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Google vs. Samsung

Samsung’s recent success in mobile phones has been spectacular. It overtook Nokia for the top spot in overall unit sales. It went from having almost no smartphone sales to selling over 50 million units per quarter in a matter of two years.

It now accounts for nearly 40% of all industry profits.

A key decision which made this success possible was to shift its portfolio to smartphones and to offer a large variety of such phones.

In Q1 2010 only 3% of the phones Samsung sold were smartphones. In the latest quarter the ratio was 54%. 

As a result the average selling price more than doubled, from $115 to $234.

Profit margins also soared in proportion: from 12% to 21%.

All this plus an overall growth in volumes from 64 million to over 100 million per quarter has meant that the company is raking in enormous profits. Not only did it overtake Nokia, the market share leader for 14 years, but is making more profits than Nokia ever did.

So much profit in fact that it has overtaken Google’s decisively.

The reason I point this out is that Samsung’s success is dependent on having ridden on the back of Android. Samsung’s ascent can be precisely timed to their adoption of Android. The groundbreaking Samsung Galaxy launch was the Galaxy S which shipped in June 2010.

Meanwhile, indications are that “mobile” is causing a contraction in Google’s margins.

If nothing else, Android has created a very interesting industry. There are many questions of course: Is Samsung’s trajectory sustainable? Why aren’t there other vendors successful with Android? Why isn’t Google successful with Android? Why isn’t Google’s Motorola successful with Android? What would happen if Samsung soaks up so much profit from mobile that it’s in a position to acquire Google and control the trajectory of their enabling platform?

  • Stefan Constantinescu

    Is Samsung’s trajectory sustainable? Why wouldn’t it be? You always say Apple could sell more widgets if they could make more widgets. Me thinks Samsung has the same problem. After all, many of their devices use a large amount of components made “in-house”.

    Why aren’t there other vendors successful with Android? See answer above. They don’t make components. Why would Samsung sell components to them and make meager margins on a screen or a processor instead of making higher margins on the devices themselves?

    Why isn’t Google successful with Android? Define success. More people are using smartphones to consume content, content that’s subsidized by advertising, advertising that’s provide via Google’s ad network.

    Why isn’t Google’s Motorola successful with Android? I think this one needs time to play out. The aquistion only closed in May of this year. That’s just six months ago. Product planning takes at least 12 to 18 months. Motorola was never a large player anyway, at least not outside the United States.

    What would happen if Samsung soaks up so much profit from mobile that it’s in a position to acquire Google and control the trajectory of their enabling platform? Google’s market cap is > $200 billion. Can Samsung buy them? I don’t really think so. Can Samsung negotiate some sort of partnership whereby both parties win? Possible, but right now Samsung is obviously investing plenty of money into their own software projects, most notably Tizen, Bada, and the TouchWiz user interface they throw on top of Android. Oh and don’t forget Samsung’s increased spend on services like their recently launched “Music Hub”.

    • http://twitter.com/mikecane Mike Cane

      >>>Why aren’t there other vendors successful with Android? See answer
      above. They don’t make components. Why would Samsung sell components to
      them and make meager margins on a screen or a processor instead of
      making higher margins on the devices themselves?

      Samsung sells components to Apple. There isn’t one “Samsung.” The component manufacturing side is open to all customers and doesn’t even care if Samsung itself uses their components.

      • http://www.isophist.com/ Emilio Orione

        User’s don’t buy a samsung phone instead on say an htc because samsung makes component and htc does not. This could explain different margins not different sale’s numbers.

      • http://twitter.com/davidchu David Chu

        I think Samsung making components allows it to be much more flexible to demand than HTC when there are shortages in important components. Switching components on the fly is not as easy as people think. The simple fact that Samsung could make sure their inventory channels where stocked could have lead to the difference in sales numbers.

      • http://www.isophist.com/ Emilio Orione

        If you don’t sell a phone you don’t have shortage.
        iOS is supply constrained not android.

      • http://twitter.com/davidchu David Chu

        Android as a whole is not supply constrained. Individual phones can be when you are fighting for key components.

        http://htcsource.com/2012/06/qualcomm-s4-supply-issues-to-blame-for-the-s3-chip-inside-taiwans-htc-one-s/

      • http://www.isophist.com/ Emilio Orione

        So htc used an s3 processor at 1.7 ghz instead of an s4 at 1.5 ghz, for a supply problem (as they say, perhaps a cost one too, who knows).
        What’s the point, who cares, who will not buy it and buy a samsung phone because of the s3. Samsung success is due to this issues? That’s nonsense.

      • http://twitter.com/davidchu David Chu

        That’s only one component. Imagine constantly juggling lots of components. It eats up resources to integrate the parts. It complicates and delays your production because you have to retool. It creates holes in your distribution channel, which means it’s sometimes not on the shelf when a customer is looking to buy. It hurts vendor relationships which hurts product placement and then the worst of all, it makes you unable to expand your retail network. If supply wasn’t such a big deal, Tim Cook wouldn’t be CEO.

      • http://www.isophist.com/ Emilio Orione

        Supply is a big deal when you sell, htc is not selling how can that be for supply constrains?
        You are telling that htc is inferior to samsung because they had to make certain choices on hardware specs due to supply constrain. That can not be true, even if is true they had to make those choices, that cannot have had such a big impact on the market.
        Hardware specs does not influence purchase decisions in a significant number, when you sell by the millions the ones that know what a processor is are very few.
        Even if you are a conscious geek you should not care about the specific processor but of the general response of the machine, benchmarks.
        If you look at benchmarks there is not much difference from samsung or competitors and position in benchmarks change frequently with models iterations.

      • http://twitter.com/davidchu David Chu

        Your argument: The component side of Samsung does not give it an edge sales wise.

        My response: It gives them a big advantage. The biggest advantage is that they can make sure the phones are on the shelf when the consumer is buying through better forecasting, component road maps, etc. This in turn allows them to expand their retail network much faster, which leads to more sales.

        Your 2nd argument: HTC phones aren’t selling.

        My response: True as of late. Not true even a year ago. Even back in 2010 when HTC was selling like hot cakes they were having problems sourcing components. Enter Samsung.

      • http://www.isophist.com/ Emilio Orione

        Is born first the egg or the chicken?

        You have a supply chain problem when your product sells fast, more than your forecast and you can’t keep up or when you have a big forecast and pre-production difficulties, but ultimately you have constrain in the supply chain if customers want your product faster than you can build it.

        Apple is know for having a fast and cost effective supply chain. Samsung may have it as well, I don’t know, having in house production is not the whole point since your production must meet your customer needs too, but let’s take for granted that they manage their supply chain better than what htc is able to do. That doesn’t say anything, nothing on about how customers will love your products, you still have to make them, advertise them and see if the market respond, if it does you can start having supply chain constrain, if it does not your problem is elsewhere.

        So before the supply chain inferiority start affecting your sales you have to build an an attractive product and your initial sales must be stellar.
        Your product must fly off the shelves at launch if it does not it can not be a supply chain problem.
        We are speaking of android’s sales of this year, no one has sold phones like samsung, it is an execution problem not a supply problem, because no one has had stellar first sales (perhaps the nexus 4 this month) followed by supply constrains limiting sales like happens with apple’s iPhones and the like.

      • http://twitter.com/davidchu David Chu

        The debate is whether Samsung’s component side gives them an advantage in sales. There are many reasons that Samsung is winning. All I am arguing is that being more integrated is one of them.

        There are many causes for supply chain problems that are not directly related to customer demand. Too much competition for a component. Not being high enough on the priority list for suppliers. A supplier’s supplier delivering late. Etc. It’s a wonder it actually works. Being more ‘integrated’ simplifies a lot of these problems.

        I think our disagreement stems from different perspectives. My timeline goes back to 2010 with the introduction of the first Galaxy S, while yours is this year. If you only asked about this year, I’d say being ‘integrated’ is not important, but if you said going back to 2010, I would say that being ‘integrated’ was a crucial advantage and that we are seeing the fruits of that edge today.

      • http://www.isophist.com/ Emilio Orione

        The fact is that better management of the supply chain is related to margin not sales and integration or outsourcing of the supply chain is the same related to margin and more in general with management theories not sales.
        Furthermore outsourcing increase your choices while you believe that integration does it, our disagreement has more to do with reality in economy versus success of an advertising campaign by samsung.
        Nevertheless samsung has succeeded no doubt about it, question is: is this success sustainable? Supply chain efficiency is fundamental in sustaining success, here samsung has a chance, money gain marketing power, another point in favor of samsung, but samsung has gained only a tactical advantage versus competitors and this kind of advantage are easily and quickly closed usually.
        Late adopter might be choosier, has horace showed, and android’s gain is declining, we will see if they can keep up or let other android’s makers regain share in a decelerating market.

      • http://twitter.com/davidchu David Chu

        You started this thread with this argument…

        “User’s don’t buy a samsung phone instead of, say, an htc, because samsung makes components and htc does not.
        This could explain different margins not different sale’s numbers.”

        I agree with your first point. Users don’t care if Samsung makes components. What I’ve been trying to do is to explain to you how better supply chain management leads to better sales numbers.

        I never said that integration increases choices. It clearly doesn’t. My point was that in new markets where the supply of components are limited, being integrated has a big advantage because you have increased control. (Integration vs Modularity = Optimization vs Variability). You are correct when you say that this edge is not sustainable. When the supply for mobile components has matured, there is very little value in integrating the supply chain. Personally, I don’t think that day has come yet, but that’s another discussion.

        Now. Here’s the meat of my argument. How does a supply advantage lead to greater sales? I used to work in channel sales for electronics and the two key metrics that retailers care about are:

        1) How quickly will your products sell?
        2) Can you keep the store shelves stocked?

        Margins are negotiable based on each individual retailer’s profit formula. (E.g. Wal-Mart and Apple). You are correct to point out the importance of the first metric. Samsung has done a great job of advertising. My point is simply that the second metric is important as well. (especially in markets were retails think there is little differentiation). If you were a retailer, it’s a much safer bet to go with Samsung versus HTC. My instinct tells me that Samsung got all the premium retail space. Many customers never even considered a HTC phone because they either never saw it (since it was placed in less trafficked part of the store), or the store wasn’t carrying it (because HTC couldn’t produce enough phones to expand their retail channel), or they heard that Samsung made better phones (which Samsung does because they have better access to premium components).

        Emilio. Thanks for the debate. It’s forced me to think through my thoughts much more clearly. I don’t think I will be able convince you but that’s alright.

      • http://www.isophist.com/ Emilio Orione

        Thanks to you too, discussion is always a good thing.
        I agree with the last one almost entirely, second metric is also important and retailers does look at it.
        But my vision is at the beginning of the story, your is at the end. At the beginning HTC was the great saler, because before android explosion htc had a good market share and popular models while samsung practically didn’t have any selling phone. At the beginning htc had the better metric for retailers and samsung supply chain was not a iussue.
        Then android exploded and samsung has become the almost only vendor making a margin and selling in big volumes. Why was that? Not because of the supply chain or the second metric, those are affecting sales now that a great market share has been reached and numbers are big. Supply chain influence margin, retail space influence sales? Yes and no. Yes for the end user, no for the big clients, the operators that are very important in the phone market. The target for them is to have an apple competitor and not being forced to sign contracts with apple. They choose samsung, the more apple like phone maker, to have a more effective competitor, they tried also other android makers, but market refused them and here we are, the present situation. Will it be sustainable or the next big thing will be killer?

      • obarthelemy

        In a way, they do, because Samsung have a leg up on the best, latest components, which they both can get early, and can integrate into designs early.

      • unhinged

        If we accept that one of Apple’s advantages in the market is favourable deals with component suppliers, then Samsung Mobile having a similarly beneficial relationship with the various Samsung component businesses could be an important factor in their success.

    • FalKirk

      “Why isn’t Google successful with Android? Define success.” – Stefan Constantinescu

      I would define success as profits or the promise of profits. I would even accept a defensive strategy as a successful outcome if I could identify one. However, it seems to me that the only thing Android is defending Google against right now is Google’s ability to monetize mobile. And that ain’t good.

    • Walt French

      “Why isn’t Google successful with Android? Define success.”
      OK, it’s building a business that generates economic value that the firm (Google) can capture for its shareholders — not just a market-rate return on equity, but a incremental return on Google’s human capital.

      There’s no question that Google HAS been successful overall, but there’s likewise no evidence that Android has contributed to that success. In fact, Android actually appears to be cannibalizing Google’s profitable business, as the profit drop in the topmost chart is NOT from any new assault from Bing, the macro slowdown or other reasons. Having successfully destroyed the mobile OS’s profitability as regards Windows Mobile, Google finds itself ALSO destroying the value of advertising, by facilitating access to bite-sized, timely information; commercial interruptions destroy that value proposition and have to be judiciously held back.

      So, can Android be seen as a huge investment that just hasn’t paid off yet? I don’t even give it credit for knocking Microsoft off the heap; Apple did that. And Horace’s entire article is laid out in terms of profits to hardware, a game that Apple and Samsung are playing quite well; neither of them are wedded to the success of Android.

      So I don’t see that Android is a success for Google. At best, I’d give it credit for holding off the wolves as Google’s desktop business has saturated and mobile has entered with a brand new value proposition.

      • FalKirk

        Walt, this is some fine analysis. I’m writing a series of articles this week on why Android is winning the battles and Google is losing the war. I have a sneaking suspicious that a little bit of the analysis you provided above just might slip into my final two articles. :-)

      • Walt French

        Works for me. Maybe you’ll use the phrase, “value stack” in a way that finally lets me understand the concept. Win-win.

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        “…..neither of them are wedded to the success of Android.”

        Obviously this is true for Apple but for Samsung, they are wedded to Android is Prince William is to Kate Middleton. Android is a key factor in Samsung’s success. If not Android, then what else, Bada OS? That OS is junk.

    • http://www.isophist.com/ Emilio Orione

      “Is Samsung’s trajectory sustainable? Why wouldn’t it be?”

      Samsung trajectory could not be sustainable because samsung has not a stronger value proposition in comparison with other android phones makers.

      Apple has iOS, which is proprietary and iCloud, iTunes stores, the hardware design that is unique etc.. etc.. all this things make apple position unique and difficult to challange.

      Android could challange it as an ecosystem, but why only samsung makes money from android phones?

      The android phones seem more or less the same from and hardware point of view, they have differences but not so significant to have only one winner.

      The only difference is the android customization made by samsung that is the one that mimic more apple’s (blatant copy as ruled by the trial).

      So the only phones that sell are from apple or from the android makers that more copied it.

      Is this sustainable? That’s a question. Other android phones makers could copy apple, or apple could redesign it’s iOS and samsung will soon look old or google could stop to develop android or fail an evolution leaving samsung without a competitive o.s.
      Where is value uniquely added by samsung execution that competitors will have difficulties to fulfill?

      • obarthelemy

        Not really. Samsung have a strong hardware advantage, thanks to their own R&D, and bleeding-edge parts that are not readily available to the competition:
        – AMOLED screens, with their infinite contrasts and true blacks
        – Exynos CPUs

        Plus they’re starting to have interesting value-add: split-screen multitasking, and different user accounts.

        Don’t forget that Android is Open Source. Samsung can at any time fork it into their own OS, at the cost of the Google Play store and other Google apps, in theory. That’s what Amazon is doing, last I checked it was easy to get the Google apps back on Kindles.

      • Simon

        I credit to Samsung’s excellent marketing for those advantages. At one point they were advantages, but right now they are not:

        – AMOLED: currently it lags behind competition with lower brightness , inferior resolution, and worse color accuracy . For now the latest LCDs have superior resolution, excellent color accuracy, and good enough black level to be competitive in regular lighting scenarios. That is, unless watching movies in dark on your phone is the main concern. The SLCD of HTC One X or the in-cell LCD of iPhone 5 are all measured to be superior.

        – Exynos Processor: This is what puzzles me. The latest quadcore Krait with Adreno 320 GPU is faster than Exynos overall but somehow even the very same spec-obsessed Android fans aren’t making the same hype about it. It’s just odd.

        To be fair Samsung’s AMOLED and Exynos did have some tangible advantages at some points in the past. But the very fact you’re espousing them as advantage at this point even when the objective measurements say they aren’t, tells me that Samsung really did a wonderful job of marketing them as an advantage.

        You cannot compare Samsung and Amazon in selling content. That’s just not Samsung’s forte.

      • obarthelemy

        1- watching movies no, reading, yes. In bed, every night. I hate the black glow of LCDs, and their too-high luminosity.

