The end of Android as we know it

Android devices account for more than half of the smartphones sold or at least shipped; sales figures are, to say the least, suspect. Yet a growing number of signs indicates that Android has peaked as a platform and will do a slow fade into either irrelevance or the kind of anonymity the operating systems powering “regular” cellphones have long known.

There’s no single reason why Android seems to be on the cusp of a decline — and that’s perhaps the most worrisome sign of all. Precisely because there are multiple, independent factors rather than a single Achilles’ heel, Google can’t address the issue with a single silver bullet. I won’t be surprised if in 2015, Android has faded to a third or less of the smartphone market. I’m all but certain that Android will be nearly nonexistent in the tablet market, though its proprietary Kindle Fire offshoot will remain a distance No. 2. Already, it’s a footnote and Windows 8 tablets aren’t even real yet.

There are many factors contributing to Android’s smartphone success, but few relate directly to Android itself. Android has succeeded mainly because it gave Asian smartphone makers a way into the cellphone space just when the market was going through a seismic shift. Apple’s iPhone had redefined a cellphone into a smartphone, and Research in Motion’s stubborn clinging to an irrelevant BlackBerry past knocked out the one data-savvy traditional vendor that might have joined the smartphone revolution and competed with Apple. Also stubbornly clinging to an irrelevant past, Nokia made lots of noise for a parade of mobile OSes but ultimately didn’t really try to deliver, knocking out the world’s largest cellphone brand from the new race.

In that context, Samsung and HTC seized the opportunity to redefine themselves from being mere “OEMs” — original equipment makers of interchangeable, generic cellphones — to actual mobile brands. HTC came out strong, but has since faded. Samsung took a longer view, building up its Android capabilities and becoming Google’s unofficially preferred hardware partner, as well as filling in some business security needs keeping Android as a phone platform for kids, retirees, and adults who don’t have “knowledge worker” jobs. Motorola Mobility, spun out of the faded American icon Motorola, saw a similar opportunity and has delivered a series of business-oriented Android devices. Other Asian manufacturers — Acer and Asus, most notably — also joined in, but with less real commitment.

A big gap was emerging just as Google released its first version of Android in late 2008 as a way to enter the mobile search advertising market, and Samsung, HTC, and Motorola Mobility jumped in to use it. (Google bought Android in 2005, two years before Apple unveiled the first iPhone.) It was sort of like Apple’s iPhone; even better, it was free to license. HTC and Samsung also quickly discovered they could use Android on many of their existing Windows Mobile devices, with just slight modifications, making it an easy bet. If they didn’t sell the Android versions, they could reflash them as Windows Mobile devices for sale to government agencies. Today, Samsung is the top seller of smartphones and may soon edge out Nokia as the top seller of all cellphones. In comparison, HTC hasn’t done nearly as well, and Motorola is stuck in a prolonged acquisition by Google.

With that history established, let me explain the three groups of reasons that cloud Android’s future.

Threat No. 1: No strong commitment to Android from Google

Google has spent billions of dollars on Android’s development and marketing since it acquired the core technology in 2006. If its acquisition of Motorola Mobility goes through this spring as expected, that tally will rise to perhaps $20 billion. You’d think that Google sees Android as critical to its future, seeing as it’s already footed such a big bill.

Not necessarily. Testimony in the current trial in which Oracle is suing Google for using the Java APIs without permission shows that Google indeed considers Android “important” but “not critical.” Android-based search revenues — how Google makes money from Android — are also not huge, perhaps $500 million in 2011 (four times that of 2010 and eight times that of 2009). Google doesn’t break out its mobile search revenues by platform, but most estimates are that it now makes a little more from Android search than it does from iOS search, for which Google has to pay Apple a commission. Add in search revenues from the other mobile platforms, and Android probably accounts for half of the expected $1.3 billion in mobile search revenues expected this year.

That’s nothing to sneeze at, but Google’s expected revenues for 2012 are more than $40 billion, of which Android search represents 1.5 percent. If all Android devices disappeared tomorrow and were replaced by competing platforms, that percentage would not change. However, the effective profit would decline by about 15 percent because Google would have to pay a commission to those other platform makers, which it does not pay itself for Android search revenues.

Still, you can see that Android per se is not necessary for Google’s mobile search advertising growth.

That may explain why Google has been so slow and inconsistent in growing the Android operating system itself. The first version of Android on the market debuted in 2008 on the T-Mobile G1 to positive reviews. The first iPhone a year earlier got very mixed reviews, much like the original Mac in 1984: an engineering triumph in some respects, but with frustrating limits and a high price. Perhaps taking a page from Microsoft, Apple kept refining the iPhone, and by the time the iPhone 4 and iOS 4 debuted in summer 2010, it had become the most-loved mobile platform.

Meanwhile, Google was on Android 2.2 “Froyo,” a decent mobile OS that still suffered by comparison. The iOS-Android gap had widened in iOS’s favor since Android’s debut — then there was this device called the iPad that Google had no way to compete with. The Android OS was for smartphones only, and although Samsung, Dell, and others shipped 7-inch tablets using “Froyo,” the lunacy of that plan became quite evident in their products, and they tanked. Meanwhile, Google waited until spring 2011 to ready Android 3.0 “Honeycomb” for tablets — delivering a new version of Android incompatible with smartphones.

Then we all waited for Android 4.0 “Ice Cream Sandwich” (ICS), the first Android version for both tablets and smartphones, which debuted in the Galaxy Nexus smartphone in late 2011. It turned out to be a cross-device version of “Honeycomb” with a handful of additional refinements. Most of us are still waiting; few devices have yet to be upgraded to ICS as yet, and just a smattering of new devices have shipped using it. Google has been strangely silent through it all, with major partners such as Motorola Mobility and Samsung left hanging in the breeze. Oh, and those customers who’ve been hearing about Android 4 for a year but still don’t have it? They’re prime candidates for a new OS when their contracts expire.

Android’s journey has been amazingly lackadaisical and haphazard, especially when compared to Apple’s steady, deliberate pace and clearly unified strategy for iOS across iPhones, iPads, iPod Touches, and even Macs. Even Microsoft, which screwed around with Windows Mobile, then the Kin, followed by the first two versions of Windows Phone, now seems to be on a more deliberate path with Windows 8 and Windows Phone 8 “Apollo.”

Apple has been serious all along, Microsoft finally seems serious — but Google does not.

As for those billions of dollars of investments, which might indicate seriousness on Google’s part, remember that Google has spent much of the last year ditching dozens of investments in technologies and services that it made in previous years. It’s clear the company, in an effort to move beyond its core search advertising business, threw almost anything up against the wall to see what might stick. It had the money and the youthful energy to try anything, but half a decade of such an approach hasn’t led to significant new businesses.

When co-founder Larry Page became CEO last year, he finally stopped that wasteful approach and began to unwind the clearer failures. Many more projects are in a maintenance mode or even limbo. Google’s focus is now on Google+, the company’s attempt to own a social platform where people engage with content in a way Google can actively mine — not easy to do in mobile apps, where users are increasingly focused.

I won’t be surprised if Android ends up in the maintenance mode list in the next year or two, a pseudo-open source project that Google maintains but doesn’t invest in, providing a cheap OS for mass-market devices from which Google gets commission-free search revenues, even as the more lucrative search ads go to professional users’ devices, such as the iPhone.

Threat No. 2: No strong commitment to Android from device makers

Samsung has been able to ride Android to become one of the top smartphone sellers in the world, trailing only Apple. But Samsung trots out many horses, not just Android. It has its own Windows Phone, the Focus S, and is working on Windows 8-based devices. It also has had good results from its Bada OS, used in entry-level smartphones both for poorer customers in Europe and the large untapped market in developing countries. Additionally, Samsung recently decided to merge its Bada OS with the open source Tizen OS core, which could give it more resources to expand Bada’s presence.

It’s true that most of the Android device innovation is coming from Samsung and no one else. But those innovations are almost all on the hardware side, and they could be used in Windows Phone, Bada, and other devices. Anyone who believes Samsung is deeply invested in Android is wrong; Samsung will play wherever it needs to, working with anyone and everyone, which has long been the successful strategy of large Asian electronics firms. Android is a convenient — and so far successful — platform for Samsung’s ambitions, but Samsung will drop Android should the need arise.

The other Asian manufacturers using Android are even more opportunistic. Despite a promising start, HTC adds little to the Android platform at any level, delivering a generic hardware and software experience more in line with the traditional “disposable cellphone” strategy long standard in the mobile business than with the “your platform forever” strategy RIM introduced with the BlackBerry more than a decade ago and that Apple has taken to a whole new level with iOS. Acer, Asus, Sony, and the rest are even more generic, with innovations centered around superficial qualities such as bezel design or obviously self-interested proprietary services that are poor imitations of iTunes, iCloud, or BlackBerry Messenger.

Some people believe the “fair-weather friend” nature of these companies explains Google’s purchase of Motorola Mobility. Remember — all those terrible 7-inch tablets based on Android 2.2 “Froyo” were made despite Google’s public pleas not to. But the OEMs didn’t care; they thought they might sell a bunch of these patch jobs during the 2010 holiday season, tempting buyers who wanted an iPad-like device for less money. Google’s Motorola buyout began soon after. And we saw last year how quickly Samsung and Acer “forgot” about their Chromebooks, after Google’s poorly conceived Internet-only Chrome OS tanked.

Whether or not that was Google’s main justification — Motorola’s mobile patents are just as often cited as the reason — even the starry-eyed folks at Google have to understand by now the OEMs’ uncommitted commitment to Android. They’re committed to cheap, free, and easy. (As are the cellular carriers, who keep pushing non-Apple products to no avail because they make more money in the short term on the competitors’ sales. However, those customers turn over more frequently, reducing carriers’ long-term profits. Oh, the joys of quarterly earnings!)

Basically, there’s no strong loyalty to Android — not from device makers, not from carriers, and perhaps not from customers who regard their Android smartphone as simply a smartphone (its Androidness being incidental) or a gateway to an iPhone. “Easy come, easy go” may be Android’s epitaph.

Threat No. 3: A likely loss in the Oracle lawsuit over Android’s Java base

The trial that began last week over Oracle’s claims that Google stole the Java APIs for use in Google’s underlying Dalvik JVM has been a fascinating Silicon Valley soap opera, mainly for the spectacle of former Sun Microsystems execs testify against Google in favor of Oracle. Never mind that Sun’s culture — like Google’s — was pro-open source, and that many Sun employees have been bitter about Oracle’s takeover in the name of making money, not one of Sun’s core skills.

Cnet’s Dan Farber has a nice wrap-up of the testimony from Sun execs, including founder Scott McNealy, former CEO Jonathan Schwartz, and Java founder James Gosling. In a nutshell, all three claim that Google was wrong to use the APIs without a license from Sun. Where they differ is whether Google was legally obligated to have done so, with Schwartz saying in essence that Google should have but couldn’t be compelled to legally, given how it worked around the law. The other two say bluntly that Google was legally in the wrong, but acknowledge Sun wasn’t the kind of company to go after infringers. All three testified basically that Sun gritted its teeth but said nothing publicly.

Oracle, of course, is not that kind of company. It’s as fearless and profit-driven as Apple, and it’s more willing to brawl in public.

I fully expect Oracle to pull off a victory in this case, as it did when the company sued SAP a couple years ago. At first, its claimed received a skeptical reception, but Oracle proved them in embarrassing detail. The same pattern seems to be occurring here. (The lawsuit has deeper implications on all software developers. My colleagues Simon Phipps, Neil McAllister, and Bill Snyder have done insightful analyses on these implications.)

Oracle won $1.3 billion from SAP and could win as big a settlement from Google — wiping out all of its Android revenues to date. Plus, Google’s future revenues per device would be subject to a commission to Oracle, leaving Android no more profitable to Google than iOS, Windows Phone, or any other platform. Additionally, those device makers who now pay no licensing fees to Google will likely have to pay either Google or Oracle, removing one of their chief benefits from using Android. Both results would take away much of Google’s financial motivation to stay invested in Android.

Assuming Google loses the trial, the damage to the company will be more than monetary. Google’s behavior as shown by the emails and other evidence so far presented is not that of a company that does no evil. In the last year, it’s been clear that Google’s public morality is not matched internally. The intentionality of avoiding a Java license from Sun shows how Google’s execs at all levels are nothing like the saints they like to present themselves at. That revelation is much more damaging than visibly and consistently playing the role of a hardball business exec or an unpleasant manager, as Apple’s Steve Jobs and Oracle’s Larry Ellison are known. With Jobs and Ellison, you knew what you got and could respect that they made no pretense about who they were.

Much of Google’s fan base comes from people who admire the open source movement behind Android and the “do no evil” slogan associated with the company. But we keep seeing that this is mere marketing fiction, creating a disappointment in customers attracted to Google for its ostensible ethics. Once you lose that, you can rarely regain it. Even if Google wins this lawsuit, these cynical business practices remain exposed.

Although such true believers form a small minority of the Android user base, they tend to be its leading evangelists. When the preachers leave, the congregation tends to disband.

What could keep Android going despite these threats

Together, these trends suggest a platform built on and supported by expediency. That’s not a long-term strategy, and it can’t compete with a highly capable, highly focused Apple or even a highly invested Microsoft.

On the other hand, owning half the smartphone market is nothing to sneeze at, and that heft gives Android a lot of momentum. It took RIM five years to destroy its own BlackBerry market through a combination or inaction and inept action; Nokia took as long. Microsoft’s Windows Mobile died faster, but only because Microsoft replaced it with Windows Phone after three years of intense neglect.

Android will continue to coast for a year or so even if Google and its hardware partners do nothing more. The variable is Windows Phone, which Microsoft has also mistreated by limiting its slick interface to underpowered devices with limited application capabilities and no ability to be used in business settings. If Windows 8 and Windows Phone 8 “Apollo” succeed this fall, the majority of mobile users not committed to the iPhone and iPad will have a compelling and immediate option to leave Android for. If Microsoft’s efforts fail — and there’s certainly controversy around Windows 8 — then Android users will have no real alternative but iOS, an option they’ve known of all along and will be less likely to jump to immediately.

Of course, Google could change the rules by becoming seriously focused on Android in an Apple-like way. That means finding business value beyond mobile search ads. Apple owns the media revenues, thanks to iTunes, and the cloud revenues are iffy, given the domination of cloud storage by Dropbox and Box and the poor mobile performance of Google Docs on the office suite front. Google is trying to address the storage deficit via Google Drive, but cloud storage is clearly a feature (as Apple recognizes with iCloud), not a big business opportunity. Google Docs would also need a major overhaul that Google was unwilling to do for its Chrome OS, iOS, or Android heretofore, which makes me wonder if Google Docs can ever be more than it is, at least with the HTML and AJAX technology that exists today. Microsoft’s Office 365 is similarly hamstrung.

The tech industry is not a linear one, so the market could change at any moment with a technology breakthrough or unexpected shift in strategy by any of the major forces. But pending such an abnormal event, it’s hard to see how Android sustains its momentum any longer.