Commentaries

Now raising intellectual capital

Smartphones’ ecosystem dilemma

November 20, 2009

Why  is the Motorola Droid apparently gaining traction in the smartphone market, when Microsoft and Nokia are failing so miserably?

The Droid, built on Google’s Android mobile operating system, sold 250,000 in its first week on the market. That’s way behind the 1.6 million iPhone 3Gs sold in the first week after its launch, but it’s still enough for Motorola to see possible salvation after years of decline and for Google to feel self-congratulatory about its venture into mobile.

Some of the success of the Droid, and the increasing number of Android-based phones available, can be ascribed to its clean and versatile operating system. Reviewers and users agree that Android still lags the iPhone, but the gap is closing. In contrast, Microsoft’s Windows Mobile has stumbled through numerous iterations — it’s now on version 6.5 — and endless renamings. No one has ever liked it.

 Nokia once ruled the roost with its Symbian-based smartphones, but its market share has been declining steadily. Nokia still sells more mobile phones than anyone else in the world, but Apple — which sold 7 million phones versus 113 million for Nokia in Q3astoundingly makes more profit, $1.6 billion on handsets in Q3 this year against $1.1 billion for Nokia.

The operating system alone, however, doesn’t explain the Droid’s initial success, or even the iPhone’s ascendancy. What Apple has done so successfully is build a thriving ecosystem around its product. The various Android-based phones are following the same path. There are now more than 100,000 applications (dubbed apps) for the iPhone, with hundred more appearing every week. As the advertisements tell consumers, there’s an app for that, whether it is timing your cooking for a complicated dinner party, using Facebook, tracking FedEx packages or getting snow reports from ski resorts.

As more apps are developed, there are more and more reasons to buy an iPhone rather than the competitor, the phenomenon economists call network effects. In contrast, there are about 10,000 apps available for Android-based phones. That probably covers the vast bulk of what most users want to do, but the perception is that the iPhone can do much more (hence the Droid’s advertising slogan: Droid Does).

Apps, overwhelmingly built by third-party developers, are nothing new. Apple’s innovative idea was to put an app store on its device, so users could browse, choose and buy apps casually and spontaneously. You didn’t need to search for different vendors, or download apps to your computer for future syncing with your phone. So the ecosystem becomes the phone itself, the app store and the thousands of developers.

But there’s a dilemma with such an ecosystem which is being exposed by the contrast between the iPhone and Android. The differing philosophies pose a choice companies in other fields seeking the benefits of an ecosystem around their products will need to weigh. True ecosystems grow organically, and the process can be messy. One reason why many companies have shied away from encouraging an ecosystem around their products is that coordination and control can be difficult. Apple and Android take radically different approaches.

Apple exercises severe control on what developers can do. Apps go through an opaque, lengthy and at times arbitrary review process before they are accepted into the App Store. Apps can be rejected without explanation. One developer, Rogue Amoeba, says that it took four months to get a bug fix approved for one of its apps. One of the most prominent app developers, Joe Hewitt, who created the Facebook app for the iPhone, recently announced that he was quitting developing for the platform because of Apple’s review process. Another prominent developer, Justin Williams, also stopped his iPhone development, tweeting, “Baseless app rejections, an unsustainable pricing structure, piss-poor developer relations and a blackbox review system. Where do I sign up?”

Android, in contrast, is letting a thousand flowers bloom in its ecosystem. There is no approval system to put your app in the Android Market. That may sound a recipe for chaos and a steady stream of junk apps, but the web is a similarly open and unrestricted. No one can tell a web developer that they can’t launch their new idea, which has led to extraordinary innovation (as well as plenty of junk).There are certainly problems for developers in the Android model, particularly that different handset manufacturers use different versions of the Android system, meaning it’s hard to develop one app that can work across many phones. But the best developers relish the freedom Android provides.

For an ecosystem to succeed it will need the best developers. Apple’s policy of near-tyrannical control ensures certain quality and standards, but it also risks scaring off the best talent.

Comments

I’ve always owned the latest and greatest handset. I owned the Motorola Razr. I switched from the Razr to the Blackberry which was a game-changer in its day. I now own an iPhone another game-changer. The difference is that I can’t see how I could ever switch from the iPhone because of apps like NeuroMobile and others that I rely on. The iPhone’s applications advantage makes the underlying handset technology less relevant. The battle in the smartphone market is now most about applications support. This could be a challenge for the Droid and Pre.

Posted by BT | Report as abusive
 

Development of Microsoft’s Windows Mobile operating system happens at such a snail’s pace it makes me wonder if Microsoft has already given up in the mobile space.

An example is that the operating system still does not recognise multi-touch finger input. It was designed with small icons to be hit with a stylus pen.

