Smartphone Commodity Usage

Frasier Speirs switching from iOS to Android has really stuck in my mind.

Let’s review his thinking in brief:

It turned out that, consistently, what I did with my phone was exactly this, in order of screen time:

  • Twitter
  • iMessage
  • YouTube
  • Google Maps
  • Instagram
  • Overcast (although Screen Time doesn’t count screen-off time, which would have put Overcast at #1 by a country mile.)

Everything else was typically minutes per day at most. This started to sow a seed of doubt in my mind – why do I have this £1,000 phone to do such, well, basic things?

Boldfaced emphasis added by me.

He’s pointed out something that I think Apple might have gotten a clue about.

We’re No Longer in Smartphone Plateau. We’re in the Smartphone Decline.

As the market reaches maturity, smartphones are verging on becoming a commodity — a fate the major smartphone manufacturers like Samsung and Apple desperately want to avoid.

“Commoditization is the normal cycle for most products,” says Willy Shih, a professor of management practice at Harvard Business School. “When the first Xerox plain-paper copier came out, they were really cool and Xerox became a fabulously successful company. But then their patents expired, and other companies like Canon came in and introduced low-cost office copiers. Now, copier machines are a dirt-order commodity.” Think very hard about your own office — can you name the brand of your office copier?

Or take televisions, another commodity where consumers show little brand loyalty, allowing for upstarts like Vizio, TLC, and Hisense to strip market share away from established players like Sony or Panasonic — which, of course, had displaced established players in television like Magnavox or RCA.

“Once you get driven into the commodity space, you start to think, ‘Oh, I’ve just got gotta come up with the next great feature that will cause people to buy my product over the others,’” says Shih. “But at some point, you way exceed what consumers need or are willing to pay for. And then you become a commodity.”

That ignores what Fraser Speirs has discovered for himself.

Commodity usage.

Practically all phones can do all things now. And Speirs’ collection of use mirrors that of many people.

While phones can still differentiate themselves, what people use them for is now a commodity.

There’s no distinguishing feature that only one phone can do. This is no longer the world where the iPhone was revolutionary.

Apple has clued into this:

The iPhone is uniquely positioned in two ways, one that works for it and one that works against it. In markets like the U.S. or some European countries, where the iPhone enjoys significant market share, iOS and its ecosystem are a true differentiator. If you want a phone that can use Messages and avoid the dreaded green bubble when texting people, there’s only one manufacturer available: Apple. The same goes if you want to use a HomePod or an Apple TV, or want a phone that integrates easily with your MacBook.

Boldfaced emphasis added by me.

Still, Apple has a firm grip on a large and affluent share of the U.S. market, and Tim Cook and his executive team have a clearly developed long-term strategy to deal with a world where people buy fewer phones: Make the phones themselves more expensive (thus the iPhone X at $999, followed by the iPhone XS Max at $1,099), and attempt to boost services revenue (everything from Apple Music to iCloud storage to Apple Pay to the 30 percent Apple rakes in from any App Store purchase) as quickly as possible, with the goal of bringing in $20 billion a year by 2020.

In other words, lock-in. Creating a captive audience.

Do you know what people who don’t have freedom are called?

Hostages!

This is not a strategy that lasts.

But globally, iOS isn’t as attractive. In the Chinese market, an app called WeChat is practically an operating system unto itself, allowing users to do everything from message someone else to pay their electrical bill or order food. And WeChat runs equally well on Android or iOS, meaning the iPhone has consistently struggled to find a foothold in the Chinese marketplace. In other markets, messaging apps like WhatsApp are dominant, and phone price is much more of a concern. The results are stark. In the U.S., about 40 percent of phones run iOS. Globally, that number is just 14 percent.

Boldfaced emphasis added by me.

What’s that saying? “Software ate the world.”

There’s an example of software eating smartphones.

People aren’t getting a phone for the sake of the phone. They’re buying any phone that will successfully run a single app: WhatsApp.

Apple is hoping that its services strategy will bind their customers to them.

How long before people realize they’re not being served, they’re being handcuffed instead?

And really, what Apple services aren’t available elsewhere? Speirs points out that Google’s ChromeOS offers services that Apple’s iOS doesn’t.

Both Google and Amazon are probably even hungrier than Apple is. And, unlike Apple, their businesses exist primarily as services.

This is going to get interesting quickly.

While Apple prices its phone in the upper atmosphere, the winning strategy is to create an app or service that any phone can use.

Google has repeatedly shown itself to be privacy-violating as well as negligent in policing its own Play Store. They also can’t focus (really, five messaging apps?) Their success with ChromeOS is actually an anomaly in that company’s history.

Amazon, however, takes privacy seriously. And Bezos is an apex predator who Wants It All.

With the massive cloud infrastructure Amazon has created, how long before they dedicate just a small portion of it to going after smartphone services in a big way?

Apple can’t hold onto its customers forever. Fraser Speirs is proof of that. Is he the start of a trend?

Previously here:

The Revenge Effect Of High iPhone Prices
Apple Must Do What Needs To Be Done
Apple iPhone Sales Damage Control
Apple’s New Pricing And USB-C Move Kills iPhone Sales
Apple: Extortionate Rent Collector
Apple Runs Scared, Runs Stupid, Runs Smug

This entry was posted in Android, Apple, iOS, Smartphones. Bookmark the permalink.

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