The smartphone market entered a period of rapid transformation as consumers increasingly shifted from feature phones to internet-connected mobile devices. Competition among operating systems intensified as Apple, Google, Microsoft, Research In Motion (BlackBerry), and Nokia all sought to establish their platforms as the foundation for the next generation of mobile applications and digital services. While hardware innovation attracted much of the public’s attention, the real battle centered on software ecosystems, developer support, and application availability. Market share became increasingly important because larger user bases encouraged developers to build more applications, creating a virtuous cycle that attracted even more consumers.
Android’s rapid rise fundamentally changed the competitive landscape. By offering its operating system free to handset manufacturers, Google accelerated adoption across a wide range of devices and price points, enabling Android to quickly gain global market share. At the same time, smartphones were becoming an increasingly important platform for digital commerce, mobile banking, and payment applications. As smartphone penetration expanded worldwide, financial institutions, merchants, and payment providers recognized that mobile devices would soon become a primary channel for customer engagement, fundamentally reshaping how consumers shop, pay, and manage their finances.
In case you were wondering how the Android mobile operating system has been faring in its battle with Apple’s iOS, RIM, Symbian and others, this week’s news from Gartner tells the story. Android is a roaring success with a 25.5% global market share. It’s hard to argue with its price to the handset maker and mobile operator: free. In terms of market share, even iOS has dropped less than half a percentage point in a year to 16.7%. The real losers have been Research in Motion, maker of the Blackberry, and Microsoft.
Next year’s numbers will likely reflect a few changes. Apple might drop a bit further but don’t cry for Steve Jobs as the iPhone will remain the leader in the high end of the smartphone market and still contribute a whopping 30% or more to Apple’s revenues. RIM’s fortunes are looking grim as no products to galvanize consumer interest have emerged from the firm. And Microsoft can only go up from its 2.8% share – and it will. Windows Phone 7 was just released and with a $1B marketing campaign in the works and a very good mobile operating system, Microsoft should start gaining real momentum. And it will be just in time.
Finally, Android will face its own issues, the largest of which is its variability. Because it is open source, every handset maker and mobile operator can tweak the operating system to better support its business needs. That makes for different user interface standards, potential pre-installation of bloatware and its cousin craplets, and other sins that create incompatibility, increase consumer confusion and application developer frustration. To forestall chaos, Google is going to need to step up and make some standard profiles it isn’t too late to do so.
Mercator’s forecast for smartphone penetration in the USA is less optimistic than Nielsen’s recent numbers showing that 50% will have smartphone by 2011. We add another two years to that figure. But the smartphone sea change is well underway and it’s going to touch merchants, consumers, financial institutions and the payments industry in unexpected ways.
Gartner also said that global mobile phone sales totaled 417 million units in the third quarter of 2010, a 35 percent increase from the third quarter of 2009. Smartphone sales grew 96 percent from the third quarter last year, and smartphones accounted for 19.3 percent of overall mobile phone sales in the third quarter of 2010.
In terms of North America stats, Apple’s share surged past Research In Motion (RIM) but it still falls behind Android. Gartner estimated that Android phones accounted for 75 percent to 80 percent of Verizon Wireless’s smartphone trade in the third quarter of 2010.
Android’s emergence as the leading smartphone operating system demonstrated the power of an open platform supported by broad manufacturer adoption and a rapidly growing developer community. While competing platforms maintained important strengths—including Apple’s premium ecosystem and Microsoft’s renewed investment in mobile—the overall direction of the market became increasingly clear as smartphones evolved into essential tools for communication, commerce, and financial services. The industry’s focus gradually shifted from hardware specifications to the quality of software ecosystems and the services built upon them.
For the payments industry, widespread smartphone adoption represented a transformational opportunity. Mobile banking, digital wallets, contactless payments, loyalty programs, and merchant applications all became more practical as consumers carried increasingly capable devices wherever they went. Although individual platform market shares have continued to evolve over time, one prediction proved especially accurate: smartphones would fundamentally change the way consumers interact with merchants, financial institutions, and payment providers, making mobile technology a cornerstone of the modern digital payments ecosystem.
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