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.

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