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Is Android’s market share peaking?

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For all the attention the latest smartphones and tablets get, 2012 isn’t quite shaping up to be the banner year phone makers and mobile operators wanted. Most projections have the worldwide mobile phone market growing by a mere four percent during 2012 — still growing, to be sure, but at the slowest pace since 2009, when Android first hit the mainstream. Some figures for Android aren’t all that promising either, with some sources finding sales figures for Android handsets have declined during each of the first four months of 2012. What’s more, some numbers indicate 2012 will represent Android’s peak — it may have already maxed out its share of the mobile market.

What’s behind these figures? And does it mean Android’s salad days will soon be behind it?

Android worldwide

Some of the latest forecasts on the growth of the worldwide smartphone market come from IDC, which forecasts just over a four percent growth rate for all of 2012. That’s the lowest annual growth rate since 2009, when Android phones finally started to hit mainstream consumers. IDC attributes the slowdown to both tough economic conditions around the world — presumably including the Eurozone crisis and lingering doubts about the U.S. economy — along with a steep 10 percent decline in feature phone sales. IDC expects uncertain economic conditions will prompt many feature phone owners to hang on to their current devices rather than upgrade to smartphones.

IDC doesn’t think smartphones will be standing still: It forecasts overall smartphone shipments worldwide will increase by 38.8 percent during 2012, but that most of that increase will be offset by reduced shipments of feature phones. And there are a lot of feature phones around the world. Despite the popularity of smartphones, IDC believes feature phones will still account for a whopping 61.6 percent of the worldwide mobile phone market this year.

More significantly for Android, IDC predicts Android will reach its peak market share amongst smartphone Android operating systems this year, topping out at 61 percent of the global market. IDC believes that Android will continue to command the single largest share of the smartphone OS market in 2016, but it will have shrunk down to 52.9 percent.

Chart: Worldwide Top 5 Smartphone OS Market Share Forecast, 1Q 2012Description: Tags: Author: IDCcharts powered by iCharts

Interestingly, in IDC’s analysis, Apple’s iOS doesn’t fare much better: IDC projects iOS will command a 20.5 percent share of the worldwide smartphone OS market this year, and in 2016 that’ll be 19.0 — a small decline, but still a decline. Similarly, IDC thinks RIM will still be around and holding about even on market share: 6 percent in 2012, 5.9 percent in 2016.

The real winner in IDC’s view? Windows Phone. The firm projects Windows Phone will amount to a mere 5.2 percent of the worldwide smartphone OS market this year, but will balloon to a whopping 19.2 percent by 2016, a compounded annual growth rather of 46.2 percent. That would be enough to make Windows Phone the number-two mobile OS by 2016. Much of Windows Phone’s marketshare gains would come at the expense of Android and “Other” platforms in IDC’s analysis, presumably including Nokia’s sunsetting Symbian platform, as well as projects like Tizen and Mozilla’s yet-to-be-birthed Boot to Gecko.

Of course, most platforms will still be able to claim a net uptick in unit sales as smartphones continue to gain popularity — IDC believes close to 1.8 billion mobile phones will be shipped this year, but that number will be 2.3 billion by the end of 2016. In other words, even if Android has a smaller slice of the pie in 2016, the pie will be more than 28 percent larger.

Android in the U.S.

US Smartphone Installed Base Asymco Horace Dediu

What about the United States? Android’s marketshare fortunes may be headed toward a peak on its native shores as well. According to data released this week by Comscore, April 2012 represented the fourth consecutive month where the number of new Android devices coming online has declined. During April, Comscore found that Android added 450,000 users in the United States—which is not an insignificant number, to be sure. But it’s lower than March, which was 1.96 million. And lower still than February and January, which were 2.93 million and 3.44 million, respectively. Android has had consecutive monthly declines in new user adds before — but never for four months in a row. Horace Dediu has put together several charts visualizing U.S. smartphone market share and user additions, based on Comscore’s data.

Do corporations hate Android?

Perhaps the most surprising thing about IDC’s forecast is that it sees Windows Phone eventually rising to become the number-two smartphone operating system — largely by eating away at Android. Right now, Windows Phone is barely a ripple in the consumer marketplace, with even Nokia’s top-flight Lumia handsets getting at best a lukewarm reception.

However, that forecast may have something to do with how large companies are embracing Android, or rather, how they are not. In a survey of mobile device management (MDM) vendors conducted in April, market research firm Gartner found just 9 percent of enterprises are planning to make Android their primarily mobile platform in the next year. In comparison, a whopping 58 percent of enterprises plan to make Apple’s iOS their main mobile platform, with 20 percent standardizing on RIM’s Blackberry platform.

The main reason? Gartner polled MDM vendors, so you can guess what they said: Android is perceived to have far poorer device management capabilities for enterprises and larger organizations than BlackBerry (which kind of invented the category) and even Apple’s iOS. Android doesn’t offer many hooks for device management solutions to hook into; which makes it hard for companies to manage and set policies on fleets of Android devices. If MDM companies want to support Android, they either have to do it in a feature-poor way, or write their own libraries to support needed features. And that’s where Android fragmentation rears its head. In many cases, those libraries would have to be crafted on a device-by-device basis—and as OpenSignal maps pointed out last month, there’s no shortage of unique Android devices. Although 3LM (bought by Motorola, now part of Google) recently announced major updates to its enterprise-level device management tools for Android… guess what? They’re for Ice Cream Sandwich only.

