Interview
a16z Podcast | Apple and Google Won the Mobile OS War, But a New War Has Already Begun
- The global smartphone market is expected to complete its transition to smart operating systems within the next three to four years, leaving a residue of 5% to 10% of users who cannot afford devices.
- Future remaining devices are projected to retail at super low price points of approximately $25, $50, or $75.
- Current mobile OS market dynamics are not anticipated to change significantly over the next two to three years.
- The installed base of iOS devices is forecast to grow from roughly 500 million to between 700 million and 900 million, while Android usage is expected to reach 2 to 3 billion units.
- Global mobile phone usage is estimated at 3.5 to 4 billion users, with the top 2 to 2.5 billion representing high-spending demographics while the remainder spend between $1 and $5 monthly.
- Apple's ecosystem benefits from a self-fulfilling gravitational pull that attracts developers and high-value customers, with the company projected to top out at 800 million users before "winner takes all" effects fully manifest.
- Retailers and service providers are unlikely to reduce iOS app availability unless iOS drops to 10% or 25% of their subscriber base, despite potentially accounting for three-quarters of their current revenue basket.
- Consumer behavior varies by market, ranging from self-selection in the U.S. where $100 phones are purchased only by indifferent buyers, to high engagement in Indonesia where $100 phone owners have saved specifically for the device.
- Android serves a broader spectrum of customers including low-value users, resulting in e-commerce payment rates that are half those of iOS, whereas Apple retains a concentration of high-value customers.
- Apple is not expected to release a $150 phone due to the risk of diluting average value with users who lack engagement, though a $300 premium device remains a possibility.
- A competitive struggle is emerging on Android involving platforms built by Amazon, Nokia, and potentially Microsoft.
- The concept of "installed" applications is expected to become obsolete within five years, replaced by web apps, message system elements, or dynamically loaded cards.
- Future definitions of Android, its interaction with Chrome and Google Play Services, and the specific levers of innovation for the platform remain uncertain over a five-year horizon.
- Potential hardware shifts may introduce new interaction forms such as watches or smart glasses, necessitating new terminology like "smotch" or "wablet."
- Apple is described as having only the level of cloud capability it requires, while Google positions its mobile strategy as a competition against Facebook or Amazon rather than a direct fight with Apple.
- Google's Google Plus is characterized as a mechanism to index users for search relevance rather than a traditional social network.
- Market dominance was achieved through distinct models: Google via search reach and advertising revenue, and Apple via sustained iPhone sales driven by user experience.
- Smartphone adoption in the U.S. is projected to reach 50% of the population, eventually superseding the 1.5 billion shared or locked-down PCs as the dominant computing platform.
- App stores are compared to Yahoo from 20 years ago, featuring massive inventories without effective discovery mechanisms, SEO, or SEM equivalents.
- The future format for content interaction on phones, such as whether messaging links appear as strings or interactive elements, and the relevance of HTML5 versus native code, remain unresolved.
- Aggressive platforms like Line and WeChat are attempting to evolve messaging systems into comprehensive social, application, and identity engagement platforms.
- While Apple and Google exert some control over interaction trends, they do not possess direct command over the evolving "swirling soup" of mobile engagement.
- A divergence in strategy is observed where Apple moves down the stack to integrate specific hardware knowledge like the M7 motion processor, while Google lifts innovation up the stack into cloud services and Google Play.
- The current global installed base for these major platforms is estimated at 1.4 to 1.5 billion users.