asymco

A quick update on the analysis of mobile phone profits. If the available profit[1] (i.e. excluding losses) were summed and each vendor’s profit were measured as a percent of this total, this chart would tell the story of the last three years:

Note that profit share has mostly shifted from Nokia to Apple, though Sony Ericsson and LG were also casualties and Motorola has not had anything to lose.

Some assume that the future belongs to the Koreans but we see that the relatively small amount of profit that Samsung has (less than RIM actually) has not changed much. HTC is also shown to be a steady performer but not having displaced much from competitors.

Will Android change this picture? As I’ve argued before, Android is most attractive to the unprofitable and the strategically constrained. Can having undifferentiated new products change this? As Nokia is unlikely to license Android, and RIM seems very unlikely and Apple is out of the picture, the only possible contenders are Samsung, LG, HTC, Motorola and Sony Ericsson.

Motorola and Sony Ericsson have both returned to profitability but with a very small volume Android strategy. However the incumbents fielding Android are really facing a far more sinister threat: the smaller local brands in China (e.g. ZTE) and emerging markets.

On profitability, the smaller challengers are unlikely to make a large impact, but they will constrain the profits of other licensees. The distribution of phones on a global scale is challenging without a brand, and brands are very expensive to build. It’s still possible over a longer timer frame that a small brand like HTC can emerge on a global stage. But in terms of profit capture, challengers will mostly “steal” from the already constrained big brands running with Android.

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[1] Profit is not the only measure of success and can sometimes be a deceptive indicator. For this reason I look at a longer time frame so that anomalies, seasonality and business cycles are smoothed over. As flawed as it is as a measure, the most important reason to pay attention to profit is that it’s the only fuel for growth in the long term. Companies that are consistently unprofitable (e.g. Motorola) face diminishing degrees of strategic freedom further lubricating a downward slope toward financial distress.

@tim Google often finds out about new Android phones the same day the rest of the world does. The joys of an open platform!

via (1) Twitter / Home.

Clears up why they rely on “activations” to find out what’s going on in the market.

Verizon, unfortunately, is also what ruins the phone. Or, rather, what it’s forced Samsung to do to the phone, which you could sum up in a word: Bing. Bing is the default—and only—search engine on the Fascinate. A Google Android phone. In the search widget, in the browser, when you press the search button. Bing. No, you can’t change it. There’s no setting for it, and the Google Search widget that you can snag from the Market is blocked (or at least very carefully hidden). Being unwittingly forced into Verizon and Bing’s conjugal relationship is infuriating on its own, but the implementation also feels like the sloppy hack that it is.

via Daring Fireball Linked List: Matt Buchanan on Verizon’s Samsung Fascinate Lightning.

John Gruber astutely adds:

Android is “open”, but who it’s open for, primarily, are the carriers. (Somehow I doubt we’ll see any Windows Phone 7 devices where Google is the one and only search option.)

The primary defense of Google’s Android strategy is that it’s beneficial in driving traffic to Google’s services/properties. This is by no means a certainty. To the contrary, it seems likely that the Android experience will be defined by operator back-room deals.

See also: asymco | Android vs. Google Part II

Coupling a lack of control over the platform, the revenue streams, the user experience, the potential banishment of AdMob from iOS and an attack on Google’s brand, Android is currently winning the war with Google.

However, my money long term remains with Google. They can and will eventually beat Android. Perhaps with Chrome.

[Footnote: if anyone wonders why Verizon, Google's best friend in mobile, is gutting Android, you need to remember an exclusive five-year deal Microsoft struck with the carrier to provide search and advertising services on the phone. Microsoft was rumored to pay $500 million for the opportunity.]