If you’re into schadenfreude, there’s never been a better time to pick on Samsung. The smartphone market share leader has been taking a beating of late, losing market share and dropping profits. Meanwhile, Apple’s strategy of building premium devices for the affluent suddenly seems like a smart strategy again.
Such thinking completely misses the point.
Android is not about any particular vendor winning, though it certainly does pad Google’s pocket. It’s about the customer winning. And with over seven billion people on the earth, most of which will never have an iPaycheck capable of buying an iPhone, customers need Android.
The rise and fall of Samsung
According to IDC, Samsung accounted for 32.2% of all smartphone shipments in Q2 2013, up from 17.0% market share in Q2 2011. By Q2 2014, however, Samsung’s share plummeted to 24.9%. This has contributed to Samsung’s first year-over-year company-wide profit drop since 2011.
Apple isn’t the reason for Samsung’s distress, however. During this same period of time, Apple’s share of the market fell from 18.8% to 11.7%, though its profits remained strong.
The easiest way to see Samsung’s dilemma is to visualize it, as Horace Dediu of Asymco does:
Samsung’s precipitous rise has been followed by an equally calamitous fall, while Apple has steadily grown. But the real story is the rise of “Other,” a category filled with low-end Chinese manufacturers that don’t individually register in terms of market share but collectively are eating Samsung alive.
“The smartphone business was a huge opportunity for Samsung and they took full advantage of it. Unfortunately, it’s a difficult business to stay on top of. The list of victims in that industry is quite long and there have been no long-term winners….
“[Samsung’s] fast follower strategy belies its own limitations: it implies a transience or impermanence in strategy. In a fast follower strategy, it’s only a matter of time before late followers eat into the business, similar to the way that the fast follower ate into the innovator. Chinese vendors are poised to take more share…. Huawei [is] what Samsung was five years earlier. It’s easier for the low-end providers to move up-market and not at all easy (in terms of loss of margin) for the higher end to move down.”
All of which is interesting, but it also removes attention from the audience that matters most: customers, not vendors.
Feeding the 60%
For Apple fan boys and girls, it must be nice to get a reprieve from market share apologists like me. John Kirk, for example, exults in the “fall of the church of market share.” As he gleefully suggests, “Samsung and the rest of the mobile hardware manufactures may be overstretched and left in tears, but Apple is doing just fine, thank you very much.”
Sure they are. But that’s not the point.
The point for many of us who care about market share has less to do with vendor share, per se, and rather what it represents. For example, McKinsey finds that 60% of the world’s population still lacks access to the internet. Such access, as the United Nations has found, undergirds essential other human rights like freedom of speech.
Apple isn’t providing that access. As the McKinsey report notes, “About 75% of the offline population is concentrated in 20 countries and is disproportionately rural, low income, elderly, illiterate, and female.”
Does that sound like Apple’s market?
The report goes on to call out the role of mobile devices in improving access to the internet:
“Some 1.8 billion people have come online since 2004, with this growth fueled by five trends: the expansion of mobile-network coverage and increasing mobile-Internet adoption, urbanization, shrinking device and data-plan prices, a growing middle class, and the increasing utility of the internet.”
Bravo to Apple for finding ways to get rich people like me to pay ever more for smartphones. But far more significant are those that are finding ways to improve communications and access to information for the vast majority of people on the planet that can’t afford an Apple device.
Android for the masses
VisionMobile has been tracking mobile developer trends for years, and finds that developers “in the lowest ranges, i.e. those that make no money or earn less than $1,000 per month, tend to prioritize Android. From $1,000 and above iOS becomes the priority platform.”
One way to interpret this data is that Android developers create things that people won’t pay for. But the better way to read it is to see Android developers working in markets where $1,000 per month is a lot of money. We need to do more to encourage this group, and asking them to develop for devices their peers can’t afford is callous and inane.
In sum, as much as I wished Samsung well for carrying the Android banner so well for so long, I don’t think it ultimately will do much to dent Android’s rise. While I’m the first to suggest that open source is an exceptional competitive tool, I also believe that open-source software like Android, Drupal, or Hadoop can have a much bigger impact than the profit and loss sheet of any particular company.
This is why market share matters more than profit share. Profits are what companies keep for themselves. Android will make plenty of companies rich but, more importantly, it will bring the riches of the internet to a much broader swath of humanity than Apple can with its premium model.