The Appeal of Android

Ryan Heise has an interesting blog called My Dinner with Android. Four months ago he switched exclusively from an iPhone to a Nexus S running Androud v2.3 to get a long-term test drive of Google's operating system. With the purchase of his iPhone 4S, his experiment has ended and he's posted his final analysis, which includes the question of who Android is for. He writes:

"To be frank, I still don’t know who Android is for.

If it’s for those who don’t want or simply refuse to as a product with an Apple logo, that’s sad, because all you’re getting is an inferior facsimile.

If it’s for those who still want to make some sort of argument predicated on shouting the word “OPEN!”, that’s sad, because Android’s “openness” is a meaningless bullet point to average users and a facade championed by its most devoted. If anything, the openness of Android is it’s biggest threat with the imminent release of the Kindle Fire.

If it’s for hackers and tinkerers, I can somewhat understand that. But jail breaking iOS seems like a more enjoyable path, and one supported by many of the computer engineers I’m surrounded by at my day job.

I know there are people who simply choose to use it, and I accept that. I don’t really care. But I just can’t wrap my head around any of the arguments that come up in support of it."

I think the answer is that Android has appealed to two main markets so far in the course of its existence. At first it was for the tech nerds who decried iOS' lack of customizability, or for whom one or two specific features (eg. unparalleled email service or 4G connectivity) were more important than the overall experience. Android is probably still for those people, but they are a decided (if dedicated) minority.

Android moved aggressively onto multiple carriers and appeared quickly at multiple price points. When this happened, Android was the OS for those who wanted a smartphone but couldn't afford an iPhone, or who didn't want to leave their carrier or join AT&T. Android's market share went through the roof during this phase (which ended on October 4, 2011).

On October 4, Apple unveiled the iPhone 4S, and dropped the price of the iPhone 4 and 3GS. And they announced a partnership with Sprint as the third U.S. carrier. So now Android and iOS are just about on equal footing, and Ryan's question is valid today. Customers can get an iPhone at any price point from $399 down to zero. And all except the free-on-contract iPhone 3GS (which is available only on AT&T) are available on the nation's three biggest carriers (sorry, T-Mobile) as well as a wealth of international carriers.

Much has been made of Android's meteoric rise in market share over the last year. But I suspect that to start to decline in the quarters ahead. I think as iOS becomes a more accessible option for more consumers, and especially next year when (conceivably) the iPhone 4 drops to $0 on contract on the heels of the iPhone 5 announcement, we're going to see iOS market share increase as first-time smartphone buyers choose it, Blackberry users switch to it, and many former Android users switch to it. Android and Windows Phone will duke it out for second place, but it will be a distant second. In essence, both Windows 8 and iOS will grow at the expense of Android.

This isn't to say that Android won't still have a very strong appeal for its original niche market, because it will. But that niche market is nowhere the size of the rest of the market, made up of non-technical people who are certainly not reading this blog. And further, that niche market will likely be divided between Windows 8 and other devices like the Kindle Fire, which appears to be in very high demand.

Full disclosure: I own a modest number of shares of AAPL.