Analyst Report: Is Android broken, and if so, will Google fix it?


Google’s Android platform arrived in Oct. 2008 with just a single handset on one carrier: The G1 for T-Mobile. Since then, however, the mobile operating system has spawned over 1,000 Android smartphones and tablets around the world. This rapid expansion has been the best and the worst thing for Google when it comes to mobile: Android has quickly become the most used platform, but, as has been much discussed, the sheer amount of varying hardware it runs on has created problems for developers, carriers and consumers alike.

But the one entity that has the power to fix it — Google itself — doesn’t appear to think the OS is broken. And Google isn’t likely to “fix” Android anytime soon, because despite the fragmentation problem, the company is getting what it wants: massive amounts of user data. And besides, at this point, Android may be beyond repair, unless Google takes drastic actions in light of closed platforms gaining ground.

Android is a winner . . . depending on whom you ask

From Google’s perspective, Android looks like a relative winner, at least on the surface. Here in the U.S., Android phones started outselling Apple iPhones in Aug. 2010, and they still continue to best the iPhone, as of comScore’s data from February. No single Android device can beat the iPhone head-on in sales, of course, but Google doesn’t care about that. As long as the number of Android devices combined exceeds the number of iPhones, Google is putting its services in more hands.

And unlike most companies that profit on sales of software or hardware, Google’s currency is information. All the Android device sales put more of this power into Google’s hands for lucrative advertising and future products.

Google isn’t yet seeing the same success in tablets, but the market is young, and far more smartphones than tablets are sold each year. So far, Apple’s iPad is the top-selling tablet, accounting for 62 percent of all tablet sales in 2011. Amazon’s Kindle Fire and the Barnes & Noble Nook tablet, both built on Android 2.3, are the best competition to the iPad, but since both have custom user interfaces and software, Google gains little data, no software sales and a limited amount of search information. But maybe Google isn’t ready to try to win the tablet war. And besides, it could claim its overarching strategy isn’t impacted by this mediocre showing in the tablet market.

So why doesn’t Google think Android is broken?

With Android as the most widely used smartphone platform, everything must be great for Google, right? Perhaps, but it’s not yet clear if its Android investment is paying off financially. A recent estimate by the Guardian (see disclosure below) suggests Google has only earned an estimated $550 million from Android between 2008 and 2011. That’s far less than the estimated $25 billion in iPhone and iPad revenue Apple saw in the final quarter of 2011 alone.

But money may not be the reason Android exists. My GigaOM colleague Tom Krazit argues Google is trying to stay relevant into the future with Android as a defensive play; it can’t simply give away the mobile market to Apple, Microsoft and others. I would add that it is happy to gather as much information as it can for future products and ads, as opposed to instant gratification on mobile ad revenues. And how does it gather this information? To get the maximum benefit from Android, users need a Google account, which syncs data between the phone and Google’s servers. All of that data quickly adds up: Google says it is now activating 850,000 devices per day.

From Google’s perspective, then, Android is working out well. From the Android users’ point of view, it’s a different story.

Android is a mess for device makers and developers . . .

The best aspect of Android — its ability to be used by anyone as they see fit — is a double-edged sword. Without a licensing fee for Android (although there is a fee for Google apps) device makers have found an alternative to compete against Apple without having to pay for the platform. There are are more than 1,000 different Android devices built by more than 55 hardware makers running on 300 networks around the world.

As a result, the Android experience varies wildly by device: not a positive aspect for a single platform. It causes headaches for consumers and enterprises, not to mention developers who sometimes have to test their software on every combination and permutation of Android hardware. Netflix, for example, is now running on more than 1,000 different Android devices, requiring testing on more than 10 main devices for every new build.

. . . and for consumers . . .

This issue affects the Android platform and therefore end users as a whole. Take the recent debut of Hulu Plus for Android tablets as one of many examples. The software is available in the Google Play store, but it only works on seven Android tablets. That means Hulu Plus subscribers who bought the “wrong” tablet or a slate with a nonsupported processor can’t watch TV shows on their tablet through Hulu.

Perhaps those customers will see support in the future, but there’s no guarantee. That’s inexcusable for a platform. In fact, given the various customizations and widely supported hardware, Android itself may not be a “platform” by definition but more of a starting point for manufacturers to build on. HTC and Samsung, for example, have designed their own interface skin and apps so their Android phones don’t look alike and aren’t used in the same way. The Kindle Fire and Nook tablet are even better examples: You would be hard-pressed to find the Android interface, apps or features, because all are essentially hidden.

. . . and even for carriers

Each of the carriers too is trying to differentiate from its peers. Historically, that’s always been the case: Single-phone models have always been tweaked so that a Verizon version looks unique or has custom services that differ from the same phone on Sprint, for example. But Android exacerbates the problem with so many ways to modify or adjust the end-user experience, which expands the variances in Android handsets. That leads to issues with software updates. Google is fast advancing the Android platform, but carriers can’t react quickly enough to get such updates and new features out to end users.

What can Google do?

While Google probably isn’t thrilled with the Android mess it has allowed to flourish, it will do little. Why? These issues haven’t yet hurt Android adoption in a measurable way. Google will not make a serious attempt at reigning in Android’s various combinations. If it starts to significantly lose market share to Apple’s iOS and, likely, Microsoft’s Windows Phone platform, Google may shift strategies. But there’s simply little benefit for Google to do so until then — likely not for another two years or more at the earliest — and such a situation would force Google to play its next hand in the mobile poker game going on right now.

For Google to truly address the problems Android faces, it will have to “own” Android. By licensing the platform as it currently does, Google has limited control over what hardware makers do with Android. That could be part of the reason Google decided to acquire Motorola Mobility: It could offer Android devices that have unique functions or features, even as it uses Motorola’s patents to protect Android at large. Patents or not, Motorola could be the key to Google’s taking Android back.

With a true hardware manufacturer of its own, Google could reclaim Android with its own devices, and it could even still allow partners to keep using the platform. If Google decided to hang on to Motorola, this could help, but there are already rumors of selling off parts of the hardware company and keeping the patents. But from day one, Google has said patents are only one reason for the purchase, noting, “This acquisition will bring Motorola Mobility’s hardware expertise closer to our software expertise — accelerating innovation.” Perhaps Google could even use Motorola’s LapDock solution to merge Android and ChromeOS, thus killing two birds with one stone.

Motorola-built Android devices under Google would be the de facto standard of the Android platform, giving consumers, manufacturers and carriers a fully integrated hardware and software experience to work with, first with phones and later with tablets. That’s a proven model that works: Just ask Apple.

Disclosure: Guardian News and Media Ltd., the parent company of the Guardian newspaper, is an investor in the parent company of this blog, Giga Omni Media.

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