Last year, I wrote an article about the upcoming explosion of the 'not so smart'smartphone business. The iPhone and iPad hype would not last for too long, I stated (that is, a strategy restricted to only high-end smart devices). As a matter of fact, it's kind of over already. The new players, characterized by a more flexible business outlook, are already 'following the money' by addressing the middle-class and ethnic minorities. Or in marketing terms, they are simply being more targeted, personalized and tailored in their offerings.
The new mantra is not to produce mostly technologically advanced products, but creating real value for customers. Yes, I said that before too:
"Product innovation is about giving value to a customer, and this is independent from how advanced the technology may be. In general, I reckon this concept may be tough to digest for many of my readers in developed markets, who typically tie the concept of progress to up-to-the-minute technology innovations. In general, in developed markets the effort by [CSPs] is placed on enabling the most up-to-date technology and devices, rather than focusing on what customers really want and can use – even when it doesn't involve the latest gadget – until the organization is ready to fully support the massive offering of such state-of-the-art inventions."
But things are finally changing.
The Google-Apple Competition
Despite strong marketing efforts and buzz employed by Apple, Android stepped up, and there has been an increase in demand for smartphones that run on Google's OS. According to ComScore, 61.5 million Americans ages 13 and older owned a smartphone, and 26 percent had an Android-based phone. Third-place Apple followed with a 25 percent share and Research In Motion, maker of the BlackBerry, led the pack with a 33.5 percent share.
ComScore found that 234 million American ages 13 and older had a mobile phone, with Samsung the leading manufacturer with a 24.5 percent share. LG was second with 20.9 percent, followed by Motorola, 17 percent; RIM 8.8 percent and Nokia, 7.2 percent.
Why is this happening? Google has been taking some smart steps, and there's more good stuff on the horizon.
The New Google-Apple Battleground
Let's think about it for a moment. U.S. Hispanics and Asians contributed two-thirds of the annual spending increase last year. Just Hispanics, which are 16 percent of the population, represented nearly 50 percent of U.S. consumer spending growth in 2010.
No wonder Google is now focused on specific strategies for the Asian, African-American and Latino markets in the U.S. In fact, the company has created a 'specialist team' to focus on the U.S. Latino market and plans to be methodical about connecting with this market across platforms. Google says that it determined about 18 months ago ago that the U.S. Hispanic market had become too big to ignore, with about a trillion dollars in purchasing power.
The U.S. Hispanic market is one of Google's fastest-growing segments. According to the company, U.S. Hispanics are 58 percent more likely to click on search ads, compared with the general population. This market segment is significantly more likely to recall online ads, particularly video ads, when looking for retail-related information. And six out of 10 made a purchase in a store as a result of seeing online advertisements while researching products – 22 percent more than the general population.
Minorities are the New 'Majorities'
A recent survey from Nielsen shows that smartphone adoption rates are higher among minority groups. "Hispanic and Asian/Pacific Islanders reached levels of 45 percent during the fourth quarter of 2010, with 33 percent of African Americans owning a smartphone during the same quarter. In comparison, only 27 percent of white Americans had a smartphone during the fourth quarter of 2010… Some 60 percent of Asians/Pacific Islanders who got a phone in the last six months got a smartphone, compared with 56 percent of Hispanics, 44 percent of African-Americans and 42 percent whites."
Google is going after middle-class consumers overall. It makes sense. According to IDC research, the high end of the market has been important to help grow the smartphone market in recent years. The analyst firm expects vendors to provide more mid-range and low-end smartphones at lower prices to reach the mass market.
Android's market penetration, helped by the numerous handset manufacturers adopting the platform (including HTC, LG Electronics, Motorola and Samsung) has become a cornerstone of the smartphone market's growth, noted Ramon Llamas, senior research analyst at IDC. Adding to the competitive landscape is the entrance of two refreshed operating systems, Symbian 3 and Microsoft's Windows Phone 7 platform.
How is Apple Responding?
The Android success has forced some changes in strategy for Apple. We heard last week that Apple would target Android with $200 iPhone Mini. The new device will cost only $200 without a contract, and will be one-third smaller than the iPhone 4.
"Instead of targeting 25 percent of the global mobile phone market, Apple would be going after 100 percent," according to a recent article published by Bloomberg.
Is it true? Some say it's not.
In any event, the new game is on, and as much as things look promising for Android, both Google and Apple will have a lot more guests attending the party. Which strategy will win? Apple's closer business model or Google's coopetition strategy? Or something else?
I don't know whether Google's strategy is a smart reaction to Apple's business model (that is, a Silicon Valley company that up until now has been pushing their high-end technology globally), the result of a more global understanding of the communications business (where frugal technology efforts born in emerging markets began to show global success) or a combination of both. But the war for the global middle class is on and includes some key, new players coming from emerging markets that have been conquering the pockets of consumers in developed markets. I'm inclined to think that Google has it 'more right'… that is, for now.
ZTE's and Huawei's Smartphone Strategy
According to Pyramid Research, low-cost smartphones, such as those offered by ZTE and Huawei, are not only popular in emerging markets. Even in the more affluent world, such as Western Europe, inexpensive smartphones are becoming a 'smarter' option for many.
Pyramid says that ZTE, for instance, has just reported an annual growth of 150 percent in Europe, a figure three times higher than its average global unit sales growth in 2010.
This is just the beginning of a new phase in the communications industry. "Rapid adoption of e-tabletsin education, business and other enterprise will super charge the exchange and maintenance of global data bases in all industries and an all aspects of personal life, beginning with consumer health. The pervasiveness of a mobile, instant information-based world will be a catalyst for exciting, lightning fast change that has a lucrative business upside."
The malleability of some new players is outstanding. They understand their customers, adapt to their needs and deliver what customers perceive as value. There will not be survival, without personalization. What about the CSP community?
Can you hear me now?
By Monica Zlotogorski, Vice Chair, TM Forum's Latin American Advisory Board, and Editor, Inside Latin America