OpenSignalMaps Android Device Models

So guess which smartphone platform could have an easy time making headway in enterprise? Windows Phone. Not only will Windows Phone have an inside track on integrating with Microsoft’s corporate software offerings — including Office 365, Exchange, Active Directory, and the ever-popular Sharepoint — but Windows Phone 8 “Apollo” will reportedly address enterprise device management shortcomings in Windows Phone 7.5 “Mango.” If Microsoft can get its enterprise story together, it may be able to capture market share from Android, and maybe prove IDC right in four years.

Why could Android be hitting a brick wall?

As always, market share estimates should be taken with a grain of salt — even when offered by analytics companies with the best of intentions and methodologies. All these figures represent educated guesswork rather than cold hard facts, and projecting forward four years in the turbulent mobile industry might be better characterized as an act of chutzpah than one of analysis.

Does everyone want smartphones? — Market watchers have been predicting for a while that smartphones will come to account for 50 percent of the U.S. mobile phone market by the end of 2012—and, even with Android’s recent drop-off in adding new users, it still seems like that goal will be met. However, smartphone markers may find the remaining 50 percent of the U.S. mobile market will be tougher to convert than the first 50 percent.

One possible reason might be in Comscore’s smartphone usage data. Why do people have smartphones? To surf the Web, play games, and use apps, right? According to Comscore, that’s only partly true. They find barely half (50.2 percent) of U.S. mobile phone users launched an app during April 2012. Slightly fewer (49 percent) launched a browser. Some 36 percent checked in with social networks, while just under a third (33.1 percent) played games. Barely a quarter (25.8 percent) listened to music. What’s the most-used non-voice feature on mobile phones? Texting. In April, 74.1 percent of U.S. mobile phone owners used text messaging. Admittedly, that’s down half a percentage point since January, but it’s still head and shoulders above any other mobile phone activity. Bottom line: Feature phones do voice and text just fine, and plenty of mobile users seem to get along without apps, browsers, or social networking.

android money shutterstock palto

It’s the economy, stupid! — The counter-argument to “not everyone wants a smartphone” is, of course, “everyone wants a smartphone, but not everyone can afford one.” The long-term cost of carrier-subsidized phones can be daunting for anyone on a shoestring budget. Sure, a top-flight smartphone might only cost a couple hundred dollars up front, but even the most basic contract carries a cumulative price tag over $1,500 for two years of service—and some reports have the average two-year cost of smartphone ownership landing near $3,400 once fees, overages, and other costs are rolled in.

There’s no question the economy is dampening some consumers’ enthusiasm for smartphones, but that should impact all smartphones, and Android might see less of an impact thanks to a number of carriers offering inexpensive pre-paid Android devices. Getting a foot in the door with the Android platform is basically easier than any other smartphone platform — particularly Apple’s iPhone, which will only become available as a pre-paid phone from a single regional carrier later this month. Yet during the same four months, Android has seen consecutive declines in new users in the U.S., while the iPhone has been faring a bit better. According to Comscore, the iPhone saw an increase in new users from January to February (910,000 and 1.52 million, respectively) and basically held flat from March to April (1.13 million to 1.15 million). That’s in the same economic conditions Android is facing, and with no pre-paid iPhones yet on the market to appeal to cost-conscious consumers.

The two-year itch? — It’s worth noting that the beginning of 2012 marks the two-year anniversary of Android first becoming a major player in the U.S. smartphone market. Many consumers whose first smartphones was an Android device are now reaching the end of their contracts, and facing a decision about whether to stick with what they’ve got, buy a new Android device — or perhaps defect to a different platform.

What did consumers get if they bought an Android smartphone in late 2009 or early 2010? Android 1.6 “Donut” or maybe Android 2.0 “Éclair.” If they were lucky, maybe they got an upgrade to Android 2.2 “Froyo” or Android 2.3 “Gingerbread.” They are almost certainly not getting an upgrade to Android 4.0 “Ice Cream Sandwich.” It would be easy to argue that these are the consumers that have borne the brunt of Android’s growing pains and fragmented ecosystem—and paid a high cost to carriers for the experience. In the meantime, Apple is still selling a phone it released in 2009 (the iPhone 3GS), and it’s still supported by the latest version of Apple’s iOS. Many consumers who entered the smartphone market with Android may not stick with it—particularly since the iPhone is now available from three of the four U.S. national mobile operators.

Bottom line

It’s too early to say whether 2012 will represent the peak of Android’s market share. If market research figures are to be believed Android seems to be losing some momentum, at least in terms of signing up new smartphone users. But Android may just be the first platform that’s large enough to show the symptoms of slower growth in the overall smartphone market. If the overall growth of the smartphone market continues to slow, eventually all smartphone platforms are going to have to change the way they complete. The race won’t be to convert new users from feature phones—it’ll be about giving consumers a reason to defect from one smartphone platform to another.

[Android/money image via Shutterstock / Palto]