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Android has the All Momentum in the Smartphone Business, iPhone on Decline

June 29, 2010 - Written By Chris Yackulic

I wrote earlier this month that Apple’s  iPhone juggernaut is not slowing down. I was quickly tagged as an Apple fanboy (which I am not), and I continue to believe that Apple’s position in the mobile industry is unbelievably strong. As Current Analysis analyst Avi Greengart explained to me recently, the scale of the content ecosystem Apple has created, coupled with the functionality, style and buzz of the iPhone, has sparked a virtuous cycle for application developers, customers and, ultimately, Apple. That dynamic is not going to be altered anytime soon. Just witness the 1.7 million Phone 4s Apple sold at launch.

And yet, Apple’s position of strength is coming under pressure from Google’s Android platform like never before. Google’s push is attributable to not only the number and quality of Android phones making their way to market, but also the multitude of innovations Google is adding to the platform. The stage is set for a smartphone shakeout, and Android appears poised to gain the most.

The platform has achieved astounding growth. According to research firm Gartner, Android surpassed Microsoft’s Windows Mobile OS in terms of global smartphone market share. Android’s share stood at 9.6 percent in the first quarter, up from 1.6 percent in the first quarter of 2009. Apple’s iOS also grew, from 10.5 percent in the first quarter of 2009 to 15.4 percent, but Android clearly has a lot of momentum. According to a recent survey by mobile software tools provider Appcelerator, more developers prefer Android than iOS for “its OS capabilities, platform openness and long-term outlook.”

As Business Insider noted recently, Google’s latest Android innovations offer users some features that Apple has not yet matched, and indeed does not seem to be contemplating right now. These include being able to see calendars from every Google account, support for Adobe’s Flash 10.1, APIs for developers that support cloud-based data backup, a messaging service that allows applications to more easily share information and, in a clear knock on iTunes, a planned music service that will allow users to store their music in the cloud and stream it to their handsets.

These new features–some of which are set to hit Android handsets in the next few months–coupled with increasingly powerful devices like the Motorola  Droid X from Verizon Wireless  and the HTC Evo from Sprint Nextel  (not to mention all of those Samsung Galaxy S variants), are putting more pressure on Apple on the high end. Android is increasingly becoming as much a trend setter for mobile as the iPhone.

“It’s a fantastic thing to witness, the competitive dynamic between these two companies,” CCS Insight analyst John Jackson told me. “As much as it sounds like hype to obsessively talk about Google and Apple, these two are setting the competitive agenda for the mobile sector at this point.”

But there’s plenty of innovation to go around. Research In Motion  is pretty confident that its new OS, BlackBerry 6, will be a “quantum leap” forward. Likewise, Nokia  believes its MeeGo offering, which it will unveil later this year, will bring the company back to prominence in the high end of the market. And there’s also Windows Phone 7, which shows a lot of promise, and whatever the re-capitalized Palm  decides to roll out under the aegis of Hewlett-Packard.

For any of these efforts to succeed in the long-term, however, they will have to do what Apple has done and what Android is in the process of doing: build competitive application and content ecoystems that create positive feedback loops for all those involved. Already, Google’s Android partners are selling 160,000 Android phones per day, and there are now 65,000 apps in the Android Market. Those numbers have nowhere to go but up, creating even more scale. Indeed, I think the Linux-based operating systems that do not make it in the market–maybe Palm’s webOS, maybe Nokia’s MeeGo–likely will cede their developers and talent to Android, which is also a Linux-based system.

It’s simplistic to think that smartphones have to be a zero-sum game. But that doesn’t mean some players won’t benefit more than others. Apple is still dominant, but the momentum is on Android’s side.