Samsung and Facebook – One chance

Samsung has one chance to avoid the fate of its predecessors.

• Samsung looks to be teetering on the edge of suffering the same fate as all market leaders before it as its products have become commodities.
• In order to prevent disaster, it must add something back to its products to make them again desirable to users.
• The iPhone now has large screens and the Chinese are voraciously attacking at the low end, leaving Samsung very little to fight with other than price.
• This is why its relationship with developers and providers of Internet services is now so important.
• RFM’s analysis has indicated that its best chance is to work with content developers to create Samsung specific versions of their apps. (See Samsung and Google – Gorilla war, 27^th May 2014).
• This is why Samsung’s recent meeting with Facebook is so important.
• Smartphone users spend 24% of their time on their devices using social networking and Facebook accounts for 75% of that time.
• If Samsung and Facebook work together to make the Facebook experience meaningfully better on Samsung devices than anyone else’s, then users will have a reason to choose a Samsung product other than price.
• This is the key to retaining margins at attractive levels as preference is what drives pricing and how Apple makes such fantastic margins.
• Currently, over half of the Android devices in the hands of users are made by Samsung.
• This combined with the fact that Android remains very fragmented means that every developer wants to develop for Samsung devices before any other.
• This creates the potential for a mutually beneficial relationship that can extend far beyond Facebook to all of the other major app developers.
• Games can be extended with Samsung specific versions with extra levels or downloadable content as can media or productivity apps and services.
• This is where Samsung must focus and it must do it immediately.
• The more share that is lost, the less attractive the relationship becomes for app developers and the less willing they will be to write Samsung specific versions.
• With Google firmly in control of the ecosystem, this is Samsung’s only option to support its handset margins and avoid the death spiral that has consumed all market leaders before it.
• There is a chance for Samsung to avoid repeating history but it must act immediately and wholeheartedly.
• In the short-term I still see downside in Samsung to KRW1m where there is significant psychological resistance.
• Google, Microsoft or Apple in the short-term make far better options in the ecosystem.