Only two short years ago many thought Apple had built an insurmountable lead. Android’s recent surge is proving that entirely wrong. Today, many believe that Microsoft is too late to the game. This too is entirely wrong. A lead of sixty million devices is not much of a lead in the mobile phone market. To put this in perspective:
- 140 million DVD units per year [source]
- 360 million PCs (laptops, netbooks, tablets) units per year [source]
- 100 million videogame consoles units per year [source]
- 1.3 billion mobile phone units per year [source]
Mobile phones sell more than all of those – combined. The two largest handset manufacturers Nokia and Samsung shipped 175M mobile phones (mostly feature phones) in Q1 of 2010. That is more than 3x the total global PC shipments for Q1 2010.
The smartphone market of today is not what Google, Apple, Microsoft, HP, and Nokia are fighting for. Today’s smartphone market is measured in tens of millions of devices per quarter across all the major players and by 2011 there will be 449M smartphone users (i.e. active subscribers). The smartphone market of three to four years will be measured in hundreds of millions of smartphone devices per quarter.
Let’s be clear why Microsoft is not too late to this game:
- Massive market. An early lead of 60M devices in a 1.3B/yr shipped devices is not much a of a lead.
- Device churn: People churn through phones rapidly (PC turnover is ~4 yrs and phones is ~18 months)
- Weak lock-In: Users are not spending hundreds or thousands of dollars on content (music, apps).
- Weak network effects: Given low cost of developing apps, the important ones are being replicated to the top tier platforms.
- Carriers want Microsoft: They don’t want a Google and Android dominated market. They want at least four major platforms each with 25% of the market, and believe Microsoft has the patience (i.e. warchest) and persistence to be one of them.
Full Disclosure: I don’t work at Microsoft and I don’t own any Microsoft shares. I simply believe the Android vs. iPhone conversation is myopic and ignores how insignificant of a lead both of them have established.