Developing multi-touch is not that hard. Taiwanese company HTC, which makes most of the Windows Mobile handsets, has managed to develop its own multi-touch system, which works on the start screen, as well as some of the applications that HTC installed. But it doesn’t work at an OS level, and the OS-related functions, as well as applications that Microsoft has installed, are not multi-touch aware.

So we’re left with a bizarre situation that Microsoft has been unable to develop multi-touch, yet handset makers have been able to add some of this functionality themselves. Makes you wonder what’s going on at Redmond.

Situations like this have caused Google’s Android and Apple’s iPhone to rise in popularity (both are multi-touch aware OSes), while Microsoft’s Windows Mobile sheds more market share and fades into oblivion.

Posted by Ken | Report as abusive
 

I agree, BT. Perhaps I needed to emphasize it more strongly in my column, but applications are everything now in smartphones. That’s why Apple needs to pay more attention to their penchant for pissing off the best developers.

 

Apple’s policy on the App Store certainly won’t scare off the best talent, it might scare off the loud, objectionable ones.

No developer worth his salt is going to walk away from the only market that makes them real money…

Posted by Jon T | Report as abusive
 

It’s a question of understanding the small screen. I have an Android (G1), my son a T-Mobile Wing Windows mobile. Like iPhone, Android apps are meant to be touched with fingers. WinMo apps are by and large desktop apps crammed down onto a handheld device. Stylus? I haven’t used one of those since I had a Palm II in 1998. Palm’s app ecosystem didn’t adapt well from PDA to smartphone – apps still were loaded via PC/USB. I think Palm’s WebOS is doomed – it’s great, but too little, too late, too closed. Android can still screw it up – like by allowing phone OEMs to have multiple screen sizes and resolutions forces developers to do more work or ignore certain phone models. But Android, iPhone and Blackberry will be all unless WinMo understands the small screen – and that Pocket versions of Word, Excel and Outlook aren’t the killer, must-have apps.

Posted by Robert | Report as abusive
 

I didn’t discuss RIM’s BlackBerry because I wanted to focus on the ecosystem issues. But it’s interesting that BlackBerry remains very successful despite having no outside developers to speak of. They do one thing fabulously well — email, particularly enterprise email. That, so far, is a defensible position.

 

sorry, but that is a lot of idealistic web drivel. 90+% of developers are in it for the $’s, period. they will keep cranking out apps (at least until they hit a jackpot). a lot of them are brilliant too. a few publicity-seeking defectors don’t make a bit of difference at all. their are thousands more eager to take their place, a few of which will prove to be geniuses too. and a new crop of first timers arrives every year.

then of course there is the basic logic flaw as well: if the app approval process is so bad, how did 100,000 manage to make it anyway????? we’re talking about bruised egos here.

Posted by Alfiejr | Report as abusive
 

This article is a little late. There has already been reporting from different sources on this exact topic. Yes Apple has succeeded in creating an entire market around their product the iphone, which is mainly responsible for the Apple and it’s iphone and applications growth. Apple is already predicting future growth but the Android has not yet had a chance to really shine! The Motorola Android smart phone may only have 10,000 apps versus 100,000 and counting that the Apple iphone has, but The Android smart phone comes with those 10,000 apps free instead of having to purchase them all individually like in the case of the iphone and it’s company Apple. This may be more popular among smart phone users if the quality of the Droid smart phone (2.0 version) and the apps that come with it is good.

 

Unfortunately for Android those thousand flowers are wilting and dying with major developers like Gameloft ceasing to develop for Android because Android users just don’t buy anything. You know something is wrong when such a big gun like Gameloft says it makes 400 times more income from the iPhone platform than Android.

Then there is the hardware ecosystem not even mentioned in the article. With thousands of iPod-dock connector compatible peripherals, car stereo integration systems, even medical equipment like Insulin pumps available for the iPhone and iPod Touch, Apple has an enormous installed base of 3rd party hardware and software that is just not even a possibility on other platforms.

The iPhone has become the Windows of the mobile world – who’d have thought it?

It is becoming increasingly apparent that the 70% worldwide marketshare that the iPod and iTunes Music Store have captured may not be an anomaly – it is suddenly not so ridiculous to contemplate the iPhone heading into that territory as well.

-Mart

 

First rule. Never build stuff for cheapsters. You can’t make any profit off them. Android is a platform for cheapsters. It probably won’t be survive due to everyone trying to build the cheapest hardware which will ultimately harm the entire Android ecosystem.

Posted by Constable Odo | Report as abusive
 

Is the smart, droid market actually worth all the hype?
I have a Straight Talk Phone With all you Need $30 monthly I get 30mb data on Verizons network and find it is enough for a email and a bit of searching. what is so much better with all the applications? a normal phone works just as well in my opinion and possibly easier.

Posted by Sue | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •