Insights

The Droid Is this the Smartphone Consumers are Looking For
Article

The Droid Is this the Smartphone Consumers are Looking For

Jerry Rocha, Sr. Director, Online Division

The launch of the Droid by Motorola–which runs Google’s Android 2.0 operating system–is the latest smartphone to be tagged “game changing iPhone killer.”  We prefer to view it as simply a quality choice in a growing line of smartphones rather than something that will stifle the competition. With only 10,000 applications available in the Android market and more than 100,000 available for the iPhone, the Droid–or any Android phone–won’t be killing the iPhone anytime soon. What the Droid will do is advance the use and adoption of web content to a connected device. Android’s integration with popular and widespread Google applications such as Gmail, Google Calendar and Google Voice is a big help as is its ability to run multiple applications (up to six on the Droid). Most users do this on their computers so being able to listen to music while browsing the web and sending email makes a multi-tasking smartphone an appealing option.

The Competition to The Competition

The mobile marketplace is not just a faceoff between the iPhone and Droid; over the next few months, there are at least six new devices on deck that will have large screens like the Droid, keyboards (the Droid has both a virtual and physical keyboard), and an ever-increasing number of applications.

Nielsen’s data from Q3 2009 suggests that if you buy an Android phone, you’ll likely use more of the data features more often than if using any other smartphone.

smartphone_compare

Also, for the first time in Q3, Nielsen saw more users accessing the Internet on smartphone than that of feature phone users. If this trend continues, we’ll see more than 80% of the devices accessing the Internet being these advanced phones.

smartphone_v_featurephone

The Mobile Universe is Expanding

In Q3 2009, historically the slowest phone sales quarter, more than 25% of all phones sold were smartphones. Expect Q4 to have more than 40% of the new phones sold be smart devices. This is important to watch as smartphones are on track to be the majority of phones in the U.S. by 2011. Projecting Nielsen data out through 2010, we see smartphones crossing 50% of the market by the middle of 2011, roughly equal to 150 million users. This shift could happen much faster with the right conditions such as continued competitive price points on devices, lower “all you can eat” data packages and the increasing consumer need to be connected anytime, anywhere.

By mid-2011, the U.S. should be just over 300 million mobile subscribers. If we assume that we will have over 150 millions uses of smartphones (based on our projections) and that 80% of these users will access the Internet and 60% will access video (given the current data trend these assumptions may actually be low), this means that over 120 million mobile users will be on the Internet and 90 million will be watching video. What we have typically called the “third screen” is quickly becoming an extension of the first and second screens (TV and desktop viewing) especially in some key demographics. Note how Hispanics and African-Americans over-index on Mobile Video and Internet Usage.

mobile_demographics

Overall, we see mobile media growth accelerating over the next year with more users paying for video and premium content. Remember,  the mobile phone is the one media device that is always within reach. The trend in the U.S. is more interaction, more consumption, and more connected devices. While not a competition killer, the Droid is the next logical step in a market with a wide array of rich media devices. As that trend continues, the battle for better smartphones with better access to content will wind up seeing the consumer as the clear winner.