        2- Are you sure ? http://www.androidauthority.com/exynos-5-dual-benchmarks-125134/

        AMOLED and Exynos are constantly updated, Exynos 5 is the first A15-based CPU on the market.

        I was not comparing Samsung’s content selling ability to Amazons, but their OS-forking ability. If Amazon can do it, I’m sure Samsung can too.

      • simon

        1 – AMOLED not any better than LCD for night reading. In fact the first major Android AMOLED phone, Galaxy S, was terribly bright at its lowest setting and was pretty useless for night reading. I suspect it’s the software issue though.

        2 – Exynos 5 is an A15 chip that isn’t available for the phones right now and thus it doesn’t apply in our discussion. The fastest phone in terms of processor is LG Optimus G and Nexus 4 but curiously they aren’t getting much hype. If it’s all about hardware processor, why isn’t LG getting accolades for having the fastest phone out there?

        3. OS-forking ability means little. If they cannot provide the app store and the ecosystem, they will have trouble.

      • obarthelemy

        1- Yep, AMOLED a few years ago was not as good as LCDs today. Now, AMOLED today…

        2- Nexus 4 sold out in a matter of hours pretty much everywhere. More hype isn’t needed.

        3- Indeed. Which is probably why I don’t see it happening anytime soon.

      • simon

        @obarthelemy:disqus

        Every single Nexus has been a middling seller. Nexus 4 is sold out because its price is artificially low. Simply put there is no evidence whatsoever that the general consumers care that much about Google reference phones

      • obarthelemy

        I think you misunderstand the philosophy behind the Nexus phones. They’re not intended to sell lots. The latest one is not even specced very high. They’re just a example of what Google thinks a good phone would be, for the partners to use as a baseline. They are not marketed aggressively, and are available only from few retailers.

        I think Google is doing them mainly to avoid MS’s mistake of letting Windows be associated to hardware mediocrity and crapware. Nexuses (ouch !) highlight what a good Android phone can be, and leave room for the partners to do better, or worse for cheaper. Google are not in Apple’s situation of having one single product that must sell.

      • http://twitter.com/handleym99 Maynard Handley

        Please, this is not the site for PERSONAL arguments about who prefers what.

        If you have statistics about, for example, how many people specifically choose AMOLED based on the low-light behavior, that’s great and useful info. But saying “I prefer it” is as useful as me saying “Lana Del Rey is better than Alanis Morissette” and as relevant.
        There are sites for this sort of anecdote, but Asymco is about what the masses want, and so how the business will play out, not about what one person prefers.

      • obarthelemy

        OK. Let’s just accept the fact that 15% smartphone buyers prefer Apple’s devices, and 75%, devices running a flavour of Android.

        That works fine for me.

        What doesn’t work is an uncritical and unsubstantiated Apple lovefest, hence the counter examples.

      • Simon

        The way I see it, you have problem with people praising and trying to find out why Apple is financially successful, OK. Perhaps you should bend the reality so that Apple isn’t financially successful?

        I don’t know if you’ve noticed, but this is a website that seeks to find why companies are successful or unsuccessful in business, and Apple has been on a success train for a decade now with a very interesting tangent so it makes an interesting case study.

        But if you don’t like the fact Apple is successful and need to bent, feel free to go to another site where you can join others praising Google and Android for its marketshare, or perhaps a site where they praise Samsung for its success.

      • obarthelemy

        I know dissent is hard to take, but, again, Apple is successful because they have the image of making tech gadgets that are easy to use and socially valuable (and they’re very good at logistics, hence the reward to their new CEO). That’s it. No groundbreaking (I loathe “innovative”, which is so overused it’s become meaningless) features.

        We can keep trying to argue everything about Apple is perfect, and that Apple is responsible for all innovations for the last decade, but it isn’t, and the sooner we move forward from that silly concept, the sooner we can have intelligent, realistic, fact-based discussions.

        For example, it would be interesting to discuss if another company has the mettle to move into the premium segment, especially in light of Sony’s discomfiture, or if Android is doomed to being the workaday phone. Does MS have a shot, especially since the logical next step after the Surface is a premium phone ?

        Does success require vertical integration from hardware to software to ecosystem to shops ? Only for the premium segment, or, in the end, for all segments ?

        How will Google painstakingly being nice to their new partners vs MS short-circuiting their old ones vs Apple not having any play out ?

        It is also interesting to discuss how big that premium segment will end up being, which Horace did about smartphones in a recent post, highlighting that late adopters in the US seem skewed towards Apple.

        Those are interesting discussion. Gushing about how Apple make products that are more holistic than Dirk Gently’s detective agency ins’t.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        You had a good post except for this:

        “No groundbreaking (I loathe “innovative”, which is so overused it’s become meaningless) features.”

        It is impossible to have an intelligent discussion if you are going with the tired meme that Apple is just a marketing company (the only option if they have not done any ground breaking work). To deny the work and advancements they have made and be able to bring to market is weak.

      • obarthelemy

        Give me one groundbreaking feature of the iPad Mini. “It’s there’ doesn’t count.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        Size, weight and battery life on just the iPad mini.

        For example:

        * The Nexus 7 is 249cc with a weight of 340g and a screen area of 142cm^2.

        * The iPad mini is 194cc with a weight of 312g and a screen area of 192cm^2.

        Larger screen (albeit less pixels) with better battery life, larger screen, less weight and overall smaller package. Yes, it costs more. Yes, Apple and Google (with Asus) made different design decisions and compromises but as an engineer, I assure you I am impressed with a smaller package by over 50cc (22% smaller) while keeping less weight and a lager screen.

        But you changed the question and this is what you wrote.

        “I know dissent is hard to take, but, again, Apple is successful because they have the image of making tech gadgets that are easy to use and socially valuable (and they’re very good at logistics, hence the reward to their new CEO). That’s it. No groundbreaking (I loathe “innovative”, which is so overused it’s become meaningless) features.”

        WOW!!!! From your view point, it is plain you see Apple as nothing but a company that simply repackages the same old technology, slaps a fruit logo and knows people will just buy it. Apple does not do ground breaking design and features. Note only that, Apple just “has the image of making tech gadgets that are easy to use”; you could not even bring your self to say “Apple makes tech gadgets that are easy to use.”

        Here is one extremely ground breaking design Apple did (of hundreds). High accuracy capacitive touch. Prior to the iPhone, the two types of touch were broken into high accuracy/high localized pressure resistive touch and comfortable to use/very low accuracy capacitive touch. If you have ever used an LG Prada, you know what I am talking about. Yes, it had a capacity touch screen but it was good for about a 16X20 grid on the screen making the touch interface we see on the iPhone very much impossible.

        The iPhone (starting from the FingerWorks acquisition) revolutionized capacitive touch providing high accuracy and simultaneous input in a small package. Prior to the iPhone, there was no company on the face of the planet doing this.

        That’s it. I know it is hard for you to understand that Apple is a very engineering driven company that, like Google and MS, have some of the best talent on the face of the planet; with this talent comes the ability to push the envelope and all these companies to ground breaking stuff all the time.

      • obarthelemy

        Indeed. 20% today less volume is a major disruption, never mind it’s at the cost of a very so-so resolution, and buying capacitive screens from suppliers 5 years ago was incredibly innovative.

        You win, indeed.

      • obarthelemy

        I think my first reply got lost. I was saying that

        Indeed, 20% smaller in exchange for a low-rez, non-magical screen is incredible, especially because 3mm more thin is very important for _________, and high rez was very important, but only last year. And earlier this year. And buying capacitive screens from suppliers 5 yrs ago was a major innovation, especially when combined with actually buying touch keyboard software companies.

        I am now utterly convinced, especially since there are hundreds more (sic) examples like this.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        It is really sad.

        The simple fact that you would write:

        “capacitive screens from suppliers 5 yrs ago was a major innovation”

        shows you have little understanding of technology and its developments (and I don’t mean this in a small way). This is why it is hard to have a rational discussion because your hatred of Apple runs so deep you discount every single advancement they have spearheaded and achieved.

        EOL.

      • obarthelemy

        Substanceless ad hominem, again.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        The sad part is I give you a solid example where Apple provided ground breaking technology that is the center-piece of almost every smartphone on the planet today and you reject it out of hand with “from suppliers 5 years ago”. This, alone, shows you have a minimal understanding of the workings of technology and really can not judge “innovation.”

        The key point is, there was no supplier 5 years ago offering high resolution multi-touch capacitive touch screens on the planet. Not a one. Apple did not do this with OTS tech.

        If you have ever used a Droid, Droid X, GS I, GS II or a Galaxy Note (the Android phones I have used) and compared the onscreen keyboard to even the iPhone (1st gen) you would understand that Apple’s capacitive touch is still far far far better than anything the other guys have to offer. I have always felt Android had to go to bigger screens just to get the touch resolution high enough to be usable.

        You can tell you are an MBA with marketing.

      • obarthelemy

        Say what ? You think there is a link between the touch resolution of a toouchscreen and the pixels on it ?

      • http://www.noisetech-software.com/Home.html Steven Noyes

        Never said that.

        Never implied that.

        Never inferred that.

        What I said is that Android capacitive touch matrixes do not tend to be as repeatable and as precise as the original 5 year old iPhone. This necessitates a LARGER (not higher resolution) screen to achieve a high enough level of touch accuracy. While Android devices have improved in the past 4+ years (my friends G1 was flaky at best on the touch screen), I have found consistent typing on Android touch screens to be far below the level of what Apple gets on their iOS devices.

        You dismiss this advantage (just like the substantially smaller volume/per unit screen area of the iPad mini over its rivals) as meaningless that applies to no one and does not represent any level of technological achievement.

        I do not and see it as the primary reason Apple products can charge a premium over its competitors.

      • Walt French

        No, no, no! You ESTABLISH facts by citing sources. For “prefer,” you have to justify that what you’re seeing is not availability, carrier preferences (the US iPhone/Android competition is especially driven by Verizon’s role in developing an alternative to AT&T’s iPhone exclusive), pricing, etc.

        Beats me what “75/15/10” numbers you might be thinking of. And why comparing Samsung’s and Google’s business results is somehow indicative of an “Apple loveliest.”

      • obarthelemy

        I did cite sources a bit further up in the discussion, but thought everybody knew them already, they’re pretty much the basis for any intelligent discussion. 15% iOS vs 75% Android are last quarter’s worldwide smartphones shipment estimates. I also source the 50/50 split in tablets.

        As for the lovefest, I mean that lots of commenters seem to thing that Apple product and strategy are all the epitome of what can be achieved. I think any rational analysis needs to acknowledge that this is not the case, and that both products and strategy have drawbacks/compromises. I keep painstakingly trying to introduce them into the discussion, and commenters keep rejecting them out of hand. Maybe not the usual fanboyz, but a similar attitude from, my guess would be, investors on top of customers, who don’t face to face the possibility that Apple’s success streak has flaws.

      • Kizedek

        Whoah, did you actually go back to the old standby même of iOS vs Android, when:
        A) iOS ships on not only phones but iPods, iPads and appleTVs which also happen to make Apple a load of money and extend the ecosystem.
        B) “Android” “smartphones” are comprised of all sorts of models made by all sorts of manufacturers sold by all sorts of carriers in all sorts of markets where Apple might not even play, and sold to all sorts of people who may or may not have hired these so-called smartphones to do the jobs that apples devices are hired to do and do so well.

        Compare iPhone to other phone (or any 10 other top-selling flagship phones if you wish). Compare Apple to Samsung. But find some way to allow us to bring profitability into a discussion of “success”, and not just market share alone in your comparison of Apple to the sum of all the OEMs out there that happen to jump on using the only free OS out there capable of competing in any way with Apple.

        The other même you seem in danger of deluding yourself into, is that “open always ‘wins'”, and that somehow Apple is going to inevitably trip over itself at some point… just as they supposedly did “in the PC ‘wars'”. And yet here we are, and here Apple is; and it is MS that should be the recipients of our concern at this point in history. How about we get concerned that Google will inevitably go the way MS is now going (sliding into irrelevance) and Samsung will inevitably go the way HP is going (divesting itself of its hardware businesses)?

        But scoff away — any negative analysis or interpretation or pronouncements about MS, Google, Samsung or HP are sure signs of an “Apple lovefest” while your sheer blindness to your anti-Apple bias, your lack of logic and refusal to engage the actual issues are perfectly reasonable. But it’s OK, we get it and are used to it: just as Apple are held to a higher standard than any other company, so too we are expected to provide more evidence and prove much more if we have the gall to speak in favor of Apple.

      • obarthelemy

        A) I’m not quite sure I get your point. The question was Apple’s share in smartphones, that’s the answer.

        B) see A) I’m sure non-Apple smartphones are less smart and people only got them because they couldn’t get an iPhone, but still…

        When I compare phones, I get told this is not the site to do it, this is for maket share and company strategy. When I go market share, I should compare phones… Sorry there’s bad news for Apple on both fronts ?

        I have no clue where you get I think “open always wins”. Did it ever ? Who’s deluded again ?

        And, the signs of the Apple lovefest are not negative comments about the competition, but refusal to acknowledge drawbacks and compromises in Apple’s products and strategy. That’s delusion.

      • Kizedek

        The reason for the phone/market share/platform/profit back and forth is that it matters what you are comparing to what.

        They are all factors with various relevance to varius discussions. What does “market share” mean in and of itself?

        Not a lot. Who is it “meaningful” for and when? It was meaningful to MS at one point — when they had lock in and were assured of large corporate buyers renewing thousands of licenses of various sorts each and every year n matter what brand of PC was purchased, hey, that was significant. Again, here is Apple. MS isn’t assured of its income in a day and age when more people make their own choices of what computer or device to buy. It’s the standards and data that is important, not the locked-in software monopoly. MS just can’t command the profit it once did.

        So, Android is growing faster than iOS. Is that a big deal? Android isn’t making money for Google as Windows made for MS, so that makes it harder to say how good it is for Google (not to mention 12 billion expense). OK, it helps get eyeballs for Google. Great. Where is that going? Don’t know because mobile may turn out to be whole different animal than desktop. So far it is Apple that seems forward looking and agile, not Google, despite Google being young, hip, Internet age company. Google seems to be reacting. Hmmm.

        Therefore, I said, you *seem to be in danger of deluding yourself* into the “open always wins” même. I can’t think of any other reason that you seem to think that Android is a win-win for Google and is the bee-knees as an OS/platform. Technologically, it really isn’t that great compared to iOS despite the lack of innovation you recognize from Apple and however much kudos you attribute to Android’s great list of half-baked features. It’s iOS that is around for the long-haul. And when it comes time to change it, you can bet Apple will change it and disrupt itself.

        So, if Android isn’t really helping Google as Windows “helped” MS (until it was too late to change it as significantly as it needed changing), then who is it really helping? Samsung? Maybe.

        How do we measure that? In terms of market share? Maybe, but doubtful. Since Android updates are diff to manage, some work is ultimately required to master their own destiny. Until then, they react or copy what seems to work. Where are the likes of Dell today?

        Sure, Samsung are “winning” at “marketshare”, but at whose expense? Arguably at the expense of HTC, RIMM, Nokia, etc. Android “winning” doesn’t help Samsung… Only people buying Samsung phones helps Samsung. So what if Android is “winning”.

        But how do we measure the success of Samsung’s Large marketshare? Is the “success” of Android a win-win for Samsung? No, the platform and App Store income streams don’t belong to Samsung.

        So you can’t mix and match and add “successes” for both the Android platform and individual smartphones or OEMs and cumulatively add them all together and say this all makes Google successful, or this all makes Samsung successful whenever you choose to. Different kinds of “successes” have varying impacts on different participants’ bottom lines or longevity or stability or dominance or whatever the metric is, at different times and under different circumstances.

        At the same time, however, all these kinds of successes *can* be added cumulatively when it comes to Apple. Why? Because it is a fully vertically integrated company that controls the whole platform and hardware and governs the road map for 10 years in advance.

        Now, why is marketshare not a big issue and concern to us Apple supporters right now? Well, among other things: for one, Google isn’t MS and has a different business model (one it may increasingly be forced to give up on, who knows). Two, Apple makes more and more devices and sells every one it can make at very profitable and sustainable margins? Three, who cares if Samsung sells more when it takes them 5 sales to make the money that Apple makes on one and more people than ever are buying Apple products for the first time? Four, companies were making the choice to go Windows for thousands of employees at a time, but are now giving employees a choice (or buying iPhones). Plenty of people love the iPhone and will buy another, because they recognize the value they get from it (even if you don’t).

        And whatever you may think, people aren’t purchasing iphones and keeping them and upgrading them because of slick and deceptive marketing by Apple. Apple has added value to the phone market and Apple reaps all the value it has added (just read Horace’s articles a little more closely and try to follow the logic, something notably lacking in your posts)

      • obarthelemy

        I think Marketshare is only part of the equation, alongside profits and strategy. But marketshare matters because:
        1- it validates Android as an OS. 75% of customers can’t be all wrong.
        2- it validates Android as an ecosystem. Even if purchases per handset are much lower, it means there is a sizable market for apps and content on Android.
        3- it means there’s a large part of the market that, for one reason or another Apple is not addressing. I doubt the 4 and 4S are still supply constrained, and I think Apple is still selling some flavor of the 3 in some markets, so this is not a supply issue. That probably leaves specs, the 3 and even the 4 ranges are getting long in the tooth, and pricing, meaning Apple may have difficulty maintaining them. I don’t think distribution is much of an issue for Apple anymore.

        I’m sure Google would prefer not to have to pay for Android’s development, and to see more revenue from mobile, and that Samsung would prefer to have their own OS/Ecosystem (much like IBM would have preferred for OS/2 to succeed). That point is moot though. Going forward, if things stay at they are or keep evolving the way they are, we will, again (cf PCs), have a very dominant platform with low margins (and no MS to thrive from it since Google isn’t making much, if any, profit on it), and Apple as an almost niche player, but with high margins. Not a bad position to be in, but a strong check on what they can do and charge, and constant pressure because the other guys are “good enough”.

        The reasons people buy stuff are complicated, and difficult to ascertain (I should know, I got an MBA in Marketing). I think social validation is a very strong driver, and Apple got that one down pat. I’m not sure there are a lot of objective reasons though, which means Apple is dealing with feelings, which is a big risk because they are flighty. Apple might have reached Nestlé levels though, where the trust is almost unbreakable. Not sure you can get that for tech gadgets as opposed to food, though.

      • Kizedek

        I’m still having trouble seeing any logic in your arguments.

        Validation? Who cares? What does that even mean? Those who use it feel good about it? Google feels good? The creators of Android feel good? Google is altruistic (yeah, pull the other one). And you accuse Apple users of emotionalism?

        I’ll tell you what “validates” iOS… Developers choose to put their first efforts into iOS apps because it makes them money!

        Oh, and several hundred million iOS users have got iTunes accounts with credit cards attached.

        Apple chooses to address what it addresses when it addresses it. This is part of their log term strategy, philosophy and business model. i am really not too concerned if you disagree.

        Right now, Apple is addressing those who want something easy to use and want to do certain things without hassle. If that’s not you, then fine. Apple also doesn’t do low end for the sake of it, or junk. Sorry, that is just the way it is. They will split up product lines more and more as time goes on, via-a-vis iPod and now iPad.

        “Once again a dominant platform with low margins”? Yeah, the OEMS got low margins and are now dying. MS got sixty percent margins for printing serial numbers. Now it is not doing so hot, so it is doing an Apple and a going for vertically integrated model. Go figure.

        Sure, the iPhone will be a “niche” player in a world in which every man woman and child on the planet potentially has both a phone and a tablet. If “niche” means anything less than 50% of this 7 billion person market, then we concede. As you say, great position to be in.

        But unable to do what they want when they want to because they are “under pressure”? Nah, just not seeing it. “Under pressure”? Seriously? You don’t call it “under pressure” when MS comes up with the Surface? You don’t call it under pressure when Google purchases Motorola for 12 billion or desperately creates 360 or whatever the beta service of the month is? Yeah, sure: it’s not Apple that is creating markets and the terms of engagements and supply chain innovations and new manufacturing techniques and cash mountains from satisfied users who stay loyal. No, it’s just deceptive and slick marketing that rewrites history and deludes Apple customers while Google is transparent as glass.

        Dude, you seem to have something religious going on in your head quotation Google. Are you sure you aren’t trying to validate your choices?

      • obarthelemy

        Of course Google and MS are also under competitive pressure. Did anyone (not just me, anyone !) say the contrary ?

        Releasing an unfinished Maps service to get rid of Google more quickly is an example of the pressure Apple is feeling. So is releasing a non-retina iPad Mini, with clear plans to fix that asap.

        Apple *is* opening new markets, as I said, moving tech gadgets outside of the nerd niche. The question is more about their ability to hang on to these markets once they are open. And to find the next new market. Android has mostly caught up in all important areas (hardware, OS, apps, content), only peripherals is still an Apple exclusive. MS is entering, and will persevere long enough to be a pain to everyone, even if they don’t ultimately succeed.

        Apple *is* very good at generating revenues from their customers, both repeat hardware purchases and recurring content. The whole thing hangs on their ability to get and keep customers though.

        PS: I just came across an interesting French study (http://www.slideshare.net/cedricbuisson/etude-surikateifop-sur-le-comportement-des-utilisateurs-dandroid). 95% of French Android smartphone owners declare themselves satisfied. 91% for tablets. of those, those that had previously owned an iDevice before going Android, 93% and the same 91% are happy, so switchers are happy too. The iOS version of the study (http://www.slideshare.net/SurikateSK/etude-surikate-ios-juin-2012) shows 98% happy iDevice owners. Better, but only slightly, and, again, for about twice more money. Results are not broken down by Android version, which is too bad. 93% iOS devices are v5 (latest at the time). The usual caveats apply to this type of study, to be taken with a huge grain of salt.

      • http://www.asymco.com Horace Dediu

        Market share does not equate preference. You can’t suggest that only 5% of car buyers prefer Mercedes. Nor that 95% of people prefer McDonald’s as their favorite restaurant even if they eat there more than in any other restaurant.

      • stefn

        Spot on. The rise of Apple over the last decade, I wonder sometimes, was owed to pent up demand for it products, which the affordable (compared to computers) iPod fulfilled. And it became the thin edge of the wedge for Apple’s burst of effort in consumer built and priced electronics. Computers for the rest of us.

      • obarthelemy

        Well, we’ve got to invent a word (and may a concept), or when people have choice between 2 things, and freely get one, while still thinking the other would have been nicer.

        The restaurant example is flawed, there is huge place utility there, and time utility (well, not quite time utility, it isn’t really about when the restaurant is there, but about how long it will take to eat), that isn’t there for phones. Also, preference is complicated. For an evening or week-end meal for example: I prefer to eat at home. Except I don’t often have time to shop and cook and cleanup. Hence I need to go to a restaurant. I prefer a fancy dinner in a quiet restaurant. Except it’s expensive, and the kids whine and are pests, and you’ve got to dress up and behave. So I choose to go to McD, saving time, money, and making the kids happy. In a very real way, I prefer McD. The food quality is only a very small part of my decision. They won’t eat their veggies anyway ^^

        For cars, it’s price sensitivity, which also does apply to phones. I do argue only 5% of car buyers prefer Mercedes, because price *is* a factor in preference. People could sell their homes and go without holidays nor nice clothes for a few years to buy a Merc, but they *prefer* not to do so. Or maybe get a 2nd-hand Merc vs a new cheaper brand.

        Purchasing decisions are not made in a vacuum. You invest money and time (and ego if that purchase is a failure or resounding success) to get utility in the form of a product/service. The utility you get has many dimensions (ego/money/time, but also, functionality, resale value, skills learned, comfort, security, self actualization…). The price is weighted against that utility, against the competition, and against completely different ways to spend/invest your time and money and ego.

        In the end, the fact that when presented with a choice between an iPhone and an Android phone, 15% go for iPhone and 75% for Android, means 75% prefer Android. Not as an OS/hardware/ecosystem, but as a utility vs a price/time/ego investment.

      • http://www.asymco.com Horace Dediu

        No it does not mean that. What makes you think all purchase decisions are on the basis of both products being offered in every decision? The iPhone is only sold through 250 operators world-wide. There are over 800 operators in total. Furthermore, even if available, the decision is clouded by misdirections, sales spiffs and pricing illusions put in front of buyers.

      • obarthelemy

        1- Apple has been at it for a while now. If some channels/countries still don’t have their products, that’s an issue. Is it because Apple chooses not to be there, or because they can’t ? At that point in the game, is that situation in likely to change much still ?

        2- Customers have known about the iPhone for a while now, and have had several contract cycles to switch carriers for one offering the iPhone, assuming contracts are a factor (ie, no pay as you go). It does induce a bit of a pain, hence stickiness, depending on the legal environment (in France, network companies *must* unlock a phone, for free, if you ask, 6 months max into a contract; and you can switch networks w/o changing phone numbers, and you can exit a contract early after a year by paying about 25% of the remaining fees… I think that’s pretty exceptional though). Ditto for company phones, though there’s a large lag compared to consumer and many companies may indeed be still switching away from RIM right now.

        3- Is Apple still absent from major countries ?

        4- Misdirections, sales spiffs, and pricing illusions work the same for all players, and thus are not really a valid excuse. Commercial strategies are a valid differentiator. Apple never runs promos, Samsung runs promos almost permanently (at least in my country). This has a complex impact on perceived value, but is no more a trick, for example, than using the word “magical” very liberally. Ditto for securing in-store push.

      • obarthelemy

        Oh my, it seems the system ate a very long answer. I’ll do it again…

        Preference is a multi-faceted issue:
        1- You invest in a product/service. What you invest is complicated, the main elements are: time, money, ego
        2- You get utility out of your investment. Utility is also straight time/money/ego, but also lots of others things, such as self-actualization, new skills, safety, comfort, fun, resale value …
        3- When deciding to invest, you weigh all those ins and outs, then against the competition, then against doing something completely different, or nothing.

        For example, in your car argument. Most people in developed countries could get a Merc. They would have to sell their homes, go without holidays, nice clothes, sell their first born… So they *prefer* to get a more common car, even to a second-hand merc. They don’t prefer the car by itself, they prefer the value proposition in all its ins and outs.

        For the restaurant. I’d prefer to eat at home. Except I don’t have the energy and time to shop, cook, and cleanup every evening. So restaurant it is. I’d prefer a fancy restaurant. But that entails spending more, getting there, grooming the kids (and me, but that’s a lot less work ^^), maintaining decorum… so McD with runny noses, food fights, arguments (though fewer than in a fancy restaurant) and dirty clothes it is. In a way, I’d still prefer a fancy restaurant, but I actually preferred going to McD.
        Ditto for a weekday lunch restaurant, except place and time utility are even more emphasized. (Actually, I prefer a bakery sandwich or lunch bag, but let’s assume…)

        Going back to Android vs iOS, 75% customers buying Android when they have a choice to get iOS instead does mean they prefer Android. Maybe not the actual device/software/ecosystem… but the overall utility vs investment proposition.

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        As far as processors, Apple’s A6 and A6X smokes everyone else right now and they’ve only been in the processor game for 2 years. That’s talent.

      • http://www.isophist.com/ Emilio Orione

        I don’t really think post pc devices are bought basing on specs. Amoled is not really better than other solutions, their color space is inferior, but that’s not really the point. The point is that no one care of specs (when devices are bought by the millions it is not possible that they are all geeks). You buy it for its look and feel and from samsung to competitors there is not the difference to justify sales.
        Forking android is indeed a possibility but will require the ability to evolve the o.s. like google does with android, not an easy task for an hardware company. Furthermore the brand android is strong and leaving it is not easy. Bada sales are not even close to android sales looking only at samsung phones.

      • obarthelemy

        Samsung also have the OS Bada, are involved in Tizen, and have developed exclusive extensions to android (split-screen multitasking, the Pen suite for the Note 10 and the Notes smartphones…). They even have their own, uselses for now, market.

        They could do a fork if they set themselves to t, which I don’t see in the short/mid term, since right now they’re benefiting heavily with few drawbacks.

      • http://www.isophist.com/ Emilio Orione

        Bada and tizen are not selling nowhere near android, so much for the capacity to build an o.s. with appeal. So samsang has yet to prove to be able to do it on its own.
        The customization of android are not an o.s. and even if the apple’s look and feel of the interface is samsung’s winning point, they are causing much trouble since samsung is not able to keep up with android upgrades and samsung’s customer must keep older version of android using new phones. Good copying work (the one samsung has always be good at, they are a fast follow company with an unseen and unprecedented success that must be seen if can be sustained) and bad maintaining and upgrading work, the harder part.

      • obarthelemy

        Are you really equating commercial success with technical nous ? You do realize those two are orthogonal right ?

        Have ever looked at Samsung’s TouchWiz ? It mainly supplies sugary Widgets that Apple doesn’t even have.

        Are you that afraid of Samsung that you can’t be rational about it ?

      • http://www.isophist.com/ Emilio Orione

        I am sorry I should not get involve in trolling my mistake, but in this site and in this thread we were speaking only about commercial success, nothing else. You will find plenty of places to comment about fan things, but if you want a rational discussion about the samsung business model sustainability you should be aware of the rules.

      • http://twitter.com/handleym99 Maynard Handley

        The cliched thing to claim would be that Samsung is essentially in the same position as the USSR: Where progress merely required copying what went before (building steel mills and tractor factories), and in a few high priority areas (military research) the USSR could move forward, but there was no depth to support for originality and innovation.

        Now is this a fair criticism of Samsung? I don’t know. To an outsider it looks like they’ve produced very little that is truly new, that isn’t a refinement of the past, but perhaps that’s selling short their achievements in flash or fabs. After all, it’s one thing to say “making flash twice as fast is obvious” and another to actually do it.

        A more refined view might go something like this:
        (a) Apple has software strengths that Samsung doesn’t have, and that’s only going to be more important.

        (b) Google has data center strengths that Samsung doesn’t have, and there is likely to be tension there going forward as Google wants control over Android, while Samsung wants their phones to be less generic.

        These COULD be resolved in principle if Google switched to a model whereby access to its goodies was on a fee basis rather than the current passive-aggressive “business” model where there’s an implicit deal that you take Android and don’t screw with it too much, and we won’t stop your phones from connecting to our servers. But such a change would be an implicit repudiation of the free web, and Google seems unwilling to do that (yet).

        This matters because the future is ever bigger better search, ever bigger better data. Statistically driven translation, voice recognition, maybe voice synthesis, photo aggregation, augmented reality, etc etc. All the things that we like today, but feel they suck, kinda like search in the age of Alta Vista. Google is currently king of this stuff, and how they decide to allow others to access it (others being both Apple and Samsung) will have a tremendous impact.

        (c) Apple has “taste” in terms of design and appearance (sometimes not so much in terms of usability and functionality), and along with that a sense for how much to change and how fast to change. This is worth something, Samsung doesn’t have it, and appear to have no interest in getting it.

        So where does this leave us? To me it makes Samsung a glorified TSMC. They do lots of stuff and do it well, but they don’t do ANYTHING that no-one else is doing — they have zero price control. They’re not Intel, with better chips than anyone else. They’re not Google with the data no-one else has. They’re not Apple with the design, vision, and software skills.

        Best case, they’re Sony. Sony’s not awful; it’s better than being Sharp, it’s better than being EverReady, it’s better than being GroupOn. But Sony’s also in a very precarious situation.
        SO FAR Samsung haven’t made the obvious Sony mistakes. They haven’t got into content and allowed it to warp their judgement; they haven’t (for the most part) insisted that every add-on dongle to their devices be proprietary; they haven’t egregiously pissed off their biggest fans (shipping root-kit CDs, or removing the ability to boot Linux on Playstation). But to me this looks like luck more than design. I could perfectly see them making future phones unmod’able, or shipping with spyware. I could perfectly see them buying say Netflix and going Hollywood.

      • obarthelemy

        Interesting post. I’d argue again that what passes for innovation is mainly copying and repackaging anyway, even Jobs admitted to doing that a lot. I’ve already argued at length that Apple doesn’t innovate much either (but buys a lot of innovators), unless you count the US patent system as the arbiter of what innovation is.

        Samsung indeed do not seem to be very good at software, though they’ve been building up: they just added multitasking split-screen to Android, they have the S-Suite for their pen-enabled gizmos… The flip side of that coin is that Samsung is very good at hardware, and produce pretty much everything that goes into their phones. And quite a bit of what goes into Apple’s. I know menial manufacturing is devalued, but in light of what is happening in the PC market, where former OEMs are displacing incumbents, manufacturing ability should be kept in mind.

        Indeed, it will be interesting to see how the whole Android bargain evolves, especially if Google stops being such a stock market darling and have to take a long hard look at how they spend their money, and what they get in return. Samsung has had a hell of a free ride on Android’s coattails, if Google start having second thoughts about their investment, or if Samsung tread on their toes, things will get interesting.

        Samsung *is* in the very unique position of controlling all the manufacturing. They have very good and exclusive everything, from Exynos chips to AMOLED screens, to DRAM and Flash and cameras. TSMC is a one-trick pony unable to make a finished product, Samsung isn’t. They even have distribution capabilities, and are present in several markets, especially TVs. They seem to be planning to leverage all that with more frequent product refreshes too, the GS4 and GNote3 are now expected early next year, giving them a chance the be The New Thing, and to obsolete 6 months old iPhones.

        On the other hand, Apple is a designer and marketer of phones, for others to actually make. Their software lead has been erased, their hardware comes from others, and the proprietary fortress they’re building, though it makes getting out harder, also makes getting in a bit more complicated.

        As for who is in more danger of becoming evil, it’s a bit ironic that Apple already checks a few of your boxes, plus a few others like their requiring exclusive distribution for interactive manuals, lying to their customers about malware, pissing off pro video editors by not updating their hardware and dumbing down their software… and Apple is not kept in check by close competitors/partners.

        Apple has also started making brand management mistakes. The Maps fiasco for sure. The iPad Mini is a big risk, with so-so features and planned obsolescence (but a very nice design). It’s the first Apple mobile product I know of that doesn’t even pretend to be cutting-edge at launch. And maybe the constant hyperbole is starting to wear thin, with every product launch being peppered with magic features that more often than not, fizzle.

      • JDL

        “As for who is in more danger of becoming evil, it’s a bit ironic that Apple already checks a few of your boxes, plus a few others like their requiring exclusive distribution forinteractive manuals, lying to their customers about malware, pissing off pro video editors by not updating their hardware and dumbing down their software… and Apple is not kept in check by close competitors/partners.”

        “Apple has also started making brand management mistakes. The Maps fiasco for sure. The iPad Mini is a big risk, with so-so features and planned obsolescence (but a very nice design). It’s the first Apple mobile product I know of that doesn’t even pretend to be cutting-edge at launch. And maybe the constant hyperbole is starting to wear thin, with every product launch being peppered with magic features that more often than not, fizzle.”

        You let your mask slip there, proving as others have noticed that you entire reason for posting is not to bring anything usefull to the debate but to whine over Apple’s success and why they must be DOOMED. This is about Google vs Samsung and yet 95%+ of what you have posted has been Samsung vs Apple or just “I HATE Apple and they are DOOMED” showing that your only here to vent you frustration that Apple is successful.

      • obarthelemy

        1- ad hominem combined to proces d’intention. Rhetoric, no content nor validity.
        2- the other guy does it on the previous post, but i can’t answer in kind ?
        3- you’re not adressing the actual content of my post. Are any of my facts and reasonnings actually flawed ?

      • unhinged

        I think it’s difficult to have a discussion of Samsung and Google that does not occur in the context of Apple and its presence in the market.

        That said, if we’re discussing business practices that lead to success then the technological capabilities and shortcomings of devices are only worthy of mentioning to a small extent. I think we’re largely agreed that the tech is not the major factor of success (if indeed there is only a single most important factor).

      • http://www.asymco.com Horace Dediu

        You misunderstand innovation. Innovation and invention are not equivalent. There is a further distinction to be made between sustaining and disruptive innovations. http://en.wikipedia.org/wiki/Innovation
        All patent systems are designed around invention and have no bearing on innovation.

    • Noah Berlove

      “Is Samsung’s trajectory sustainable? Why wouldn’t it be?”

      Huawei, ZTE, Lenovo, Yulong/Coolpad and a probably a bunch of other Chinese companies you have never heard of.

    • http://twitter.com/snookasnoo Idon’t Know

      Samsung is happy to sell anyone as many components as they want.

  • Javed

    As usual, interesting observations Horace. Of all the questions you have posed, I can try to answer one: Why other Android phone makers have failed? I feel the Android story is not really about Samsung’s success. It’s more a reflection on the failure of other phone makers to change their old ways and make full use of Android by capitalizing on their strengths. Samsung has been successful because it embraced Android in totality. It hedged the bets on the platform and did some real hard work without making a few elementary mistakes phone makers like Motorola and HTC have made. I recently wrote a post on it, drawing lessons from Samsung’s smartphone success in India where it now holds nearly 55% of market share. You may find it relevant http://blogs.timesofindia.indiatimes.com/WebWise/entry/making-sense-of-samsung-s-android-success

    • Stefan Constantinescu

      Are you saying HTC hasn’t embraced Android fully? HTC’s boom was fundamentally due to Android. Then Samsung came out of nowhere and ate their lunch. For me, “Why is Samsung successful?” isn’t the interesting question, it’s “Why did HTC fall from grace?”.

      • xynta_man

        >For me, “Why is Samsung successful?” isn’t the interesting question, it’s “Why did HTC fall from grace?”.

        Easy – economy of scale based brute force with some amount of dumping, based on the fact of how big Samsung is. Samsung did the same thing with Nokia’s feature phones for years, before switching it attention to smartphones. Just look at the revenue per smartphone and compare Samsung’s number with HTC’s.

        Sure, Samsung has high-end iPhone-calibre devices ($600+ off contract) that do sell well enough, but the vast majority of their devices are plastic POS toys that are barely better than devices from no-name chinese OEMs.

      • Javed

        Well, I feel HTC is apprehensive. Yes, it grew well with Android in 2009 and 2010 but after that I feel it became overconfident and started focusing too much on Sense instead of making good phones and supporting them with timely Android updates. Just see the recent Jelly Bean upgrade fiasco. Also, we all know HTC has been particularly bad at marketing. Though I don’t know if it is because it doesn’t have enough resources or because it lacks proper marketing strategists.

      • http://twitter.com/davidchu David Chu

        “Why did HTC fall from grace?”

        I think there are a lot of reasons, such as upsetting operators by making their phone easy to root, but in the eyes of Disruption, I think they were naturally disadvantaged because they were less integrated. HTC lacks a components side to their business. Part of my theory of why they kept so many models was because they had sourcing issues for key components. (I remember a friend, back in 2010, who bid and sold lots of screens telling me that HTC was buying everything up). Add to the fact that Samsung had built it’s business to run on 15% profit margins compared to HTC 25% and it seems to me that Samsung was in a better position to take this market.

        Of course, I think the interesting questions in a couple years may be, “Why did Samsung fall from grace?”. Take a look at the market share chart. There is a scare monster named “other” that is experiencing the most growth.

      • Simon

        It’ll be very hard to beat Samsung in the hardware game as they have an absolutely monster scale for manufacturing and very fast iteration for their products. Companies like Huawei and ZTE might eventually come close but they’ll need a big help from the domestic Chinese market and Samsung is doing very well in China as well.

      • http://twitter.com/davidchu David Chu

        I totally agree that they are a monster right now. The question is if they can move up the value chain once ‘good enough’ hardware becomes abundant. We see that they are trying. Even if their “Siri” clone isn’t that great, it’s a signal to me that they also think that software is where value will be created in the future.

      • Simon

        Samsung also has a ton of expertise in building the bottom of the barrel low end feature phones too so I don’t think they’ll have trouble making cheap smartphones.

        At that point they’ll just wait for Apple or another innovative company to show them a new market and will “fast-follow” the leader. That’s how Samsung rolls.

      • http://twitter.com/davidchu David Chu

        I get where you are coming from. What I would ask is, where do you think Samsung is going to invest it’s profits? Is it going to invest it in building up it’s infrastructure for it’s higher end phones where it makes the most money? Or is it going to invest it in it low end phone lines? Historically, it is easier for companies to move up the value chain than to move down. Case in point. Almost every big brand such as Sony, Apple, Microsoft, Toyota, etc., all got their start as low-cost entrants into the market. Sony with cheap portable radios. Apple + Microsoft were cheap workstation alternatives. Toyota was cheap fuel efficient cars. As they matured, they pushed upmarket because that’s where they saw money. This is all part of the Disruption Theory. I highly recommend that you read the book, “The Innovator’s Dilemma”.

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        “What I would ask is, where do you think Samsung is going to invest it’s profits?”

        If they’re smart they’ll invest some of their profits in improving their software / cloud services they’re very weak at or, ideally, completely buy the licensing rights for Android since they’re pretty much the only ones making any money off of it.

      • obarthelemy

        That’s an interesting possibility. Would Google be willing to offload Android, with safety nets regarding their access to the platform and guaranteed preferential treatment for search and tracking ?

        Too risky, I think.

      • http://twitter.com/handleym99 Maynard Handley

        “Samsung also has a ton of expertise in building the bottom of the barrel low end feature phones too so I don’t think they’ll have trouble making cheap smartphones.”

        The ability to make cheap worldwide phones gets you into the position Nokia is in today. Volume means nothing without pricing power.

      • Common Man

        Wow, its great to see people making comments without respecting markets and costumers

        Stupid Question: Why Android has failed ?
        Ans: Latest Gartner numbers show that they are no 1 with over 50% of the market. The next nearest OS is 1/3rd their size. Should we first define definition of “Failed” ?

        Comment: Vast majority of their devices are plastic POS toys that are barely better than devices from no-name chinese OEMs.

        Counter Comment: How come, all the ODMS/OEMs in china (100+) combined with currency and strong low cost manufacturing advantage do not match the numbers with Samsung ?

        Galaxy S2+ Note + Galaxy S: Within them, 50 million sold.
        Galaxy S3: Already 30 million sold
        Galaxy Note 2: More than 3 million sold

        If it is so easy to make plastic boxes and sell millions, why rest of the smart world is not doing it ?
        Are you saying that apprx 100 million customers out there are fools and subject to your commentary ?

        Guys,
        Passing judgment is one thing ..Passing judgment which makes sense with market numbers is another..! Do we see a disconnect here ???

        For those who have used the Galaxy S2, Note, S3 etc know that there is no better phone available in market. They are simply the best.

      • xynta_man

        >Counter Comment: How come, all the ODMS/OEMs in china (100+) combined with currency and strong low cost manufacturing advantage do not match the numbers with Samsung ?

        It seems that you missed the “Other” segment in Horace’s charts.

        Those OEMs sure do have the numbers in terms of phone market share, even more than Samsung. They certainly don’t have the same big market share in smartphones, but IMHO that’s more a question of when, not if.

        >Galaxy S2+ Note + Galaxy S: Within them, 50 million sold.
        >Galaxy S3: Already 30 million sold
        >Galaxy Note 2: More than 3 million sold

        So what? I already said that Samsung does know how to sell make and sell high-end devices, but those 50 million devices are peanuts, when compared to Samsung’s entire smartphone sales. Their smartphone sales are made by devices like the Galaxy Ace Plus, Galaxy Ace 2, Galaxy GIO, Galaxy Y, etc, i.e. super-low-end cheap devices.

        >Are you saying that apprx 100 million customers out there are fools and subject to your commentary ?

        They aren’t fools, they just don’t want/can’t afford to spend $650+ on a smartphone. Most people are price conscious, at least to some degree. Operator subsidies in US pretty much negate this, but there’s a whole world outside of US, where price competition in smartphones is a real thing and cheap smartphone outsell expensive ones by a long shot.

        Samsung currently sells many cheap smartphones, but even their cheap smartphones are starting to be viewed by some people as “expensive”, simply because they are comparing them with even more low-end ones from no-name and semi-no-name chinese OEMs. That’s a future (3+ years) problem for Samsung.

        >For those who have used the Galaxy S2, Note, S3 etc know that there is no better phone available in market. They are simply the best.

        I have used them and can’t agree with you. They sure do have their good sides, yes, but simply the best? No way.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        I have used a GSII. There are many many better smartphones on the market.

        But the question was not “why Android failed” but “why Android failed with all other vendors except Samsung.”

      • obarthelemy

        But it didn’t fail others.

        What would HTC have done without Android ? They do have Winphones, which don’t sell. Should they have joined w/ Nokia on Symbian and Meego ? Rolled their own ? Bought WebOS ?

        HTC is still there, and still making money. Mainly thanks to Android.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        Are you saying HTC is an example of “success”?

        HTC is far from a picture of health. Personally, I find HTC an amazing story where a company did product mis-steps, have seen substantial decreases in unit sales, revenue AND profit in a market that is growing by leaps and bounds. HTC’s biggest mistake, IMO, was forgetting the carriers were their customers and not the end users. When they publicly announced they were no longer going lock their boot loaders, the geek crowd of their end user base rejoiced. The carriers stopped carrying/pushing their product. Since the hard-core Android community represents a small fraction f total units sales, unit volume plummeted.

        And they have maintained being profitable. Compare this to SE (now just Sony), LG, Motorola (now Google) that have been posting HUGE losses. Impressive. I will be very surprised, however, if HTC can post a profit next quarter.

        I think it is very fair to say only Samsung, with its highly integrated vertical IP/production stack, is the only successful Android vendor at this point. NOTE: Apple also has a highly integrated IP stack (even much more so than Samsung) but relies on others to actually produce their designs (designs you hold in contempt and being meaningless and without value).

        There is no guarantee these companies would have been better or worse off without Android. Also, Palm may still be alive. Or dead. I do think Android did push Apple faster in both development and deployment to multiple carriers. So Apple may have moved slower allowing Symbian and WinMo to provide a viable profit stream for these companies. Tough to guess but it is clear Android was no savior to most of them.

      • obarthelemy

        Apple and Samsung are the only 2 successful *smartphone* vendors, whatever the OS.

        What I’m saying is that Android has *helped* HTC, not hindered them. If they hadn’t jumped on the Android bandwagon, HTC’s situation would probably be even worse, for the exact same reasons you cite, but on top of that you’d have to take away Android’s apps and content, a nice OS; and tack on a lot of development expenditures.

        Look at what is happening / has happenend to the non-andoird players: Nokia, RIM, Palm. Isn’t HTC faring better ?

      • obarthelemy

        That one is fairly easy: they lack any distinct competitive advantage. They source everything from outside the company, all the software, all the hardware.

        They had early success because they’re nimble, but then the Samsung juggernaut started to squeeze them out. They responded by all the wrong moves:
        – building Sense, when everybody prefers quicker updates to top-heavy skins that delay them
        – to the point of adding an online version of Sense, whene everybody prefers to use DropBox and co and share with friends
        – partnering with Beats audio, whch is a marketing wonder but basically, junk.
        – letting go of their core “power users” market to chase the general public, pissing off the first ones and not making a mark with the second
        – failing to develop any kind of relevant value-add. Nokia for example have a nice screen tech that diminishes reflexivity, Maps, top notch cameras. HTC could have gotten one of those. Or stuck witch with doing only “Nexus” devices, and rolled out updates before everyone else
        – let go of the design identity. HTX used to be metal, solid, heavy. They switched to plastic, which would be a good move in a vacuum, except Samsung was already there.

      • simon

        Those are mostly just concerns of a few users that have little consequence in the actual mass market. Touchwiz didn’t slow down Samsung’s sales and while Beats audio didn’t help, it doesn’t hurt the sales of HTC phones at all.

        Vanilla Android sells better is a myth that has been thoroughly proven to be wrong in the market yet it’s always repeated ad-nauseam online. At the end, like xynta_man said, it comes down to the incomparable marketing, distribution channel push, and the economy of scale combined with the hardware advantage.

        Also it helps greatly that compared to HTC Samsung has a great loyal domestic Korean market that’s very profitable. Even when Samsung wasn’t doing great, the domestic market kept supporting the company, which also helped LG and Pantech to stay afloat in recent quarters.

      • obarthelemy

        - Are you saying customers don’t like timely updates to their OS ? Where’s your proof ? Customers might like fancy widgets (though Apple’s success belies that), which can be made available without touching the OS. Ditto for system tools. Sense and its ilk made… sense… back in Windows Phone days. It no longer does.

        – When you’re a small company, every investment that doesn’t help, hinders. That goes for Sense, Beats…

        – There’s something to be said for cultivating a user base, HTC had power users. When I switched from my HD2, if HTC had had a competitive handset, I’d have stuck with them, since the HD2 was the first phone in ages I’d been utterly happy with. Or even just plain happy. Or just not pissed at. Alas, they got behind on screens, and are now nixing the SD slot, big no-no for power users.

      • simon

        - All Galaxy phones have been lukewarm sellers. Samsung failed to live up to their update promise in some of the earlier phones such as Behold 2 and T-Mobile Vibrant, but customers kept buying sequels.

        – HTC has had Sense for years, even before Android was popular. Again, if Sense was that bad why is Samsung selling well with its Touchwiz?

        – OK so no poweruser buys Nexus phones that don’t have SD slot?

        The point is that none of the points you brought up is really relevant when it comes to phones that sell millions and millions. That has more to do with general distribution, marketing and design, not whether they update their phones to 4.2 or 4.1 or they have 512MB extra RAM.

      • Simon

        The first line should be “All Nexus phones” not “All Galaxy phones”

      • http://www.facebook.com/profile.php?id=100001578926066 Coward Anonim

        Price, price, price.

        Samsung, HTC did not make so much big impact in US as elsewhere, because US market is not so much sensitive to price. And for those who have money Samsung has got Galaxy.

      • obarthelemy

        - kept buying not because of broken promises, but in spite of them. Nexus phones are not supposed to be high sellers, I’ve answered that at length somewhere else in the discussion.

        – And Sens made Sense to hide the monstrosity that was Windows Phone, and earlier version of Android. It just no longer makes sense now.

        – Nexuses having a SD slot would be remove a strong barrier to purchase. Most of the negative comments are about SD (and LTE for the 4)

        I agree that the out of box experience is more important than updates or secondary features. That doesn’t mean those aren’t important though.

      • http://twitter.com/snookasnoo Idon’t Know

        HTC never had an android boom in terms of profits. Far from it.

    • Peter Daly

      For years, Samsung has been building a top tier single product brand (the Galaxy S), where HTC spent years releasing a random spew of products with seemingly random names and branding.

      Would Toyota have the same brand loyalty if they released 5 mid-size cars a year, then followed up at the next buying cycle with 5 new mid-sized cars with 5 new names? HTC seems to finally have (mostly) gotten their act together, but I wonder if it may be too late.

      Samsung developed (and supported) a solid phone with the original Galaxy S, used their muscle to get it launched on a huge number of carriers, then backed it up with solid brand management and top tier product quality.

      In the US, Motorola is a success as a product company (even if their business itself is a mess), with the Droid and Droid RAZR line on Verizon. Motorola’s problem may be that their core business is build on the back of a single US carrier. They have high market penetration and consumer loyalty in places where Verizon is the leading carrier. Where I live, I’d guessing the RAZR line is more popular than iPhone.

  • FalKirk

    “Why isn’t Google successful with Android?”

    My short (and shallow) analysis.

    1) Google attempted to duplicate their search success on mobile.

    2) Search does not work on mobile the way it does on the desktop, mostly because the screens are too small, but for a myriad of other reasons as well.

    3) Apps are much more popular on phones than anyone could have anticipated and apps cannot be “crawled” and monetized by Google’s web crawlers.

    4) Android owners simply do not buy content or consume advertising the way iOS users do. This completely turns market share numbers on its head. Developers, retailers and advertisers do not chase the customers – they chase the money.

    5) Why Android owners do not buy content or consume advertising is a bit of a mystery. There are many theories and few answers. I just want to make this point. Not consuming content or advertising does not make Android owners bad people – it just makes them bad customers. I am a terrible customer for some products and a great customer for others. Android seems to be attracting customers who do not serve Google’s purposes. This is probably because the phones are inexpensive and the Google Play Store is hard to access and full of clones, pirates and viruses. Insert your pet theory here. No matter the “why”, the result is clear. Until Google can attract a different clientele or change the buying patterns of their existing clientele, their massive market share numbers will mean little.

    • http://twitter.com/davidchu David Chu

      5) Why Android owners do not buy content or consume advertising is a bit of a mystery.

      This is an interesting question. I’m trying to look at it through the eyes of Jobs-To-Be-Done. I think a possible factor is that the “push” or the environmental factors that motivate a consumer to search for a solution are totally different when a person is on a mobile versus at their computer. Perhaps the issue isn’t that Android owners do not want to buy content or consume advertising, but that the traditional ways of targeting and delivering ads are not effective in the mobile context. For example, when people are on their phones, they maybe in more of a rush so that great web copy that you wrote might not convert them on mobile. There is probably a big opportunity somewhere here.

      • FalKirk

        I can recommend two articles that discuss the difficulties associated with mobile advertising and monetization. I think the New York Times article is particularly insightful.

        One irony is that advertising works best with tablets and tablets are where Google and Android are at their weakest.

        http://www.nytimes.com/2012/09/16/technology/smartphone-ads-and-their-drawbacks-digital-domain.html?_r=2

        http://mashable.com/2012/11/12/mobile-advertising-headache-marketers/

      • http://twitter.com/davidchu David Chu

        Thanks for the articles. If you look at it through the eyes of Disruption, it looks like there is an abundance of cheap mobile advertising. The person who can make sense of it all is probably going to be a billionaire. In my mind, it probably will require some other tech to become abundant as well before it can truly be leveraged. Exciting times.

      • FalKirk

        “The person who can make sense of (mobile advertising) is probably going to be a billionaire.” – David Chu

        Agreed. Everyone is trying to crack this “nut”. That probably means that the solutions – if there is one – is going to be something totally different than what we think – and therefore totally disruptive to existing models.

      • KirkBurgess

        I really didn’t see the potential until this very second. But Facebook suddenly hit me as the most likely victor in mobile ads – it’s on virtually every phone (since its platform agnostic) – it knows your “likes” – it knows your friends likes – and it usually knows your location.

      • http://twitter.com/davidchu David Chu

        It’s actually much deeper than that. I think the “sharing” function of Facebook and Twitter has the potential to really disrupt mobile and local advertising. Think about it this way. Instead of actioning ads based on keywords, you auction ads for the attention of people who are ‘hubs’, who are very connected people. I think this might be the key for local and mobile advertising where someone in your social graph is a better reference point than “star ratings’ and where content is structured in smaller packages.

      • stefn

        Aren’t Android users a self selected group comprised largely of those who believe in free lunches, aka Android? Free is conflated with open. Open with good. Good with Google. Add to it the anything but Apple, old PCers group. Not a big buying bunch.

      • http://twitter.com/davidchu David Chu

        I think that’s a dangerous assumption and I think that the vast majority of Android users don’t care what OS is running. I would more readily point at issues such as limited or confusing payment options, previous bad app experience, multiple stores, or lack of storage as reasons why Android users don’t buy apps before I consider them to be out for a free lunch.

      • shaneblyth

        most Android users dont even know their phone has an Android OS on it. As someone said there’s a tons of cheap phones sold and it’s near impossible to buy a non smart phone these days so a vast number of people are just calling and texting playing a song or 2 have no data plan at all. They’re joe average who just wants a phone and not a smartphone. So Android share is massive as no one makes non smartphones now.

      • http://twitter.com/davidchu David Chu

        I agree with you except for one point. I’m not sure that most people aren’t aware of Android. If you asked me a year ago, I would have agreed. But without some type of study, I don’t think one can make that assumption. Things change and Google has done a great job promoting Android.

      • JohnDoey

        The majority of consumers do not know what an OS is. I’m talking about like 90% of humanity. Tey cannot conceive of what the hell you are talking about.

        But they bought a phone.

        Where do you want them to go from there? Google School?

        “OS” is a part. That is technical jargon.

        Even iPhone users, who had to seek out an iPhone in most cases, do not know what iOS is or what it does. They do not know what an OS is. Even iOS is too technical in some ways because Apple is a PC maker, they are actually very computery.

        It took many years for Apple to teach consumers iPod+iTunes, App Store, iPhone, iPad, iPhoto. Nobody else is doing anything like that yet they are amazed they don’t get the same results just handed to them.

      • stefn

        Too computery. Really? Apple? Mac. iPod. iPad. iMac. iPhone. Let me count the ways in which other companies actually created “computers for the rest of us.” Uh. Zero.

      • stefn

        That’s all good and maybe valid. But the rip on Apple forever has been that its devices are expensive. And that meme has in fact passed into the popular understanding. I still hear it all the time from folks who know nothing about OSes. So I maintain that it’s a select group of folks for whom price is paramount; quality not so much.

      • http://twitter.com/fivetonsflax fivetonsflax

        I think it would be a mistake to assume that Android users bought Android. I suspect that most of them bought phones. The Android users who specifically chose Android are more similar to iOS users than those who didn’t.

      • stefn

        I’m actually saying most Android buyers bought on the cheap, for whatever reasons.

      • JohnDoey

        The question is not why Android users don’t buy content, it is why iOS users do buy content? That is what is amazing.

        Apple has been selling digital content for 10 years now, and the ISO MPEG-4 container is the Apple QuickTime file format, which goes back to 1992. And Apple is the largest volume video editing tools vendor. The iPod maker. Apple has a lot of cultural history that makes me inclined to trust that the $10 I give them for a music album will go almost entirely to the content producer and will result in me being able to listen to that album on my Apple devices over the next 35 years of Apple’s history, because for the first 35 they were the oldest and longest-running PC maker while others came and went. And Apple has over $100 billion in the bank and is managed by geniuses.

        Nobody else did anything like any of that stuff, but they expect consumers to pay $15 to watch a movie on their phone.

        And also, there is no such thing as an “Android user” any more than there is a “WebKit user.” Those are open source software components you get with a device. The user did not choose them. They chose a Samsung or HTC or Apple or other brand of phone. Trying to market to WebKit users will be essentially random. They are not a self-selected group. Neither are users of devices that incorporate the Android open source software project.

      • http://twitter.com/davidchu David Chu

        “Why iOS users do buy content?”

        I think the answer is simple. For users which that is important, they ‘hire’ Apple products.

    • RobDK

      5) Why Android owners do not buy content or consume advertising is a bit of a mystery.

      It is pretty obvious really. The vast majority of currently sold Android devices are small and underpowered, running v2.1 and the likes. They have crappy interfaces, are difficult to use, and of poor build quality. See this Samsung model, still being sold by 3 in the UK:
      http://store.three.co.uk/view/product/ql_catalog/threecatdevice/2323

      This will never be used to surf the net, buy apps, etc. Yet Samsung and Google claim it is a smartphone, on par with the iPhone 5’s pattern of usage…. It is a scandal. I do not understand why some bloggers have not called their bluff in this obvious deception.

      • http://www.facebook.com/profile.php?id=100001578926066 Coward Anonim

        “The vast majority of currently sold Android devices are small and underpowered, running v2.1 and the likes.”

        Root cause? Price, price, price. The reason people do not buy content is the same one why they like openness and interoperability of Android. Easiness of getting contents from other sources….

      • Robert Jakobson

        but the truth is that they do not consume content even if it is on the web for “free”, excluding network charges. Android users are less content aware or, I would dare say, less culturally or otherwise literate as are iOS device users. This obviously is a subject of a dissertation on it’s own.

        Android stands for practicality and price, iOS devices stand for consumption, life-style, quality of life and breadth of experience.

      • http://www.facebook.com/glennslender Glenn Slender

        Android users are less literate than iOS users? Man you are really drawing a long bow there… ROFL. You’re hilarious

      • Robert

        yes, the breadth and quality of applications developed for iOS plus the enormous size of all mobile traffic coming from iOS as compared to other devices when taking into account the amount of devices sold points to that conclusion of people who buy iOS devices being more literate both culturally or otherwise.

        Why are you laughing at an argument based on the above mentioned facts? Horace and other analytsts or commentators are much too polite to point that out but that is the implication of all of their research.

        We are not comparing different nationalities or cultural backgrounds, so no feelings ought to be hurt. It is simply the data which shows, since the launch of the iPhone in 2007 – for over five years, that regardless of ethnic or cultural background — users of iOS devices consume more content, download more paid, meaning, higher quality apps, both by an order of magnitutde..

        Remember, it was the users of the iPhone that started to demand higher quality native applications not the engineering-design community, not Apple – both of which wanted to promote web apps or engineers who wanted to promote java, etc..

        I seek to emphasise the revolutionary force that the early adopters of the iPhone platform have had to how we consume content on mobile devices and how we use the mobile devices themselves.

        the mobile revolution is more of the revolution of these highly culturally literate, intelligent human beings who have bought into the iOS eco-system than it is of corporations like Apple.

        For all it’s bravado about being community driven – the Android eco-system did not change the world with apps – the community born around iOS did that. Not Apple, not Android, not Android’s advocates, not Apple fanboys.

        You want to imply that I am an idiot for taking into account the differences between the clients of iOS and Android ecosystems and what role they have played and will play.

        But in reality it is idiotic to go for the mirage of the cheap joke, which I hope made you feel better, than really trying to understand how differentt people use mobile devices.

        thank you.

      • Ken

        The way Glenn replies proves Robert is exactly right.

      • http://www.facebook.com/glennslender Glenn Slender

        I’ve also read on the net that IE users have a lower IQ than other browser users. LOL

      • Robert

        you misunderstand completely what I am saying — going for the low hanging fruit and the knee-jerk reaction to score imaginary points in your head. That you can’t think along is to your own loss.

        consider the following- the practicality and pragmatism of Android devices does not mean that they are for lower IQ people. The Kindle devices, which are meant for reading books, run on Android so that is not what I am saying here.

        But the Kindle is a purposefully limited and purposefully cheap device, sold at a loss or break-even. It does not signify anything new culturally or otherwise — rather it is a culmination of what people have aspired to have in their hands for decades for a cheap price.

        The same is true for newer devices like Nexus 4 and so forth – they do not mean anything new, they do not create their own mark, rather they seek to fulfill a need that iOS devices have developed in users.

        Thus, the iOS ecosystem and the people who buy into that are culturally signifcant because in that ecosystem the desires, the needs, the aspirations, the patterns of behaviour are developed which will lead the Android users towards new definitions of practicality and ease-of-use – the need of which Android device makers and Google can fulfill better or rather more easily with a cheaper price point than Apple.

        Thus, Android is more practical, cheaper than Apple for people who do want to develop their needs or the culture that surrounds them.

        A significant reason to buy an iOS device is that people can shape their own future by engaging with content that matters, which is otherwise inaccesible or accesible in inferior ways. That makes them more culturally or otherwise literate than Android users.

        Therefore, I thin, Apple is mistaken in thinking it is a leader in terms of products, it is a leader in terms of serving a community, a community now 400 million or so strong.

        Android is the price leader
        Nokia/ Windows 8 is the product leader
        Apple is the service leader.

        does that sum it all up to you?

      • JohnDoey

        “Smartphone” is a made up marketing word. Everything after it is meaningless. Only phones count in the phone market, at various price points.

    • Tatil_S

      5) Why Android owners do not buy content or consume advertising is a bit of a mystery.

      Umm, I am aware of evidence that Android users not purchasing apps as much as iOS users, and mobile advertising in general is not as lucrative as desktop, but is there data showing that Android users do not consume advertising as much as iOS users?

      • GeorgeS

        Tatil_S: I don’t know the current situation, but, when Google execs testified before the US Congress, they said that the company made more money from iOS users than from Android users, even though there were more Android users.

      • Tatil_S

        I don’t think it is insightful to compare advertising income paid to reach Android users in poorer countries with the ones to reach iOS users from the rich world. Comparing per user income from Android and iOS in the US would make more sense to me.

      • JDL

        They made more money from IOS than Android even though there were more Android users.

      • shaneblyth

        Android USERS, well owners that dont use the os or a data plan and dont want to

      • Kizedek

        You are not getting it.. He is not saying Google made more from the average individual Android user than from the average individual iOS user (US or otherwise). Rather, google made more from iOS than from ALL Android users combined, period. Since Android is supposed to be so far ahead in marketshare worldwide, that is really saying something… and what it is saying is not good for Android, no matter how you cut it.

      • Consumatopia

        You can’t assume that if Android disappeared/never existed that current Android users would suddenly start behaving like iOS users.

      • shaneblyth

        again cause of no non smartphones about . people by buckets of cheap androids with a pay as u go plan and this puts the share way up but in essence they arnt using them as a smart phone at all

      • Ted_T

        http://tech.fortune.cnn.com/2012/09/02/net-applications-apples-ios-web-share-hit-65-9-in-august/

        If they don’t browse the Web they can’t very well consume advertising. (keep in mind that the remaining 34% that are not iOS include all other mobile OSes, not just Android)

      • shaneblyth

        probably .. id comment and say as before the reason its down is people like my wife dont have or want a data plan she just wants to text and call and she could not find a non smartphone so got an android cheapie as she had no other choice

      • FalKirk

        “is there data showing that Android users do not consume advertising as much as iOS users?” – Tatil_S

        Yes. Opera’s mobile Q3 2012 advertising report found Apple’s iOS to be the highest yielding platform on its advertising network, with Android slumping below RIM’s BlackBerry OS.

        http://thenextweb.com/mobile/2012/10/25/opera-ios-still-king-of-mobile-ads-as-android-drops-below-blackberry-on-value-for-money/

    • Dan Andersen

      5) — Not really a mystery: Android phones are the new default phones, the great majority of which are used, at best, as mere feature phones.

      For corroboration, see almost every Internet traffic survey since the introduction of Android. The latter hugely lags iOS-sourced traffic.

    • Ted_T

      5) Why Android owners do not buy content or consume advertising is a bit of a mystery.

      No mystery: the main reason, by far, is that a majority of Android phones are being sold to consumers as dumb phone replacements and are largely being used the same as the dumb phones they replace: voice calls, text messages, taking photos, maybe as a MP3 player by more advanced users.

      • Nokuchikushi Tekukuno

        Exactly, not much of a mystery at all. Most Android users I know do not even have a data plan, or a contract (I live outside the US and pay-as-you-go plans are more popular than contracts). When you’re putting $5 or $10 dollars at a time on a phone, there’s not much you can do with data even if it is turned on. Much of the world operates this way. Those who can afford data plans and contracts have iPhones, but Blackberries are still very popular because contracts and data plans for Blackberries are half those of an iPhone. Still, 9 out of 10 Android users here almost never go online except at a hot spot.

      • http://www.facebook.com/profile.php?id=100001578926066 Coward Anonim

        Yep. Price, price, price…

    • symbolset

      Profits are not a direct purpose of Android for Google. Android’s direct purpose is to save Google from being locked out of closed platforms during the mobile revolution. If it makes money that’s nice, but that’s not what it’s for.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        Of course Google did Android to make money. They spent 12.5 billion on a company loosing 1 billion per year to protect that profit stream.

      • FalKirk

        “Profits are not a direct purpose of Android for Google” – symbolset

        Does anyone get cut more slack than Google? OF COURSE Android was designed to make profits. It was designed to transfer Google’s successful desktop model to mobile.

        And how exactly does it help Android to not be “locked out” of a market where they they have no prospects for making any money?

      • Tatil_S

        More slack than Google? How about Amazon? :)

      • FalKirk

        You are absolutely correct. The slack that Amazon gets is simply amazing.

  • http://www.isophist.com/ Emilio Orione

    “indications are that “mobile” is causing a contraction in Google’s margins”
    Could that be caused by maps profits decline since the introduction of iOS 6 with apple’s map app and the introduction of siri that allows more search without google’s server? or is it a Motorola effect?

    I have other questions about the implication of samsung trajectory. What if Samsung forks current android and release an upgrade for all of its phones with this forked version that will use samsung proprietary services? Could Samsung make google irrelevant in mobile with just one move? What is the force balance between samsung and google now? Perhaps samsung does not need to buy google, it just needs to dominate it.

    • FalKirk

      “”indications are that “mobile” is causing a contraction in Google’s margins”

      What seems to be happening is that a) mobile is eating into Google’s more profitable desktop business and b) Google has been unable to find a way to monetize mobile.

      It’s akin to the idea of what happened to print advertising. They mantra was that moving from print to digital was giving up dollars for digital dimes. Even now, Google’s numbers are bigger than all of prints – newspaper and magazine combined. But their numbers still aren’t half as large as print was prior to Google and digital advertising coming on the scene.

      Google’s advertising has to migrate from the desktop to mobile as users eyeballs migrated from desktop to mobile but mobile simply isn’t paying nearly as well as desktop did. And that’s a problem.

      • http://www.isophist.com/ Emilio Orione

        That’s a problem really good point.
        Google can not do apps that violate apple’s policy and apps seem to be the vehicle for mobile advertising and in the same time apps are not what android’s customers want.

      • Tatil_S

        The other half of print advertising disappeared due to Craiglist (and to some extent eBay). It almost single handedly destroyed classified advertising business for newspapers, without making much money itself. I don’t see a similar mobile advertising business who is going to “altruistically” take away Google’s income. Transition from desktop heavy net surfing to smartphones may not be as destructive.

      • kibbles

        the screen size of mobile is what’s cutting into google’s ad sales. theres far, far less of it. you cannot publishes inches of ads on a 4″ screen.

      • unhinged

        There’s a fascinating article at counternotions: Is Siri Really Apple’s Future? The issue with advertising in mobile is that the traditional model is geared at people browsing the web – spending “edutainment” time. Mobile is more about directed tasks; the inefficiency of the traditional advertising approach is too great a proportion of the time available.

  • Peter Daly

    “Why isn’t Google successful with Android?”

    I’d argue they are. Google is playing the long game, and Android is a defensive move.

    Google has built quite the moat that protects other vendors from being able to control the mobile ad space.

    If iOS had huge dominance in the market, and iAd had not a horrible failure, the mobile ad space would look much different today.

    • obarthelemy

      Seconded. Google are at least allowed to compete in the 75% of the smartphone market that uses Android. The proprietary platforms (iOS, Windows) make that much harder for them, and might even completely lock them out at any time.

      Android is a “cost of doing search business” move. Not a profit centre.

      • http://www.isophist.com/ Emilio Orione

        Nevertheless Horace has shown in a past post that google earns more money from its apps in ios that from the entire android ecosystem.
        Why google could not remain with apple and earn money with great apps that apple would be happy to have?
        They were happily together with google ceo in apple’s board. Apple did not want to battle against google they would be happy to leave to google what google is good at doing, search, maps etc…
        Google choose to go against apple and are now loosing money for that choice, it was not a defensive move, it was aggressive, they wanted to win against apple not defend from a dominance.
        Documents in google trial with oracle prove what I am saying, they believed to win and put apple out of business nothing less.
        Now that they are paying the consequences and apple is trying to put them out of iOS is easy to say they were defensive, they were not.

      • obarthelemy

        There was a long-term risk: Apple was/is clearly trying to grab every piece of revenue generated by their customers: hardware, software, services…. and on top of that, blocking competitors from its platform.

        Since Mobile is seen as the next PC, Google could not stand idly by letting Apple grab a significant share, them lock them out of the search business.

        Mission accomplished ^^

      • Tatil_S

        “and on top of that, blocking competitors from its platform.”
        Definitely. If it was not blocking competitors so blatantly, we would have had Netflix app for streaming movies, Amazon Kindle app for reading ebooks, Google app for voice search, Mapquest app for maps, TomTom and Navigon apps for navigation, numerous photo editing apps from Adobe… oh wait…

        Android gives Google reach a vast market that Apple is usually not interested in serving. It is definitely good overall that Android exists for consumers. Depending on how much money Google makes out of that market and how much it spends on Android development, it may have been a successful strategy financially, but I believe buying Motorola, which cost them more than a year of profits from all of Google, not just mobile, was a costly mistake.

      • simon

        Nobody has mentioned this yet Android had little to do with Apple. It was Google’s response to Microsoft because Google knew Microsoft is the one who might lock Google out if Windows Mobile gets popular. Nokia and others did the same thing with Symbian.

        But let’s face it. Financially Android hasn’t been all that great for Google considering how much money they sunk into Motorola. In fact even without Motorola Android’s benefits might be questionable given Apple already has Google as their default search engine as with Symbian. But even Google couldn’t predict how Microsoft would’ve failed that badly.

      • Tatil_S

        If Google did not compete directly against Apple, I don’t think Apple would try that hard to lock it out, so the moat becomes a bit of a self fulfilling prophecy. In the end, it still may be better in the long term to have a moat, but buying Motorola takes it to a different level. When your moat needs a moat, it calls your tactics, if not strategy, into question.

      • obarthelemy

        Except Apple gets to decide who is a competitor. The minute they choose to move into search and ads, which they were bound to do, Google becomes one.

        Android is a defensive move by Google, so that whatever Apple does on their platform only impact as few as possible. With now 15% share in smartphones for Apple, they’ve succeeded for now.

      • Tatil_S

        Hence, the justification for a moat, “just in case”. I suppose upper management love these types of strategies. Even if the company loses money and poisons relationships with partners, you can call it a success, because it can be claimed to provide security for the nebulous future. If the company fails to capture market share, management could claim they were not trying all that hard, they were just trying to gain leverage. There is almost no way such a strategy can be called failed. $12.5 billion for Motorola, $8.5 billion for Skype, no worries, no need to use arithmetic for definition of success. Three years down the road, management can always spin the write-off as “paper loss”, even when the transaction was cash based at the time of the acquisition (see MS acquisition of aQuantitative).

        I would not take survey based third party estimates of market share data very seriously. You can compare such US market share data for with official reports of sales by the carriers. I cannot imagine why those numbers would be more accurate for global sales than they are for the US.

      • JDL

        Rubbish, Google bought Android before Apple released a phone, Google styled it on Blackberry. Android had nothing to do with what became the iPhone. Google knew Apple was building a phone and chose to fight in the same market while partnering with Apple. There was nothing defencive about it.

    • FalKirk

      “Android is a defensive move” Peter Daly

      How is this a defensive move? Apple has all the hardware profits (north of 75%) and Google makes two-thirds of its mobile income via iOS. Who exactly is this defensive move defending against and how exactly is it supposed to be working?

      • Noah Berlove

        Android was started in 2003 and bought by Google in 2005. If it was a defensive move by Google, their perceived threat was probably Microsoft, not Apple. Providing a free OS to OEM’s has certainly impacted Microsoft’s business model. I do not think they anticipated that the platform war would ultimately be between Android and iOS.

      • FalKirk

        Totally agree. But what defensive purpose is Android serving now?

      • Walt French

        The best defense is a good offense. ;^>

        Not that I think Google’s scattershot efforts are “best” in any sense other than most voluminous. But they ARE roiling the waters for ALL the other players in the game. That keeps bringing more business their way.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        I agree with you Android was a response to WinCE and a bit of RIM (funny in hindsight).

        I found it genius how Google white-washed the purpose of Android from being defensive against WinCE and shifted the conception of Android to fight the “evil Apple Empire”. This shifted a huge number of tech people to see the iPhone as “evil” and Android the “white night”.

      • Dan Andersen

        You may be correct, Noah, but Eric Schmidt joined Apple’s Board of Directors a mere 12 months after Google acquired Android. He could have become aware of Apple’s plans at that time.

      • http://twitter.com/Yogi Jonas

        It’s a defensive move against Apple having a monopoly on the operating systems of the future. Sure, Google makes money off iOS now, but you can already see how Apple is trying to ween itself off of Google’s services, removing Maps and Youtube as stock apps. I hear Maps was one of the cashcows for Google. Well no more.

        The counter-argument is that Apple is fighting back, but would it have been a better bet for Google to just hope Apple used their services in perpetuity? I don’t think Apple has the cojones to try going the Maps route with a search engine, but you don’t think they would if they could?

        And for the record, Apple is just the current “enemy” as Google obviously recognized that mobile was the future before Apple even entered the game.

      • FalKirk

        “… would it have been a better bet for Google to just hope Apple used their services in perpetuity?” – Jonas

        It appears that it would have been a better bet although it may have required 20/20 hindsight glasses to have known for sure.

        Yes, Apple is leaving Google services behind, but it’s taken them years and years despite the fact that Apple and Google are now mortal enemies. Do you think Apple would have ever left Google maps behind if they had not felt that they absolutely needed to?

        And, it turned out that iOS rather than Android – and tablets rather than phones – are the better platform for monetizing mobile. The fact that Google is at war with the one and only platform that is making them money in mobile is an irony that most have not yet come to recognize.

      • http://twitter.com/WalterMilliken Walter Milliken

        I think Apple might indeed have left Google maps eventually, though this a belief based on my perception that Apple has a bit of a user-privacy fetish, probably inherited from Jobs. Google’s business model inherently is anti-privacy, and they grab every scrap of data they can. Map queries contain a *lot* of useful data, and Google apparently was pushing to get more. At some point Google pushing location-based ads in the faces of Apple’s users was going to go become a real problem.

      • Walt French

        I think we’ve gone over the idea several times now, that Android was at first a tactic to cut the profitability out from under Windows Mobile, to prevent Bing from taking over mobile search.

        Obviously morphed quite a bit since the iPhone actually did their work for them.

        But I don’t disagree with your big premise: Google’s and Apple’s views of serving the customers depend on VERY different business models; they are essentially forced into competition. That works fine for me!

      • Dan Andersen

        @Jonas: “Google obviously recognized that mobile was the future before Apple even entered the game.”

        Not hardly. Apple was already thoroughly involved in iPhone development at the time Google acquired Android.

      • http://twitter.com/Yogi Jonas

        @Dan: I just meant that Google didn’t get into the mobile business as a response to Apple.

  • Pingback: Google vs. Samsung | asymco | Mob Tech Blog()

  • poke

    Even if Samsung can’t acquire Google, you have to wonder if it’s in a position to exercise control over Android. Google has to keep Samsung happy. This might limit what Google can do with Motorola, for example, or the degree to which Google can integrate its own services into the platform. Google must be aware that if they do something in a future Android update that Samsung doesn’t like, Samsung is in a position to simply reject it.

    • JDL

      Or even team up with Amazon, which means using Nokia maps and that would be funny and ironic on so many levels.

      • http://ARMdevices.net/ Charbax

        Amazon and Nokia maps are a joke, and so are you for mentioning those as supposed alternatives to Google’s world dominating open platform.

      • JDL

        I think you meant “world doninating licensed advertising platform” after all you can’t use Android on a smartphone without buying a license from Microsoft.

        As for jokes, here is one for you “Android is open”. OK, it’s a cruel joke. A bit like Googles mobile stratergy.

      • http://ARMdevices.net/ Charbax

        That is absolutely not true. The only companies supposedly paying secret licencing on Android (which they absolutely do not) are the exact same companies that Microsoft is trying to force into releasing windows phone and windows rt/8 devices, that all fail, Microsoft is subsidizing Android, that is the only real truth.

      • jawbroken

        In what possible way could Google Maps be considered open, at all?

      • http://ARMdevices.net/ Charbax
      • jawbroken

        So your definition of open is proprietary services and APIs that you have to pay to license? Interesting

      • http://ARMdevices.net/ Charbax

        You pay for the maps bandwidth. What do you expect, free maps bandwidth for any commercial use?

      • jawbroken

        I don’t see your point at all. In this sense, apple maps are even more open because anyone making an iOS app can use them for free.

    • http://ARMdevices.net/ Charbax

      Nobody can control free open source software. Samsung can only contribute and hope other people like what they do.

      • JDL

        Shame that Android is neither free or open.

      • http://ARMdevices.net/ Charbax

        Android is 100% open source and free, download and use it on any device without paying anyone $1 in licencing free from http://android.com you’re sad.

      • http://twitter.com/davidchu David Chu

        What he means is that it’s not completely open because you can’t contribute (the code base is strictly controlled by Google) and not all the components are downloadable (with good reason, but not “open”.) It’s not free because their are other costs that are incurred. Businesses have to factor in the costs of beings sued or the licensing costs.

        Not saying it’s a bad deal. Businesses are jumping all over it because it’s the best solution out there.

    • unhinged

      “Google has to keep Samsung happy.”

      Why? All of the other Android licensees would be overjoyed if their biggest and most successful competitor were to leave the Android game.

  • Stephen Yuen

    “What would happen if Samsung soaks up so much profit from mobile that it’s in a position to acquire Google and control the trajectory of their enabling platform?”

    Highly doubtful. Google’s two-tier stock structure allows the two founders to veto any takeover. They won’t leave until they’ve accomplished their mission to organize the world’s information, in other words never.

  • Jake_in_Seoul

    Horace, I respect you, but this is may be a case of garbage in , garbage out. Who can trust any of the numbers concerning Samsung? Why do people treat data from, say, Strategy Analytics, as independent and accurate when their press releases read like Samsung PR and they never have to disclose a fiduciary relationship? If Samsung is doing so well, why don’t they ever provide official sales figures? And why does no one ever point out that of the major phone makers, Samsung is the only one not listed in the U.S. and hence not subject to SEC accounting standards (such as they are). Few people in Korea trust Samsung’s PR and self-presentation. Why do you do so?

    • Walt French

      When life hands you lemons, make vodka martinis.

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        Vodka martinis..mmmmmmmm

    • Jared

      How do you explain the profits????? Moron

      • http://twitter.com/snookasnoo Idon’t Know

        Because they are operating income and margins not profits. Jackass. Also explain why Samsung never states profits and only reports shipped not sold. Dumbass.

      • testing

        How deep does this threading go?

      • that

        So deep

      • http://drrjv.wordpress.com/ drrjv

        Karl: There were these two fellars standin’ on a bridge, a-goin’ to the bathroom. One fellar said, “The water’s cold” and the other fellar said, “The water’s deep”. I believe one fella come from Arkansas. Get it?

        Sling Blade

        For those that don’t get it: http://answers.yahoo.com/question/index?qid=20091221195850AAzi9pk

      • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

        I do not read every financial report from Apple, but in the few that I read Apple also reported shipped not sold. The reports explain that from accounting point of view sold and shipped are practically the same thing.

