Android – Fragmentation fix.

Google and China likely to completely take over their versions.

• The latest report from OpenSignal strongly implies that Android fragmentation is getting worse but I suspect that the reverse is true.
• The latest study shows that within a sample of 682,000 devices upon which the OpenSignal App. has been installed, there are 18,796 different Android devices.
• This is a significant increase on last year where 11,868 different devices were found within the same sample size.
• This does not mean that there were 18,796 different versions of the software but there are that many different handsets in the market.
• This is both a blessing and a curse.
• Greater diversity has made it possible for the cost of Android devices to be substantially lower than that of iOS and Windows Phone.
• This has been a major factor behind Android’s rise to around 80% of smartphones shipped in Q2A.
• The ability to buy a smartphone for less than $100 has enabled Android to penetrate huge markets such as China, India and Africa where cost is the single biggest concern of the consumer.
• At the same time, it has meant that handset makers have had to make huge compromises when designing and building the devices.
• This includes the removal of many hardware components as well as using older versions of the code which are much cheaper to implement.
• This has also meant that, in many cases, very little is spent on optimising the standard Android code to run on stripped down hardware.
• This has meant that third party applications either don’t run or behave erratically on different handsets from the same manufacturer.
• No one is immune from this problem as RFM’s research has found multiple instances from app developers where their app behaves differently on different models made by Samsung.
• This is why everyone develops for iOS first.
• By developing for iOS a developer knows that he is targeting a much more consistent group of devices as well as targeting a higher demographic in the market.
• This problem is endemic to Android and there is very little that is likely to improve unless something changes.
• However, I see that change is coming.
• RFM research reveals that both Google and the Chinese ecosystem players are working on addressing this issue.
• The only way that this issue can be addressed is for those that are writing the code to take more and more control of it.
• This is exactly what I see Google doing with GMS.
• GMS is Google’s proprietary, non-open code that sits on top of the open Android software which contains all of the Google services that users are keen to have.
• I see Google slowly expanding the scope of GMS to include more and more of the device’s functionality until the open piece is nothing more than a kernel.
• This will mean that Google will have effectively created its own proprietary OS and in doing so it will be able to control the fragmentation that keeps it behind iOS in terms of quality of experience and security.
• I see the Chinese players doing exactly the same despite the failure of Aliyun which it appears that Google was successful in blocking a couple of years ago.
• In the long term, this is likely to result in Android becoming nothing more than a kernel upon which ecosystem players run their proprietary systems and experiences.
• The end result will be less fragmentation within devices within a single ecosystem but much greater fragmentation between the different ecosystems.
• Currently, there is nothing visible that will prevent Google from succeeding in this strategy and the end result is likely to be more and more user data being captured by Google on its servers.
• This will be instrumental in maintaining its market share in mobile advertising and it will also help increase the relevance of the adverts that it sells.
• This combined with strong user demand for its services is why I do not see any other ecosystem challenging its dominance anytime soon.
• This is likely to mean growth in revenues above 10% for the next few years making the stock still look interesting despite its strong run over the last few years.
• Google along with Yahoo! and Microsoft are still the most interesting places to look when considering an investment in the mobile ecosystem.