Android’s fragmentation: whose problem is it?

The topic of fragmentation within the Android ecosystem continually pops up from time to time. For evangelists of opposing platforms (and I probably count as one of those people), they like to bring up the issue as a point of showing how inconsistent the platform is and how it drags down the user experience.

Let’s assume for the sake of this article that Android, as a platform, is very fragmented. But we’re not going to assume that fragmentation is inherently bad for all people. It may in fact be very good for some, so let’s just leave that issue to the side for now.

A blog post making its way around the internets today comes from Michael DeGusta at theunderstament. I’m including his chart below for reference.

Android & iPhone Update History by Michael DeGusta

What Michael contests is that it comes down to an issue of support and that Apple is crushing it in this area and thus also driving customer loyalty (is that a shock to anyone that Apple would be driving loyalty?):

It appears to be a widely held viewpoint that there’s no incentive for smartphone manufacturers to update the OS: because manufacturers don’t make any money after the hardware sale, they want you to buy another phone as soon as possible. If that’s really the case, the phone manufacturers are spectacularly dumb: ignoring the 2 year contract cycle & abandoning your users isn’t going to engender much loyalty when they do buy a new phone.

…In other words, Apple’s way of getting you to buy a new phone is to make you really happy with your current one, whereas apparently Android phone makers think they can get you to buy a new phone by making you really unhappy with your current one.

It’s a fair argument, but I don’t know that it’s altogether there. People talk about the Android platform as this singular unified thing, when I actually believe that it is quite the opposite. The Android ecosystem is actually fragmented by design. Google created it and is licensing it for that expressed purpose that it can simply be chopped up 15 ways from Sunday in any manner you like. What we often fail to remember is that you and me, as consumers, are not Android’s (and by proxy Google’s) customers. We are merely another part of Android’s complex ecosystem of cash generation, but we don’t generate the cash from buying our phones or using our minutes, rather we generate Android’s cash by searching and utilizing Google’s wide array of free, ad-supported services.

The beauty of Android’s ecosystem is in it’s flexibility: it can be just about anything to any manufacturer, but if you want to create an iPhone like experience, a manufacturer would have to create the entire experience on their own. Amazon and Barnes & Noble are prime examples of companies trying to do that now with their locked down Nook Color and Kindle Fire.

But now let’s return to the previous idea of whether fragmentation is distinctly a good or bad thing and who it impacts. For Google, even though they act like they care, I’m not sure why they would. Android is clearly the highest selling mobile platform with no imminent threat of that changing anytime soon. They seem most concerned about what pundits say, but it’s hard to say whether they actually care about changing the culture or not when the results speak for themselves. Now let’s look at Android’s partners, the manufacturers (Samsung, LG, Motorola, HTC, etc.) and carriers (Verizon, at&t, T-Mobile, Sprint, etc.). Each manufacturer is producing multiple phones for multiple carriers. The phones vary widely (again, another benefit of the platform) in both features and price, yet also now we’re finding in operating system version as well. I’m guessing the profit margins for the manufacturers differ widely as well and with so much internal Android competition happening, new phones being introduced and launched virtually each month, there is a palpable pressure for a high frequency of releases.

From a manufacturer’s point of view, when all of your effort is on more devices, more carriers and placating each carrier with their own customization (if they don’t placate the carrier, someone else most likely will, which makes Android differentiation tricky), why would these companies care about long-term support? What’s in it for them? Customer switching costs would be quite low since there is a variety of Android handsets on each carrier from multiple manufacturers. How do these companies differentiate themselves?

The answer is they can’t. They’ve effectively turned the majority of the ecosystem into a commodity for the average consumer. I would bet yesterday’s donuts that the best selling Android handsets right now are not big name high priced ones, but they’re the “free on contract” devices that always seem like the best deal at the time (even though we know it’s not in the long run of the cost of the service). These devices are commodities, quickly to be replaced with the latest hotness coming next week. It was bound to happen once the market matured enough and the effect will only accelerate going forward.

So the question is, does this really matter to consumers that the manufacturers won’t support their device a year after it’s launched? While those of us who already get great support say yes, my guess is that the majority of average consumers simply don’t care. That’s the effect of a commoditized market.

Smartphones, Market Share, and the Definition of Success

As some of my may know about me, I’m currently enrolled in the full-time MBA program at the University of St. Thomas in downtown Minneapolis.  It’s an amazing program and after only one semester, needless to say, I’ve learned quite a bit.  In one of our classes in the first semester, within our teams of four, we engaged in a business marketing simulation known as LINKS. My team did quite well, but it was interesting how many teams took different approaches to attaining their definition of “success”.  To some it was market share, by attaining the most sales, regardless of profit, that was their goal.  To other teams it may have been high levels of customer satisfaction without industry leading market share or profit.  On a weekly basis they tended to rank us in order of quarterly profit, while disregarding such measures as market share, debt, and customer satisfaction.

To me, it really does beg the question, “what is success”?  How do you define success and what does an industry leader look like?  Smartphones right now are all the rage and if you listen to a lot of the chatter out there, either you’re an Apple fan and you believe that the iPhone will continue to be the bestselling smartphone or you believe that the Android wave is inevitable and will squash the iPhone into minuscule market share like the Mac.  To me, it all goes back to different definitions of success.  Apple store employees are sometimes reminded of the old 5-95 adage (or sometimes 8-92, basically saying that the Mac has 5% market share down, 95% to go), but is that really what they want?  What’s so bad about dominating the most profitable segment of personal computers?

I believe the iPhone is similar in this respect.  Remember way back just over four years ago when Apple unveiled the original iPhone.  At the announcement press conference, Steve Jobs mentioned how the mobile phone market was so large and all they wanted was 1%.  It’s been four big years for the iPhone and currently the iPhone is accounting for just over 4% of all mobile phone sales and just over 17% of all smartphone sales. Those are impressive numbers to be sure.  What Steve joking when he said he only wanted 1%, was he simply trying to temper expectations, or did he actually believe that 1% was the best they could do?  I have a feeling that he was simply trying to set the bar low enough so that he didn’t come off overly confident and take the buzz away from the product itself.

But does market share really matter to Apple?  If it does, they’re doing ok.  Go ahead and ask Google and they’ll be happy to point out how the Android is now the dominant mobile smartphone OS.  Talk to RIM and they’ll tell you about how they’re dominating in emerging markets (i.e. not the US, Canada, or Europe).  So if we draw a dangerous correlation line from personal computer market share to mobile phone market share, we realize that the percentages aren’t that far off (4% for phones and around 8% for computers).  But the shocker comes when you look at profit.  Apple’s measly 4% market share accounted for over half of all mobile phone profits.  Think about that for a moment:  One company that is responsible for only 4% of all mobile phones (i.e. all mobile phones, not just smartphones) sold accounted for over 50% of all mobile phone profits.

I know one thing:  If my LINKS company had industry statistics like that, we would have set a record of some sort (though to be honest, I don’t think there’s any way the simulation would allow anyone to have that much control, assuming real competition).  While other companies are playing the market share game, Apple is playing the profit game, and they don’t seem to slowing down.  When you’re raking in the kind of cash that would make Scrooge McDuck blush, how bad do you really need market share?  It all depends on your definition of success.