice to maintain a mature discussion on this topic.
>
>
> You say that "this is looking like a repeat of the Macintosh-PC Wars
> of the 1990s which Apple lost" and "one company cannot compete against
> 100s".
>
> There is a reason that we all disagree with these arguments and that
> reason is the iPod and the iTunes Store.
>
> With over 70% market share, Apple has obliterated the 100's of heavyweight
> competitors in both the media player and music store markets worldwide
> and in doing so, has proved that industry-leading design and vertical
> integration can and has trumped the massed ranks of competitors.
>
>
> Now it is the iPhone platform that has the hundreds of thousands
> of third party programs and hardware peripherals and it is Android,
> Windows Mobile and Symbian that are struggling to compete against
> the new defacto standard in apps and peripherals for media players
> and phones.
>
> Apple is not the same company it was in the 90s, but it is the same
> company that defeated Microsoft, Sony, Dell, Toshiba etc this decade.
>
>
> Considering this, wouldn't you agree that as a previous poster said,
> perhaps the title of this article should have read "Can Android stop
> Apple?".
>
> -Mart

Can Apple Stop the Android?

I really don't like the way Apple fanatics try and defend the company with blinkered admiration. Try to take a balanced objective view, which is what I am trying to do given the fact I am not particularly fond of Google. I have to protest pretty vigorously about your characterization of what I am saying. I am NOT saying Android will take 90% share. I am not saying Android will wipe the floor with the iPhone. It is much too early to make a statement of that sort. After all., I did mention the potential splintering of Android. And, the iPhone is still a superior product from a ease-of-use perspective and that wins in the consumer market.

I am saying that Android is Apple's first true test in a market it has dominated. I believe Android will win a large percentage of the smartphone market - especially in the lower price range (even Droid is being discounted to $120 already). It is not obvious that Apple will continue to dominate in the same way given a credible threat like Android which has significant manufacturer support. It is the handset maker support which makes this similar to Wintel - that is the ONLY comparison I am making.


On Nov 21 02:16 PM Troy Jensen wrote:

> Had to weigh in on this article. Actually, it's a cry to everyone
> jumping the gun on Android WAY WAY too early. My background is in
> Technology back when getting a 56k connection was the big deal, and
> (at times to my financial detriment) in mobile for years and years
> - I saw around the corner on mobile, albeit a little too early.<br/>
>
> Then Apple introduced the iPhone, and presto... disruptive technology
> Exhibit A. I use both an iPhone and for kicks, got the Droid to play
> with.
>
> Let's dive in from a REALISTIC perspective:
>
> 1. Discount market share at your own peril. Apple owns this space,
> and Android's market share figures, granted impressive when thrown
> out in a year-over-year percentage increase figure, are still minuscule.
>
>
> 2. On the subject of discounting important data, iPhone owns the
> demographic that skews both younger, and more affluent. I ran an
> advertising agency for years and years. That is one powerful demographic
> to dismiss - I use Android daily, and at this point it has nothing
> close to the experience iPhone has when it comes to this demographic.
>
>
> 3. Can anyone truly think right now Apple is resting on it's laurels?
> If you do, you are foolish at best, delusional at worst. I can't
> say anything more except just hold onto your hats for 2010 and the
> iPhone. I can't trade on that information legally, but I can squirm
> in my chair in excitement. If anyone doubts, please refer back to
> this blog posting by Q2 2010...Apple is a VERY aggressive company,
> and they aren't simply kicking back, counting market cap and cash-on-hand
> figures and watching Android with nonchalance. TRUST ME.
>
> 4. Android is in the weeds with their App Store. This is a serious
> problem, and it is being addressed in a haphazard fashion.
>
> 5. THIS IS NOT A REDUX OF MS versus APPLE! People, please understand
> this important point. There will be no 90% market share holder in
> this vertical. Rather, we will see several strong players. It's human
> nature to believe history repeats itself...there is a comfort in
> that. Stop with the comparisons. This is an entirely different paradigm,
> and Apple and Android will share large pieces of the market share,
> along with others yet to emerge. It's simplistic and comforting to
> continue to refer to the Windows - Mac scenario when forecasting
> the mobile space today...but totally and completely irrelevant. I
> use a far more dynamic model that accounts for many other factors,
> and actually weights historical trends at the low-end. This is an
> entirely different space, and should be analyzed as such.
>
> BOTTOM LINE - Android will gain market share, mostly at the expense
> of the weaker players in the space. iPhone will have another groundbreaking
> hardware and software introduction in 2010 that will further garrison
> their position as the leader in the space. AT&amp;T is indeed an
> achilles heel for Apple, but in looking at some of AT&amp;T's moves
> in short-term financing, they are quietly going to try and push hard
> to address this issue in 2010. And if they don't, Verizon and others
> beckon in 2011.
>
> And let's not forget the other introduction we can expect in Q2 (Q1
> isn't gonna happen, according to my sources - Jobs is still pushing
> for perfection) - the Apple Tablet. Long rumored but a reality once
> Steve has it right, this is going to be a 8.0 on the Richter Scale.
>
>
> Or, and I quote from an Apple insider, "Apple is about to revolutionize
> mobile computing for the second time in two years."
>
> This post isn't meant to discount Android - I love it, to be frank.
> They have a lot of market share to grab easily ahead, it is a fantastic
> experience and mobile operating system. It may even equal or slightly
> exceed iPhone market share longer-term. But there is absolutely,
> positively, 100% NO CHANCE this will be a repeat of the Windows-Mac
> market share eventuality. Apple knows this, and frankly so does Google.
>
>
> And to even make the comparison is just misguided reliance on historical
> trends. Period. And THAT is the STRAIGHT truth on this subject.
>
>
> Gotta say cheers to all the posts, both sides of it....good discussion,
> this is what SeekingAlpha is all about!

