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The Mobile OS Market

Is There Room for a Third Competitor?


Image © Apple

Image © Apple

Image © Apple

It seems the dust is settling on the turbulent mobile OS market, and two players have clearly emerged. Apple's iOS and Google's Android now power virtually all of the world's mobile phones. Technology markets can certainly undergo fast and dramatic changes, but it doesn't mean monopolies can't exist. Microsoft dominated the PC operating system and office software market, enough to spark anti-trust investigations. Google also maintains a dominant role in the world of web search. Will the current duopoly be a lasting feature of the mobile market? What challenges await an entrant to the mobile OS world?

Android: Versatility is the Key

Android now powers approximately 80% of the mobile handsets in the world. The key to Android's ascent to dominance has been its openness and versatility in adopting a variety of roles. The versatility of Google's open-source approach to Android allowed device makers to tailor the OS to its particular device, while offering a core product with a user experience that customers enjoyed. The model of Android's success certainly shows some parallels to Microsoft Windows' rise to dominance, in allowing both vendors and users to customize their mix of hardware and software. The fact that Android works well in a variety of hardware contexts makes it a difficult option to ignore from everything from budget tablets like Amazon's Kindle Fire, to high end phones like Samsung's premium Galaxy line.

Apple iOS and Customer Experience

Apple's trajectory with iOS seems to show history repeating itself with the model of the Macintosh computer. Apple upended the mobile phone market with its release of the iPhone, ostensibly creating the modern smartphone as we know it, and changing the way customers interact with technology. Since then, Android has emerged as the generic, open alternative to iOS, and device makers have scrambled to replicate the hardware that Apple created. Apple now occupies a more niche role in the smartphone market, but iOS continues to have an incredibly lucrative app and music ecosystem. Users are comfortable in the "walled garden" that Apple has created with iOS, and iPhone users tend to be more valuable economically on average than Android users. Much like with the Mac, customers will continue to remain loyal to Apple products due to the unique user experience that they provide.

Other Entrants: Windows Phone

When looking at whether a third player is to emerge in the mobile OS arena, the picture is unclear. Windows Phone is the likely contender for third place, due largely to the weight of capital that Microsoft has put behind its release. But Windows Phone has struggled despite Microsoft's partnership with handset maker Nokia; the struggles have been enough for Nokia to move out of handsets entirely, selling its hardware division to Microsoft in 2013. Other entrants have emerged, particularly to serve the value driven market, namely Mozilla's Firefox OS, and a number versions of Linux based OS, led by Ubuntu. However serving a low end of the market that Android already can reach however sub-optimally may not be lucrative enough to be sustainable.

Challenges: Network Effects

It appears that the mobile OS marketplace shows some winner-take-all type dynamics; this has been further driven by the commodification of phone hardware, and the importance of apps and the software platform. Apps are becoming the deciding factor in mobile phones, and the creation of an application ecosystem that will attract customers is both expensive and time consuming. Apple managed it by effectively being first to the party, and Google managed it by flooding the market with handsets using an open system. For another entrant to compete against these now established incumbents, they would have to offer something compelling enough to lure people away from app purchases already made, and mobile computing habits that are already formed. It may take a complete change in our current model of mobile computing, much like Apple's release of the iPhone, to make any impact on the current duopoly.

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