Henry Blodget | Mar. 30, 2012, 7:52 AM | 14,883 | 50
Mobile is now a two-horse race. And Apple is staging a comeback...
A year ago, we wrote about a mobile trend that posed a major risk to Apple.
This risk was the rise of Google's Android operating system, which was rapidly gobbling up global smartphone market share and threatening to become the ubiquitous global smartphone platform.
In the first quarter of last year, Android gained an astounding 7 points of market share in the US smartphone market.
The iPhone's share, meanwhile, was dead in the water.
The reason this was (and still is) a risk for Apple is that smartphones have become a platform game--and platform markets tend to become winner-take-all.
When multiple platforms have significant market share, as they did in the 1980s PC market (Microsoft and Apple) and as they do in today's smartphone market (Apple and Android), developers will develop apps for multiple platforms. But once one platform gains the dominant share, as Windows did in the early 1990s, developers will gradually de-prioritize and then drop other platforms. This is why Apple got demolished in the 1990s.
So market share in the smartphone market is important.
And that's why it's great news for Apple--and bad news for Android--that, in the past year, Apple has clawed back a lot of share versus Android.
In the past three months, Nielsen says, Apple has grabbed a 43% share of the smartphones sold in the U.S., versus a high-20s percentage a year ago.
NielsenAndroid's share has also increased versus a year ago--it still leads the market with 48%--but Android's share gains appear to have stalled. Android's "installed base," moreover--the percentage of the overall US smartphone installed base, not just recent sales--is also 48%. (See chart.)
Apple's gains are the result of a few key factors, all of which demonstrate that Apple learned a searing lesson from its failure in the 1990s PC market:
First, in the U.S, Apple has finally broadened distribution of the iPhone to Verizon and Sprint, instead of just selling through AT&T
Second, Apple introduced a "low-price" version of the iPhone--the 3GS--which gives price-conscious consumers an Apple alternative (lots of Android phones are cheap)
Third, Apple broadened its distribution channels to major retailers like Walmart, Amazon, and Best Buy, which has given it access to consumers it might not otherwise have reached
Fourth, and critically, Apple's products now cost the same as high-end alternatives, instead of selling at a "premium price." In the 1990s, Macs were always more expensive than PCs. Some Apple fanatics were willing to pay these high prices, but most normal people weren't. This contributed to Apple becoming a niche player.
Lastly, and also importantly, Apple is completely dominating the global tablet market, in which Android is basically nowhere (unless you count Amazon's Kindle Fire, but that's Android in name only.)
Tablets are a different market than smartphones, but they help expand the same basic development platform. If you include Apple's iPads, iPhones, and iPod touches in the global platform market share calculation, Apple's global market share looks better.
Now, lest Apple fans begin jumping up and high-fiving each other on this news, the Android-ubiquity risk is still one of the biggest risks facing Apple.
Globally, Android is still miles ahead of Apple: As of Q3 2011, Gartner reported, Android had a 53% share of the global smartphone market, while Apple only had 15%. Apple's numbers have probably improved significantly since then, but they won't have closed the gap as much as in the U.S.
But the U.S. market is important. And the fact that Android has not been able to extend its lead over Apple is also important.
In the U.S., it's a two-horse race. And thanks to the lessons it learned from the 1990s debacle, Apple is closing the gap fast.
And that's presumably one big reason Google is taking on the extraordinary challenge of buying a dying smartphone manufacturing elephant--Motorola--and going into the hardware manufacturing game. This is a huge, risky, and distracting move for Google, and the odds are that it will fail spectacularly.
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