Why Android Is Gaining Ground on Apple

I have to be honest. It didn't occur to me Seeking Alpha would post this as an investment piece (if at all). I did not write it as an investment piece but more of a personal piece on my blog - and seeking Alpha has permission to re-post all of my articles.

The spurned lover comment (I used to be an ardent Apple fan and thought Apple was going to be above board) seems on the mark here (he said sheepishly).

That said, I might have something slightly more substantive to say about strategy - time permitting - given the beating I am taking here in the comments.

On Oct 15 10:15 AM winindthedust wrote:

> Good for you Ed. Unfortunately, this article in no way helps investors.
>
>
> If your beef is that Apple didn't accept Google Voice, I'm with you...
> however, you are ignoring the fact that you over 15,000 other Apps
> to CHOOSE from. No other platform even comes close. Once Android
> has the Apps, then we'll see.
>
> My recommendation to you: iPhone like your wife and be happy. Once
> Android gets established, then check it out.
>
> As far as Apple's real reason for "holding" Google Voice in purgatory...
> they will eventually approve it. However, they are and will be introducing
> the same features within Apple's MobileMe service. Apple would be
> foolish to allow GV siphon off people from MobileMe enhancements
> soon to be introduced.
>
> Last, GV works fine as a Web App. Sure, no local data stored on
> the phone, but it still works nonetheless. And since GV depends
> on an internet connection- whether or not it's a native App or a
> Web App makes little difference to me at this point.
>
> That brings me to another point: BESIDES the tens of thousands of
> native Apps out there for iPhone... how about the burgeoning WebApps,
> which are completely un-policed, that are becoming available?

Why Android Is Gaining Ground on Apple

LOL. That's hilarious. Those reports were NOT fantasy. Don't ask me why I stuck with Windows Mobile for so long. I have escaped the imprisonment now!


On Oct 15 08:25 AM T_ wrote:

> A former windows mobile user??? I thought those reports were simply
> fantasy... Dude, having been a windows mobile user disqualifies
> you from having an opinion on which product is best! The fact you
> stuck with a loser platform for as long as you did, puts into question
> whether you have any idea :)

Why Android Is Gaining Ground on Apple

Dialectical, I will have to write up a post on this issue. The core of the issue is whether the phone companies' network are dumb pipes or whether they have the right to 'control' traffic. Indeed, this is a complicated issue.

But the overriding concern from an antitrust perspective has to be the limited number of broadband network providers in any jurisdiction. The telcos and cable operators have de facto monopoly power in that only one or two providers are available in most areas. The question then becomes, given this power, how should the companies behave/be forced to behave. This is the same question that was at stake with Microsoft and operating systems.

I believe the telcos networks have to be controlled as dumb pipes in the way utilities are. I pay AT&T to provide me network access, not to provide me services that use that access. This is true for cell phone networks as much as it is for internet connections.

Regulators understood this with the old AT&T. Yet, AT&T continued to abuse its market position as the communications landscape changed, so it was broken up. Those same difficulties have not gone away and regulators must be vigilant both in regards to AT&T in this case and Apple regarding cellphone handsets.


On Oct 14 06:52 PM Dialectical Materialist wrote:

> You may be right about some of the problems with protecting your
> moat, but I want to focus on a more specific issue. Do you really
> think it is anti-competitive for a phone company to not want (and
> try to prevent) folks calling other people using their communication
> network without paying for it? I think the internet should be free
> as much as the next techno geek, but if I sat outside your home and
> used your bandwidth for free to do all my Netflix streaming, wouldn't
> you feel I was using something of yours which you were renting and
> that I was getting for free? We are now at a place where technology
> creates many of these free holes and exploits. Just because Google
> CAN write an app that allows me to call for free over the internet,
> does that mean others SHOULD be allowed to do so. To call AT&amp;T's
> attempt to protect the use of their network "anti-competitive" oversimplifies
> a complex issue that the courts will ultimately be sorting out for
> years.
>
> I'd love to hear your thoughts about this.
>
> On Oct 14 05:52 PM Edward Harrison wrote:

Why Android Is Gaining Ground on Apple

Yes you can talk and use the Net.

I bought my phone (G1) and switchd from AT&T to T-mobile to do so. I immediately rooted the phone (jailbreak equivalent) and installed CynagenMod to give me more flexibility than a locked down phone requires (I need to use the phone with a Vodafone SIM card in Europe for one). I have since used it for a month and I would say I am generally happy.

That said, my wife's new iPhone 3GS is faster and the virtual keyboard is significantly more accurate. This G1 phone does pretty much everything I need but from a usability standpoint it lags the iPhone IMO.

The earlier comment about what open-source really is was a good one because it points to why Android could fail: "balkanasation." Because hardware manufacturers can change the code of the OS, this means different Android forks will develop, which may create problems for developers in terms of compatibility. Its early days right now so we'll see how this develops.

Google's deal with Verizon promises to be a signpost of what the future holds.


On Oct 14 04:07 PM GSlusher wrote:

> A question for the author, if you're using your Android phone on
> Sprint or Verizon: If you're on a call, can you access the internet
> or send/receive email at the same time, without quitting the call?

Why Android Is Gaining Ground on Apple

That's a fair comment and a better statement of fact. I stand corrected.


On Oct 14 03:46 PM jmmx wrote:

> I think that some people who praise that "Android is an open-source
> software system" do not fully understand what that means. It appears
> that some people believe that it is easier for developers to program
> or "understand" because it is open source.
>
> This is not true. Most developers of applications want:
> 1- A well-documented, logical, development language,
> 2 -An easy to use, development environment (i.e. good tools),
>
> Apple provides this. Their SDK (dev environment) is noted as being
> superlative. I have heard that Android also has a good environment
> but would be unable to judge personally how the two compare.
>
> Open-source means that the actual code for the OS itself is open
> and available for both improving (and submitting improvements back
> to Google) and also available for "tinkering under the hood" - i.e.
> changing the OS itself.
>
> This means that a handset mfg can actually change the basic operating
> system to suit its needs. This is powerful. It sounds cool, but doing
> so has its drawbacks. Most importantly is the fact that if you significantly
> change the OS then all applications written for the "Vanilla-Android"
> may no longer work with your version - or they may work but differently
> from how the developers intended. This is definitely NOT GOOD. Developers
> most assuredly do not want to develop special code for device X.
>
>
> So- having open-source is of little import to Android as a development
> system.

Why Android Is Gaining Ground on Apple

And for the record, I have been a fan of Apple for nearly 20 years, having used a Mac from the mid-1980s on and bought at least 6 or 7 iPods and iPhones. I am well aware of the quality of their products and ease o use.

But, it is amazing how defensive the Apple people are to this post. The fact is Apple has a chosen strategy that is anti-open source. It failed in the 1990s for them but was a success for Microsoft. But, we have to recognize that Apple wants a largely closed system so that it can control things. There are lots of arguments why one might do this (design or technology integrity for one). But, right now, Apple has crossed the line into anti-competitive activity.

Whether Google has the goods is another story - and have been plenty 'evil' themselves in other regards. As one commenter noted, it's easy to gain ground when you start from zero. But Android is a worthy competitor. Let's see how it develops.

Don't shoot the messenger.

Why Android Is Gaining Ground on Apple

You're right that I would try them out if I were open-minded. For brevity sake, I said I dismissed them out of hand but I did the research and decided that the phones don't have the features I want. In the end, the biggest reason not to go with them is fear of getting sucked into something that later ceases to be interoperable with new platforms (lack of backward compatibility support)

As for Apple, I own an iPod, use iTunes and we have two iPhones. Their products are wonderful. But, Jobs is using the same tactics he used when he was CEO last time - namely protecting his moat by limiting others from integrating fully. Last time he lost the market share battle. This time he is winning it and, as Microsoft has shown, he can continue to win for a long time.

I just think Apple is being anti-competitive with Skype over Google and trying to keep the Palm Pre from syncing with iTunes. Eventually, this sort of thing will be ruled on by the FTC.


On Oct 14 12:05 PM CGP wrote:

> the AAPL camp is quite defensive...
>
> Looks like a replay of the Apple-PC battle for the desktop; open
> source vs. managed source, interesting to see who "wins" this time
>
>
> ....boo hoo for PALM &amp; Nokia didn't even get a look (if you were
> open minded I would've thought you'd at least try it out)
>
> ......race not even close to the backstretch, more like just out
> of the gate......look to LTE &amp; Wimax as the quarter pole