        One reason I guess it would be difficult to report sell-through is that the re-sellers (e.g. operators) do not have an obligation to report that to Apple every quarter, so Apple can only get an estimate of that figure, which is not good enough for accounting.

      • Arthur LeCuyer

        Well, if you’ve read the reports then they do indeed give the actual sales totals. They always give the channel numbers each quarter, so all you have to do is look at the previous quarters channel number to determine the exact sales figure for that quarter.

    • http://www.facebook.com/glennslender Glenn Slender

      Care factor

    • Guest

      One issue nobody ever seems to discuss outside of Korean is the massive government financial support for the Cheabol, a big issue in the coming elections there. Comparing Samsung’s business vs. Apple seems meaningless because the playing field is so uneven, not to mention the different account rules too.

  • KitFR

    I think Google quickly realized the beauty of the iPhone, saw Jobs’ desire to control all aspects of the experience (and profit accordingly), and so worried about being locked out of mobile. To weaken Apple, they decided to suck the profits out of mobile hardware, much like Amazon is trying to do. For them, no pie at all is better than too small of a slice.

    Google does not need to provide search or show ads on mobile devices, at least not in the short term. They do, however, need to know what people are doing, where they are, their circle of friends, their interests, etc. Google Maps. Google Reader. GMail. Basically, Google provides services to people so as to better serve their real customers: advertisers. In the meantime, Google can try to crack the mobile experience.

    I think Apple made a grave error by not making Google a trusted partner in the mobile enterprise. Where would iOS be today without Android? Fighting off WebOS?

    • FalKirk

      KifFR, love your post. Disagree with your conclusions, but I follow your thinking and I’m looking forward to reading more.

      “I think Google quickly realized the beauty of the iPhone, saw Jobs’ desire to control all aspects of the experience (and profit accordingly), and so worried about being locked out of mobile. To weaken Apple, they decided to suck the profits out of mobile hardware, much like Amazon is trying to do. For them, no pie at all is better than too small of a slice.”

      Except their strategy did not suck the profits away from Apple.

      “Google does not need to provide search or show ads on mobile devices, at least not in the short term. They do, however, need to know what people are doing, where they are, their circle of friends, their interests, etc. Google Maps. Google Reader. GMail. Basically, Google provides services to people so as to better serve their real customers: advertisers. In the meantime, Google can try to crack the mobile experience.”

      Except that the mobile data is not proving nearly as profitable as desktop data did. Google may have 4 times the mobile share of anyone else, but their mobile services are only bringing in pennies compared to the desktop dollars.

      “I think Apple made a grave error by not making Google a trusted partner in the mobile enterprise. Where would iOS be today without Android? Fighting off WebOS?”

      I really think it’s the other way around. Google made a grave error in alienating their trusted ally, Apple.

      KitFR, intriguing analysis and a great, great discussion.

      • orcus_magnus

        So Google is still an advertising company at least from a profit standpoint. If Google is providing ads backed by its mighty data analysis prowess, isn’t the implication that when one purchases a Google ad plan, the effectiveness of the ads can be determined with a precision not provided by the old Mad Men era of media buys? With Google ads, do you as an advertiser know exactly how much bang for your buck your ads are providing? If so, how much room for profit is left for Google in their pricing? Couldn’t the price of their advertising products be driven down by the granular measure of the ad’s ROI to advertisers? Not saying this is so, but curious.

      • KitFR

        Thanks for the kind words, Falkirk, they were especially welcome after AAPL took another beating on the market.

        What follows is all too long (and perhaps a bit woolly), but I didn’t have the time to make it shorter.

        “Except their strategy did not suck the profits away from Apple.”

        Not all the profits, certainly, but every Android device sold at cost or below took something off Apple’s bottom line. In an Android-free world where Apple’s first serious competitor, Windows 8, was just leaving the starting blocks, just how successful, profitable and unassailable would iOS have grown in the meantime?

        For Google and Amazon, waging guerrilla warfare by paying to subsidize cheap hardware for consumers makes good business sense, is surprisingly cost effective, and certainly easier than meeting Apple head on. The idea is that everyone bleeds but that Apple eventually bleeds more.

        Concerning mobile ads, I suspect that Google feels little immediate pressure as long as 1) most people also keep a desktop presence, 2) no competitor such as iAd slams the door, 3) people use GMail, Google Maps et al on their mobile devices, and 4) Google can connect a freeloading mobile user back to his desktop existence, where then all that knowledge can be spun to advertising gold. Each one of these conditions has to worry Google, but the primary concern must be to never let users fly below the radar, so to speak. As long as you stay hooked on my freebies and I know everything about you, then I’ll find a way to sell you something eventually. No one has yet managed to crack mobile advertising, but Apple and Google are jostling for control of the doorways.

        “Google made a grave error in alienating their trusted ally, Apple”

        I imagine that Google felt mortally threatened by the iPhone and decided to fight back; cost was of secondary concern. Apple probably applied the screws from the beginning and this was a mistake. Neither company could be trusted for long, but a few more years of partnership would have cemented Apple’s dominance.

      • http://twitter.com/snookasnoo Idon’t Know

        It’s actually well known that Apple did no such thing.

      • Kizedek

        Your analysis might have some merit… If all things are equal and Android/Samsung are actually competing head to head with Apple.

        According to Horace, however, we are still far from saturation and participants are reaping new sales/users from non-consumption, not from each other. The “smartphone” market is still growing as percentage of overall phone market, and yet Android is also being installed on many phones that can’t really be called “smartphones” at all. Not only are sales not really taken from Apple directly, Android and Samsung are enjoying sales in areas that Apple doesn’t even compete in!

        By all accounts, feature phone users are moving to Android feature phones, then to actual Android smartphones, then to iPhone. And current iPhone users are not, and future ones likely will not, migrate to Android phones. The customer satisfaction ratings are in the iPhone’s favor. Jobs to be done are also in iPhone’s favor.

        The situation simply is not as equal as your analysis would imply. Apple always excels when the playing field is equal because it always strives to make a product that delights and delivers.

        The only “evidence” to support your analysis is the supposed truth that “open always wins” as supported by the apparent evidence that Apple lost the “PC wars” and this will be the same. Despite the fact that Apple is a dominant PC manufacturer, that the MP3 industry went differently, that Apple makes the lion share of high end laptop sales and industry profits, props up any growth in the PC industry with its tablet, etc. etc….

      • KitFR

        > The situation simply is not as equal as your analysis would imply

        I was trying to sketch out an argument, not make a comprehensive analysis. I’m in broad agreement with most of what you have written but no not feel that it negates my thesis.

        > The only “evidence” to support your analysis is the supposed truth that “open always wins”

        I never claimed that and it is really not my point. At the risk of muddying the waters, I’d say that the mobile wars can be seen through the lens of Apple punching Google where it hurts, namely access to a deep understanding of users (e.g. maps), and Google fighting back by destroying value in hardware. Google gives away GMail, destroying value in the email-providing market, and costing the company real money, but the benefits of knowing its users outweigh the costs. The prospect of Apple dominating the future must have felt like an existential threat. If Google could swallow the costs of mailing free Android phones to everyone in the world, I think they’d go for it. Apple battles in a market where products only have a shelf-life of a few years; advertising is forever. Apple is always fighting to carve out an uncertain future, whereas Google is fighting to ensure a future that seems to stretch out indefinitely Different markets come together in mobile in ways they did not on the desktop, and giants like Apple, Google, Amazon and Microsoft are waging asymmetrical warfare. Straight up comparisons like wondering whose map application is superior cloud what is really going on.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        “I imagine that Google felt mortally threatened by the iPhone and decided to fight back;”

        I agree with this statement but I think you are missing the target Google was threatened by: MicroSoft. At the time, WinMo was one of the dominate mobile OSes (that and Symbian) and growing stronger every month. MS had a very unhealthy online service with what is now Bing but both MS and Google knew mobile was the future.

        Android was purchased as a defense against WinMo becoming a dominate player and Google never foresaw the strength iOS would have in the market until after the iPhone had been out for some time. The biggest mistake Google made was making Apple a mortal enemy when, up to that point, both had been joined as an ally against the common foe MS.

        It was not until the 2010 Google I/O that Google retconned the threat as Apple’s iOS.

    • Walt French

      @KitFR wrote, “[Google does], however, need to know what people are doing, where they are, their circle of friends, their interests, etc. … so as to better serve their real customers: advertisers.”

      and also, “I think Apple made a grave error by not making Google a trusted partner in the mobile enterprise.”

      I’m not sure that it’s in Apple’s DNA to trust any other firm with its customers, at least not since the bad blood over Adobe’s efforts to convert Apple users to Windows, about 20 years ago.

      And Google’s business model, as you neatly put it, seems inherently in conflict with Apple’s.

      So I think you contradict yourself here.

      • KitFR

        I’m not sure that I see any contradiction, but I do admit that Apple and Google were likely to clash at some point. From Google’s point of view, not having proper access to a mobile platform would have been a grave strategic risk. From Apple’s point of view, and with hindsight, having a few more years of smartphone dominance would have been invaluable. Although it probably did not seem so at the time, Apple had more to lose.

      • Walt French

        I think it’s a contradiction to advocate partnering with a firm that wants to coöpt your way of doing business with your customers. You can just never get your interests

      • KitFR

        Let’s not forget that Google had search, maps and YouTube on the original iPhone, so they were partners. Still, Google obviously saw some danger and decide to spend vast amounts to counter it.

      • http://www.facebook.com/tony.lombroso Tony L’Ombroso

        I also wonder what the landscape would have been without Android fast countering Apple’s dominance.

        But you’ve also to take into account that Apple’s share would’ve still been in part self limited by their pricing strategy and by objective constraints in ramping up production.

        Android limited Apple but also suffocated WebOS in its cradle, obstructed Windows Phone comeback, and exposed the obsolescence and slowness of BlackBerry and Nokia.

        Those players would’ve been in much better shape today and IMHO would enjoy a sizeable part of Android market share.

        Plus, in general I think that global smartphone adoption would’ve been lower today without Android.

      • KitFR

        Tony, I actually agree with nearly everything you wrote. I can only squeeze so much into a comment, and sometimes feel I can put an idea into sharper focus with some slight exaggeration and fewer words.

        Without doubt another platform would have gained traction, if only to satisfy the legion of Apple haters! But any proprietary OS would have inevitably made a few missteps along the way and Apple would have capitalized now and then. In any of these counterfactual worlds, I imagine Apple coming off better, but, really, who knows?

        My one disagreement involves production. Here Apple could certainly have produced almost any number of phones by adding more capacity. They certainly must make a cost-benefit analysis to find the optimal capacity that allows them to be supply-constrained six months of the year, and demand-constrained for the rest. It is not like FoxConn is an Apple-only shop.

  • stefn

    “Why aren’t there other vendors successful with Android?” Rene Ritchie says it today: “Being Apple without being Apple led to Samsung becoming far and away the leading Android phone vendor by market share, and there’s likely no amount of wrist-slapping that with level the playing field for vendors like HTC and Motorola which chose to field more unique, more authentic products from the get-go.” http://www.imore.com/samsung-and-patent-settlements-why-pay-cow-when-you-can-have-milk-free

    • obarthelemy

      Wow, that’s an impeccable, unbiased source. And unimpeachable analysis, too. What does it mean exactly ?

      • stefn

        Let me unpack it for you. Samsung stole the Apple iPhone design. That’s a fact of law, not to say simple eyeball observation. It did it for a reason. Sales. It persists at it for a reason. Sales.

      • obarthelemy

        Actually, that’s a fact of law in the US only, ad that outcome is obviously flawed and is being appealed.

        In many other countries, Apple have lost lawsuits, to the point of having to publicize their loss and pay for not only legal but also ancillary costs in the UK.

        All companies are working for sales and profits, so I don’t understand your second point.

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        What he’s saying is that Samung made money by being a fast-copier and fast-follower of Apple.

      • stefn

        If you must put words into jargon, I guess that’s what I said.

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  • FOAM

    What is the explanation that APPL is plummeting??? Who is shorting it…the “Black Box”???

    • JDL

      What’s the relavence, you invested at the beginning of the year, your up 30%-40%. Also I doubt anyone would be willing to tell you why shares shootup or plummet, they would be to busy drinking martinies on one of their Caribbean or Meditaranian islands.

    • http://ARMdevices.net/ Charbax

      Apple is worthless. All they make money on is the iphone. Even ipad gets auto-cannibalized by their own ipad mini. Samsung is telling Apple to go find other suppliers, and there is no way Apple can do that without collapsing. Even China is threatening to discard all supply to Apple going forward, simply because China makes way more profit manufacturing for their own brands like Huawei and ZTE, keeping the profits in China instead of exporting China’s profits to Apple’s offshore bank accounts. On top of that, sub-$50 Android smartphones are here, and they are dominating 95% of next years smartphone sales. The 2-year contract phones are dead, so is Apple.

      • unhinged

        If all my other customers cannot consume the entirety of my production, I would rather sell the excess at a lower profit per unit to another party than tell that other party to go jump.

        Although if I was negotiating, what I would _say_ is something different.

      • tz

        “Apple is worthless.”
        That statement is worthless.

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  • Jeff G

    Apple has ramped up scale, new and diverse popular products, new stores, new apps and wealth of cash, intellectual property, human capital, innovation and enthusiastic customers. Clearly they are doomed.

    One statement clearly resounds in my mind. “No-one is doing this on the scale we are.” -Tim Cook

    My hunch is that manufacturing reality will align relatively well with capital expenditure math Horace covered. Product refresh will pay off and Cook’s comment on “Doubling down on secrecy” supports the claim of Apple “Being Unlredictable”. Was Cook wrong or just giving a vision of what’s coming? I bet the latter.

    • http://www.facebook.com/tony.lombroso Tony L’Ombroso

      Sure Apple is doing awesomely well.
      (even if, looking at the revenue per phone shipped graph, one wonders if they’re, “at the critical juncture”, going for profit instead of market share, but this is a tricky argument that I won’t touch – and anyway they’re almost always at maxed out production)

      Re. scale, instead… If you consider the combined effort in hardware, software, services, content, retail – yeah there’s no one operating at their scale.

      But limiting to mobile devices, Samsung mobile division is producing roughly double their volume, while their components division is pumping out parts for both their offering and the whole Apple line-out.

      So I think in this context some appreciation for Samsung is just due.

      • Kizedek

        Sure, and even Nokia at its height, which didn’t enjoy a position equivalent to half or more of the South Korean economy, produced more phones than Apple.

        Appreciate what, though? How many of the phones being produced “in this context” are actually top end smart phones that are technologically comparable to the iPhone?

        The glossed over truth is that Android has become the default OS for anything and everything, regardless of the actual features, complexity or job the phone is hired for. Many if not most Android and Samsung phones are feature phones or are used as feature phones…. And yet, the impression given is that anything running Android is a “smartphone” by definition. Therefore, in this context, the definition of smartphone is being indiscriminately widened to favor Google and Samsung. It’s a self-fulfilling prophecy.

        So, tell you what, “in this context” (of anything goes as far as number of devices that Samsung or Nokia produce), let’s just add the iPod. Then let’s see where Apple stacks up in terms of its relative production.

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        “…….let’s just add the iPod.”

        You mean the iPod Touch. But I definitely get what you’re saying.

      • Kizedek

        No, I meant the iPod in general. Because if we are going to count every plastic snap together piece of junk as a “smartphone” just because Android can be shoe-horned onto anything and everything at any price or given away, then let’s count ALL the precision pocket instruments that Apple makes and that its satisfied customers choose to pay good money for, new or second hand.

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  • Albee

    Google’s idea of a battle is similar to amazons and Facebook. It’s simply a “war of attrition”. If you have a cash cow (search in google case) or a rich benefactor (investors in amazon and facebooks case) what do you do with the spare cash?

    Spend it on r+d? That might protect you from competitors for a bit if your lucky.
    Spend it on plants and equipment? But you make software, there is no barrier to entry that having extra manufacturing will give you.

    How about destroying other businesses by offering free or low margin product that they could never compete with? That’s it!

    Google are systematically crippling Microsoft bit by bit. OEMs cannot build 7inch nexus competitors without MS subsidy. MS cants subsidies these products because it would be like throwing money down the toilet. Google are selling nexus 4 phones for £250!! It’s getting crazy out here now. I’ve never seen a company go as aggressive as google is right now.

    If google didn’t have a reason for this it would have stopped ages ago. If google really needed to make a profit from android and found they couldn’t they wouldn’t be selling nexus 7s at cost. So the reason for android in googles eyes has never been about profit.

    It’s been about creating a computing environment where no entity has a monopoly on the operating system. I.e. no one owns the land! And making sure it stays that way by open sourcing the whole thing. When nobody owns the land google (and anyone else) will be free to do what they want.

