Google’s Android software is on the cusp of becoming a heavyweight in the smartphone world, says Gartner Research.
Gartner thinks Android will be the number two operating system for smart phones by 2012, going from 2% of share today to 14%. It will still lag behind Nokia’s open software platform, Symbian, though.
Eric Schmidt, Google’s CEO, agrees. On last night’s earnings call, Schmidt said, “Android adoption is about to explode,” according to Erick Schonfeld at TechCrunch who listened to the call. The reason is simple. Google is giving away the software, and it has multiple hardware devices, and carriers on board.
Schonfeld counts 12 phones, with 32 carriers in 26 countries. Since the software is free, the phones should be cheap. So far that hasn’t been the case.
While we highlighted RBC research showing Apple’s (AAPL) market share growing, Gartner says it Apple will fall back by 2012.
Their argument is that Apple is limited because it only makes one device, and it likes to have exclusive carrier deals.
Of course, that’s not set in stone. If Apple opens to other carriers, as we expect, it could create an explosion in sales. Morgan Stanley says the market share could double if it gets on more carriers like Verizon.
Google’s Android story doesn’t mean much from a business perspective, until it starts making money. Google’s hope is to drive more people to the mobile web, where they’ll use search and Google Maps. From there, Google will start earning a return on the Android investment.
How are the prospects for that growth looking? According to Google’s CFO, Patrick Pichette, pretty good. On the call he said, ” On a quarter over quarter basis, mobile searches grew 30% on Google.”
That’s great for Google, but it remains to be seen if this will generate new revenue, or cannibalise desktop search revenue. Here’s the key questions that need to be answered on mobile ads:
- Will all the Google search paid-clicking that mobile users are doing be incremental paid-clicking? Or is it just going to be paid-clicking that used to happen on the desktop and now happens on the mobile phone? If it’s the latter, “mobile search” will not be a huge new opportunity–it will just cannibalise desktop search. We suspect a lot of mobile search will just cannibalise deskptop search. Not all of it, but a lot of it.
- Is consumer spending and GDP going to grow faster because consumers can shop on their phones? If not–and we have a hard time believing it will–then, again, we’re talking about an ad share spending shift, not a huge new pot of ad spending. Remember: The number of “clicks” consumers generate is irrelevant to the growth of search ad spending (if there was ever any doubt about this, the recession has proven it). What IS relevant is the amount advertisers spend. If consumers start clicking all day because of their phones, but they don’t buy any more stuff, the price per click will just go down. Again, this sounds to us like a share shift–away from traditional media and desktop, toward mobile–than a gigantic new advertising medium.
- On the display side, do you think advertisers will jump for joy at the ability to place a quarter-inch by half-inch unreadable banner ad in front of someone who is already squinting? We don’t. The fact that advertisers now have an opportunity to reach people 24/7 regardless of where they are is good. But the fact that they can only reach them with ads the size of paint chips isn’t going to get Madison Avenue all hot and bothered.