Google latest moves in mobile are its most important yet
Yesterday I wrote up a review of Apple’s earnings. And while the earnings are declining, Apple is still in pole position in the mobile space. Nonetheless, Google’s product unveiling yesterday was huge because the various products in handsets, tablets and for TV show that Android has entirely closed the gap with Apple. Today I want to review why this is so important.
Apple is one of the most profitable companies in the world. Outside of oil companies, it is hard to find a company with such a large market capitalization that sells as much as Apple does. Just a decade ago, Apple had barely emerged from a near-brush with bankruptcy, saved only by Microsoft ironically. Now it has nearly $150 billion in cash on its balance sheet. And most of this is largely a result of the iPhone. Apple’s iPhone was the right device at the right time for computing as it caught a wave of consumers just as the computing world was switching to a more mobile-centric computing ecosystem.
But now there’s Android. And Android has been taking share for months now. In fact, in the handset market in Europe Android is dominating; Android leads Apple 70% to 18%. According to Android head Sundar Pichai, one in two tablets purchased now run Android. So that is serious competition. But what came out of Mountain View yesterday was huge because it showed Google’s Android on par with Apple’s iOS in every important space but at a much lower cost.
First, let’s look at the handset market. Right now it is dominated by two companies Apple with iOS and the iPhone and Samsung with Android and its Galaxy handsets. These two companies are said to account for all of the profits in the mobile space as many other competitors are losing money. But Google owns handset maker Motorola, which has gone through a heavy turnaround. And Google’s Android platform is at parity or better than Apple’s iOs platform from a feautres and user experience level. Motorola is now out with a set of devices that I believe will take share because of features and price. The first three, the Ultra, the Maxx and the Mini, were launched yesterday. Once near parity is reached on a technological or user experience level, what’s important is distribution. And Moto is selling into the Verizon distribution network in the US with these three handsets in a heavily marketed and prominent distribution deal. That means big volume. The biggest losers from this deal will be Apple and Samsung.
In addition, Google is going to release a US-made Motorola ‘Nexus’ handset next weekl called the Moto X. Everyone in the space is talking about it because it will be the first mainstream device manufactured in the US in a very long time, because it represents a big step in the comeback for Motorola as a competitor in the space and because marketing hype is driving a lot of discussion forward. This device will come with the latest Google Android operating system codenamed Key Lime Pie and likely to be called Android 5.0 when released and it will come with a ‘stock’ Android build, meaning it will be completely stripped of manufacturer and telecom carrier bloatware. Both of these features make it a must-have device for technology early adopters. Most importantly, however, the Motorola X will be sold off contract – for perhaps as low as $300. Droid Life ran a story on this on Tuesday:
Dennis Woodside – Motorola CEO – said himself in a recent interview that his company is interested in the “low-cost, high quality market.” They see this huge gap between feature and smartphone pricing ($30 to $650), and they feel as if they can bring that gap closer together or at least dive right into the middle of it. You could call that a hint or a vision of the future, but Motorola seems poised to make something radical happen today
I believe this story is credible. And what it points to is enormous downward price pressure that Google will try to assert in order to beat Apple. Apple’s average selling price is still nearly $600. Most of that is financed via telecom subsidies in the US. But here we are talking about a device of top-tier quality – much better than the anticipated iPhone mini – for half that price. Either Apple drops price, raises iPhone mini specs or eats share. It’s that simple. (Don’t forget Amazon will be coming out with its own handset soon too).
I see these moves as gigantic – Google’s first major phone releases as a hardware company in direct competition with Apple.
Then there’s the Nexus 7, Google’s iPad mini competitor. Let me cut to the chase here: this device has much better specs than an iPad mini for two-thirds of the price. It will clearly take share, especially as it has bundled a Netflix streaming connection at the maximum high definition resolution quality level of 1080P. The attraction of the iPad or the Kindle is the larger form factor that makes content viewing better than on a phone without the lack of portability of a full-size tablet. Frankly, the only reason to own one of these things is because one wants to ‘consume content’ at a proper size i.e read and watch TV or movies on a larger portable screen. You can watch videos, look at photos or read on vacation, on the plane, at home, in bed at a friends house at the highest resolution available in home entertainment. So the question is why you would pay $100 more to do any of these things on a lower-quality iPad mini? Unless you are locked into the Apple ecosystem, you wouldn’t. And so, again, Apple drops price, raises iPhone mini specs or eats share. It’s that simple.