    I dont think google cares about amazons forking or whatever skin any company is using. Even Apple has been beneficial for them because apple will never control the “land”. It’s physically impossible for Apple to have a monopoly in computing.

    Could you imagine 5 years ago that in the modern, growing computing environment that is mobile, MS are NOWHERE and android is like 70% of all systems? That’s a phenomenal achievement. I don’t know how Ballmer sleeps at night sometimes I really don’t.

    Android is a success because its cut off Microsofts legs before it even had a chance to start running!

    • JDL

      Of course it’s about making a profit, otherwise Google would not have bothered. It very simple not to make a profit in mobile, just don’t play. But Google did more than “just not make a profit” they went and poured $12.5 billion down the drain buying Motorola, they even went so far as to raise their bid when no one else was biding against them.

      So what you have to now answer is why would Google want this “When nobody owns the land google (and anyone else) will be free to do what they want.” if not to make a profit?

      • Albee

        You can’t make a profit if the farmer won’t let you work the land .. Get it?
        Look at what apple just did to google with maps. Google can’t be default for maps because apple won’t let them. Apple control the land and ultimately decide who makes money there.

        MS are trying to be in that position too with Win 8. That’s why Valve are pissed off and want to go to Linux. If MS didn’t have that court case they would have cut googles access to the land along time ago. Now google had made it that no one can do that to them. They are free to roam and do what they want.

        The key with google is they can play the game long term because they have search and larry and Serg own alot of shares and can’t get ousted. So if they have a vision they can execute it

      • JDL

        So Android has allways been about making a profit for Google then. That contradicts your entire point that “… the reason for android in googles eyes has never been about profit.”

      • Albee

        ok, let me clarify. A business (in the capitalist sense) is always about profit at some point. The debate in my mind is “when” is that profit realised and is that profit tangible,

        For example, can we quantify the money Channel or Versace have put into their brands over decades with how much money they make every year in profits? Or can we quantify the long term benefits that staging the Olympics brings to a country in real money?

        Somethings just don’t appear on the balance sheet but are essential to doing business. This is especially true for the long term performance of a business. R&D can be seen as a black hole until on the 6th year of spending a company finds a killer product that allows them to dominate for decades. Its just too hard to quantify this stuff.

        So my feeling is that Android is one of those things. Something where people are looking for the ins and outs in the balance sheet year on year and missing the point. The proof is in the pudding after all. And what strikes me is this:

        In 2002 Microsoft controlled over 95% of the platforms that can be used for personal computing. In 2002 thats probably down to about 50% and is declining year on year. There is now no central control for computing and thus no barrier to making money in the long term for companies like Google.

        In hindsight I cant think of a more important activity Google could have put their money into than to making sure Microsoft do not control the next (and arguably more significant) emerging personal computing platform.

        This is the computing equivalent of securing the Suez Canal. Costly yes, profitable.. in the long run even more so.

      • KitFR

        My guess is that Google thought that the handset makers were dropping the ball and that they would need to take matters into their own hands. Between now and then Samsung started showing how the game should really be played.

        That Motorola purchase probably doesn’t look so convincing now.

      • JDL

        I don’t buy that, why raise your bid when no one else wanted Motorola and in the last 48 hours, no one made a counter bid.

      • unhinged

        I seem to recall hearsay that one of the major Moto shareholders threatened to use the company’s patents _against_ other Android manufacturers. Google were apparently forced to pony up the extra cash to avoid this possibility.

      • http://www.asymco.com Horace Dediu

        That major shareholder also happened to be the CEO at the time.

    • obarthelemy

      It’s a gatekeeper problem. When Apple set out to aggressively use their gatekeeper position on mobile devices, Google had to ensure Apple wouldn’t end up in a position to short-circuit them. Since MS didn’t have a compelling counter-offer, Google had to do it themselves.

      • unhinged

        That’s not my recollection. Google went after Microsoft, expecting the mobile landscape to turn out like the PC landscape. Then Steve Jobs got upset about Android copying iPhone, and all the players had to shift strategies.

  • MarkS2002

    I want the best camera for my money, the ability to download iTunes playlists, access to Google mail and My Yahoo, and good 3G service. If there are apps that make any of this easier, that is fine with me. If I am going to buy something on line, I will use my Pad or laptop. Netflix will have to be on my iPad, unless Samsung comes out with a screen with “wings.”. So now it is down to a few features against price. Likely, something less than a Galaxy will be fine. If I wait another year I should be able to get the 4s off contract for about $500, so that will be the price that I will compare to the Android/Windows field. I guess this makes me an ideal Android customer; but the point is that likely many/most of us like the computer in your pocket, without all of the other stuff, and actually prefer going shopping in a bricks and mortar store.

  • commie pinkofag

    “Where does this wind up?”

    The same place unregulated corporatism (i.e., overweening greed) always ends up: stupidity, waste, and the prioritization of short-term gains over long-term sustainability.

    Before life becomes truly unlivable, it will for a very long time be simply unendurable. But never mind, “we have a responsibility to our shareholders.”

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  • Rajesh Bansal

    Samsung can call the shots on Android atleast as much as Google can – it would be more than enough if the Android team just went off to Samsung to work on a fork of Android

    • http://ARMdevices.net/ Charbax

      Samsung makes more money by not forking. Free open source does not need to fork. Closed proprietary does not work anymore, that is the business model of the past.

      • stefn

        Tell that to Jeff Bezos.

  • JohnDoey

    Samsung obviously should buy Android from Google for way more than Google paid for it in 2005 and then everybody would be happy. Even Apple, who could combine lawsuits.

    • http://ARMdevices.net/ Charbax

      Samsung isn’t going to buy Android, they don’t need to. It’s free and open source. Anyone can take as much of Android as they want and do whatever they want with it. That is the beauty and awesomeness of Android. Google makes constantly more and more money the more people use the web thanks to Android.

      • stefn

        Right. Why buy Android when you can milk the Google cow for free. Did you actually read the article?

    • Heisenberg

      Then Samsung would be saddled with all of the development costs. Right now, they get it all for free.

    • stefn

      That would make Google simply another advertising firm with no skin in the big game.

  • http://ARMdevices.net/ Charbax

    Google makes over $20 Billion yearly revenue from Android users. Everyone in the Android industry is successful thanks to Android. None of the Android makers would be where they are today in terms of activity, market share, prospects for growth if it wasn’t thanks to Android. The whole consumer electronics industry banks and lives on Android. You’re just jealous because Apple and Microsoft have no future.

    • Heisenberg

      Can you provide a source?

      Forbes says that Google made $550m from Android from 2008 to 2011. And ZDNet says they are only making $2.5b/year, as of a year ago.

      http://www.forbes.com/sites/timworstall/2012/03/30/google-makes-more-from-iphones-than-it-does-from-android/

      http://www.zdnet.com/blog/hardware/how-much-money-does-google-make-from-mobile/15539

      • http://ARMdevices.net/ Charbax

        Forbes doesn’t know what they are talking about. Just look at Google’s earnings reports and look at the proven number og Android users and their demographics. Google makes over $20 Billion per year on Android users, and that number is growing fast.

    • snoof

      Google made 47 billion in TTM revenue. Hard to believe that $20 billion of that is from android users through android… Link would be good….

      • http://ARMdevices.net/ Charbax

        Google makes $50 Billion per year, 1.5 Billion users. Google makes $20 Billion per year on the 500 million active Android users. Making money for Google is not restricted to how the user does one thing, it’s based on all the things each user does, and Android significantly increases the monetization of each user as each user becomes orders of magnitude more additected to the web and the more people use the web, the more money Google makes, automatically.

    • unhinged

      So why is Samsung the only manufacturer reaping large profits from the Android platform?

      • http://ARMdevices.net/ Charbax

        Over a million engineers working at Android companies, Android pays their salaries. Visually Samsung makes most profit, obviously because they are by far the biggest company in the world and Samsung owns the largest smartphone market share by far worldwide. But every other Android company is getting huge income from Android, they are all able to hire, to expand, to grow, Android R&D spending worldwide is about 100x larger than iOS and Windows R&D combined. Now is a time to capture growth, thus spend all your profits on increasing your R&D right now, capture the growth is what’s best for each Android company. You do not want to give dividends to your shareholders, not today, no need for that. That’s why you do not see large profit statements on all Android makers earnings reports, that is because they are all investing in their futures right now.

      • DarkKnightCrisis

        My god, the stuff that comes out of you is just so ridiculous and without factual basis. It makes me embarassed to be human.

        You consistently arbitrairily choose “facts” to fit your argument and will continue holding onto that position(s) even when proven wrong. Whether it’s your ego that holds you to this line of behavior or some other strange reasoning, you should realize that it does you no good and you lose a lot of credibility when doing this. Even when you do make a good point (yes, sometimes you do make good points), they are totally overshadowed by your overly-zealot/fanatic-like behavior.

        I believe your motives/intentions are good, but you could be so much more credible — and gain a larger audience — if you didn’t spew all of your nonsense sometimes.

      • http://ARMdevices.net/ Charbax

        I don’t have problems with audience. 21 million youtube views and I’m just getting started, even though I’ve been video-blogging all technological developments in worldwide exclusives for over 8 years now. If you like tablets, you could be watching my ARM tablet videos being posted online since 2004. I video-blogged about Google Glass 6 months before Google announced it officially. 3G smartphones video-blogging since 2003. Sunlight readable screen exclusives, I filmed them all before anyone else. Latest for example search for my e ink Android phone video with a 1 week battery life.

        I’ve never been proven wrong. I can’t tell you the exact date, just know Apple is pretty much worthless today. Thus sell your AAPL stock. They are not going to make as much money on wearable computing and most importantly, the suppliers are not going to work for Apple anymore, regardless how much money Apple is going to be forced to pay up for supply and manufacturing.

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  • Sander van der Wal

    As I understand this, Samsung is making almost all the money in the Android ecosystem, and Google is paying Samsung’s software bill. Samsung is apparently making more money from an Android customer than Google is.

    Why would Google’s shareholders keep accepting that situation? It seems to me that being a Samsung shareholder is a much better way to make money.

    • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

      Google is trapped in its own Android web. If they stop the Android development now someone else will pick it up, hire the Android developers and then do what Google feared from the beginning, i.e. cut their services off from the mobile devices. It could be Samsun or Facebook or Amazon who could take over Android, but the result would be almost the same: Google would have difficulties to access mobile user information.

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        Google only cares about getting its software / services in front of as many eyeballs as possible to grow their ad revenue. I don’t think they’re too worried.

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  • Alt

    Buy Google? Larry and Sergey have a majority of the voting power…

  • swirlingovercoffee

    So, if Samsung buys Nokia for their maps (looks like they can afford it), forks their own version of Android (like what Amazon did), sets up their own controlled-curated app store (because Google isn’t doing a great job at it), and buys DuckDuckGo (Google search replacement), then Samsung effectively loops Google out of the non-iOS mobile market? (Why not just buy Google?)

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  • joshhyde

    Is the Samsung mobile chip business included in the last graph?

    • http://www.asymco.com Horace Dediu

      No

    • http://www.asymco.com Horace Dediu

      No.

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  • http://www.facebook.com/glennslender Glenn Slender

    Interesting stats. I certainly see a lot of Samsung phones out there. It will be interesting to see how Nokia goes with its new Lumia models running Windows 8. Maybe they’ll return to being a force in the mobile phone market?

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  • http://twitter.com/Kanjo Kanjo

    One issue nobody ever seems to discuss outside of Korean is the massive government financial support for the Cheabol, a big issue in the coming elections there. Comparing Samsung’s business vs. Apple seems meaningless because the playing field is so uneven, not to mention different account rules too.

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  • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

    Going back to the jobs to be done theory, the differences in behaviour between iPhone users and Android users would suggest that iPhone and Android devices are hired to do different jobs. The reason why Android users do not buy apps might be explained easily: they need only few additional apps for the device to do its job. If I try to create a prototypical Android owner based on their behaviour pattern, I would imagine the people hiring an Android phone might need a relatively good camera, classic internet communications, like email, skype, social (Facebook, Twitter). They might be too busy to browse the Internet often, but they do it occasionally, so they appreciate the option of a big screen. The big screen is also a better option if they read books on their smartphone.

    iPhone owners do all of the above and more. The iPhone plays a more active role in their life and the jobs to be done by the iPhone requires additional applications for entertainment, education, work, etc. The role of iOS as a platform is much more important for the iPhone owners than for the Android.

    Thinking that iPhone and Android are hired to do different jobs would explain why they are both successful, even when they compete in the same market and why they have different usage patterns. It would also give an indication to whether Samsung’s trajectory is sustainable: as long as there are enough users who do not value the platform side of the smartphones, Samsung will be able to compete with Apple.

    From another angle, in those markets where Apple is not able to distribute the iPhone (e.g. India, Ukraine), people start to use of Android as a platform also, because an imperfect platform is better than no platform. When iPhone will become available it could face the challenge of an established platform, with all the strengths coming form the networking effects. If it takes long for Apple to distribute the iPhone in those markets, being the better platform might not be enough to win.

    • http://twitter.com/davidchu David Chu

      Thanks for starting a Jobs2BDone discussion.

      I think there is an infrastructure factor that needs to be taken into account when doing J2BD analysis. In countries where mobile data is inaccessible (because of speed or cost), there are less ‘jobs’ that an iPhone can be hired to do.

      The weakness of iOS will always be that it isn’t as flexible as Android in filling these holes in the market, but it will be interesting to see if users will switch from Android to iOS as their infrastructure problems are solved.

      • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

        It’s true that the communication infrastructure is an obstacle for some of the jobs a smartphone can do, but there are few ways to go around: mobile optimised web sites, network proxies that compress the data, WLAN. You will not have the same quality as with a 4G network connection, but people will use those solutions because they are better than the alternative.

        Also, the infrastructure keeps on improving. Rural India is probably not yet a market for smartphones, but India has many big cities where middle class people have access to Internet and wireless Internet. If we count only that part of the population the market is still bigger than any European country.

        I can imagine the same dynamics in Africa, where, again, there are large urban areas developing fast and with people having similar JB2D as in the Western cities. If we talk about sustainable trajectories, considering where the growth will be in the future is more important than where the growth is now.

      • http://twitter.com/davidchu David Chu

        Some great points and I have to say that I am enjoying this discussion.

        One valuable point you made is about the city population in countries like India. One area where Apple has put themselves at a disadvantage in Taiwan (I live there) is that enterprises are integrating their workflows with Android because of the lower cost of hardware and the greater flexibility of writing and installing apps. I’m sure this is also happening in India and other developing nations.

    • http://www.asymco.com Horace Dediu

      I’m coming around to this way of thinking. It’s very hard without data, but there might be something in the usage patterns we are seeing published.

  • stefn

    My takeaway: Apple should buy Google before Samsung does.

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  • ricard

    hey Horrace, interested the data you used to source the graph. what tool you used to produce the graph

    • http://twitter.com/asymco Horace Dediu

      The data comes from company financial reports downloaded from their web sites. The tool is Apple Numbers, a Mac application downloadable from the Mac App Store for $19.99.

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  • seeking_a_source

    Horace, Why don’t you source your data?

    • http://www.asymco.com Horace Dediu

      The data in this post is from the companies financial statements or derived by me.

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  • Pete Lazic

    Great article. As for your questions:

    Is Samsung’s trajectory sustainable? – No it is not. Chinese mobile manufacturer are and will be able to produce mobile devices cheaper (similar to shift from Sony Jap to Samsung SK years back).

    Why aren’t there other vendors
    successful with Android?

    Take Motorola for example. The are simply inefficient, inflexible, and didn’t learn to listen. Motorola is BTW shifting now under Google’s command.

    Why isn’t Google successful with Android?

    Google is very successful with android and you can find somewhere in Googs last earnings report about it. Thier business model differentiate from Samsung, HTC, ZTE, Apple, RIMM, or Microsoft. Google’s business model is easier compared to Amazon digital delivery then any of previously mentioned companies. 1 million $ question would be if advance in mobile market will be able to cover loss in PC market.

    Why
    isn’t Google’s Motorola successful with Android?

    Again, it takes time to change current state of affairs and to make such unpopular company in Android community to shift toward producing better hardware, provide timely updates, listen to smartphone owners, provide needed service, and much, much more.

    What would happen if
    Samsung soaks up so much profit from mobile that it’s in a position to
    acquire Google and control the trajectory of their enabling platform?

    It is not in interest of Samsung to acquire Google. Sammy may acquire competitors in the same industry, Google is neither.

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