And to make matters even better for Google, the Chromecast connector they are hawking makes any Android device you own immediately viewable on most modern television sets. Apparently, Google has developed a dongle connector that fits into the charger slot of their devices which wirelessly connects them to a television so that you can view any content that you receive via your Android device on the television. That means, again from a mobile-centric perspective, you can take your Android anywhere – on vacation, to relatives, to a friend’s house, to the beach, whatever – and you can view or watch everything at full HD resolution on a giant TV anywhere at any time. This is exactly what mobile is all about. [UPDATE: Apparently, this device also works on iOS devices as well.]
The bottom line here is that Google has unveiled a set of devices that put it on par with or ahead of Apple on technology and user experience but at much lower cost and increasingly through well-oiled distribution channels in the US like Verizon, Best Buy, etc. Apple must respond or lose share. And if they respond, their margins will erode as they either cut price or raise specs. I never really took Google seriously as a hardware company, especially after the fiasco with the Nexus One, a device I still own. However, in my view, these are Google’s most important moves yet. They are game-changing in terms of dominance in the mobile ecosystem.
Links on new developments below
Trends
Google reportedly accounts for 25 percent of North American internet traffic | The Verge
“DeepField found that Google accounted for only six percent of North American internet traffic. While the firm doesn’t pinpoint why Google’s traffic has quadrupled, Wired reports that much of it is due to YouTube. Because the traffic is determined by the amount of data being sent — and not by the amount of visitors — YouTube has a big impact from delivering its data-heavy video streams.”
Google: Android app downloads have crossed 50 billion, over 1M apps in Play | The Verge
The operating system
Android 4.3 Jelly Bean: A Summary Of New Features & Improvements
Mobile handsets
Up Close And Personal With Verizon’s New Trio Of Droids | TechCrunch
Verizon announces Motorola DROID Mini, Ultra, and Maxx | Android and Me
DROID ULTRA and DROID MAXX Specs – Droid Life
DROID ULTRA, DROID MAXX and DROID Mini Have Locked Bootloaders – Droid Life
What if the Moto X is $300 Off-contract? – Droid Life
Tablets
Google’s Sundar Pichai – One in Two Tablets Is Running Android – Ina Fried – Mobile – AllThingsD
This shows Android making headway into the tablet market. Apparently, about one of every two tablets now being sold are Android. But, the reality is that Apple’s installed base gives them a huge 85% of the market and 91% of traffic right now.
New Nexus 7 Packs Quite a Pixel Punch, Landing a Blow at Apple – Ina Fried – Mobile – AllThingsD
This chart shows how foolish it is to go with an iPad mini over a Google Nexus 7 exept for those who are completely invested in the Apple ecosystem. On the specs, this tablet is far superior and $100 less. But, of course, that is’t all that matters, user experience and marketing are key in terms of gadgetry and the iPad still owns this market on both. Nonetheless, I think this marks the end of Apple’s technological advantage in tablets. Just like in handsets, the competition has arrived and that spells trouble for Apple. Also see the Samsung, Nook and Amazon offerings.
New Nexus 7: how Google’s latest compares to iPad mini and the best small tablets | The Verge
New Nexus 7 is the first Android tablet to stream Netflix at 1080p | The Verge
This article gives the specs. It is also the first Android 4.3 device. Expect Android version 5.0 in the fall.
Qualcomm Snapdragon S4 Pro 1.5GHz Processor
802.11a/b/g/n Wi-Fi
2GB RAM
16GB or 32GB onboard storage
5.0MP rear, 1.2MP front camera
Bluetooth 4.0
0.3-inches thin, 7.9″ x 4.5″
16GB Wi-Fi ($229), 32GB Wi-Fi ($269), 64GB LTE ($349)
Wi-Fi models available in the U.S. July 30
LTE edition and global models “in the coming weeks”
Google likely to miss with next-gen Nexus 7, may set new Android standard with ‘Moto X’
Take this with a grain of salt as it is “Apple Insider” that is hawking this story. Nonetheless, it is a view that should be appreciated.
“Although it boasts an impressive feature set, Google’s second-generation Nexus 7 tablet could be a bust, says one analyst who believes the Internet search giant’s real potential lies in the forthcoming “Moto X” handset.”
Google unveils Chromecast along with slimmer Nexus 7 tablet | Technology | guardian.co.uk
Google’s Chromecast and Nexus 7 event: everything you need to know | The Verge
Video/Chromecast
Chromecast’s secret weapon to take over your TV: HDMI-CEC — Tech News and Analysis
Hands-on with Google’s $35 Chromecast, a streaming TV stick | The Verge
At $35, the Google Chromecast multimedia dongle is a no-brainer
The Cloud/Storage
Google Updates Cloud Storage With Faster Uploads, Auto-Delete And Regional Buckets | TechCrunch
Google is trying to compete here with Amazon and now Microsoft
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