Android Isn't As Big As You Think

Yes, Google's (NASDAQ: GOOGL  )  mobile operating system is huge. The latest numbers from ABI Research have the operating system accounting for 78% of all smartphones shipped worldwide in 2013. But the numbers also show Android has a slightly weaker grip on the smartphone world than we may think it does.

Android's true influence
In its report released at the end of January, ABI Research showed that although Google's OS dominated the mobile market in Q4 2013, the share of Google-controlled Androids are waning in light of "forked" versions. So-called forked versions don't come preinstalled with Google's suite of apps or direct access to the Google Play Store, though they can run regular Android apps. And they're growing fast.

Here's a look at how the forked versions, also referred to as Android Open Source Project (AOSP)-based phones, stack up against non-forked versions:

Source: ABI Research. 

When separated out from certified Android versions, we see AOSP-based phones nab 25% of all smartphone OSes in the last quarter of 2013, up from 14% a year earlier. That's more than BlackBerry and Apple's (NASDAQ: AAPL  ) operating systems. But most importantly, it's causing the market share of official Android versions to shrink.

Why this matters
Most of AOSP's growth comes from the Indian and Chinese mobile markets, where the populations are buying up smartphones faster than other markets.

The implications for Google are notable but not devastating -- at least for now. The company has made moves to further set its official versions of Android apart from the open source kind. In an investor note, Jefferies & Co.'s analyst Hyunwoo Doh, recently wrote:

Google's main strategy is to reduce Android's compatibility with AOSP, by: 1) increasing the number of GMS applications; 2) gradually changing the runtime system from Dalvik to Android RunTime (ART); and 3) increasing the number of coding native applications with C/C++, using Native Developer's Kit (NDK) and Java Native Interface (JNI).  

That's a bit technical, but it essentially means Google is trying to make it more difficult for AOSP to gain additional market share by increasing the standards phone makers need to have in order to make their versions of Android compatible with Android apps and services. But reining in the forked versions won't be easy.

Nokia X+. Source: Nokia.

Even Nokia (NYSE: NOK  ) , a long supporter of the Windows Phone platform and future Microsoft company, introduced an AOSP-powered device late last month. The Nokia X is targeted at India and China and could raise the forked versions of Android even higher. Preorders for the device were at 10 million in China within the first week.

The recent and somewhat surprising success of the Nokia X paints a growing and slightly gloomy picture for Google. Xiaomi, one of the fastest growing smartphone brands in China, uses forked versions of Android as well. The company sticks relatively close to the Android OS, so its phones can be updated and run the latest apps, but that doesn't help Google make money from its app store. Xiaomi's ambitions go far beyond China, something that could add to AOSP's growth.

If Google's intention was to release a free OS so it could make money with long-tail purchases through its services and app store, AOSP is inhibiting that ambition.

Foolish final thoughts
Though Google is trying to persuade original equipment manufacturers to release full versions of Android running Google's app store, it's clear the company hasn't fully succeeded. That could be advantageous for Apple and Microsoft. The two companies obviously want more share of the mobile space, and if Android essentially steals market share away from itself, than even better.

Apple meanwhile is pushing harder into China, and the possible launch of a new, and bigger, iPhone this year could help its efforts even more. Google could likely wrangle in AOSP whenever it wants and force OEMs to use Android as Google truly wants it be used. But at this stage of the game, the company seems happy to perform the balancing act of tightening its control of Android, while leaving much of it open at the same time. That is, until the latter starts significantly cannibalizing app store revenue.

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Read/Post Comments (6) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 30, 2014, at 1:41 PM, GaryDMN wrote:

    Android is as big as I thought, Google isn't as big and is shrinking.

  • Report this Comment On March 30, 2014, at 6:52 PM, steekyjim wrote:

    AOSP phones can still have Google Play on them out of the box, or installed manually. This article is a little bit misleading.

  • Report this Comment On March 30, 2014, at 11:39 PM, eldernorm wrote:

    Android is the worlds largest producer of mobile phones..... er.......well....... they really don't build any phones...

    Actually Android is an OS that comes in about 15 different variants. About 4 types are main Google then each company tweaks its versions to do different things.

    If you just live for tweaking your electronics, you will love Android. If you just want something to just work... well then maybe not so much.

    Just saying.

  • Report this Comment On March 31, 2014, at 10:22 AM, webguy76 wrote:

    I just find it amazing that you idiots at the Fool still love Apple so much! J$sus Christ man, if Apple had a 78% share you would be going crazy about how no one else has any chance. Get over it! Apple is just a common company, the same as Sony now. People go through phases, every decade has them. Nintendo was unstoppable in the mid-to-early 90's, now its PlayStation. Ericsson phones were the "must have" phone in the early 2000's, then it was the iPhone. The general public goes crazy for the new fad and then moves on. Get over it already. How about some non-biased reporting for a change?

  • Report this Comment On March 31, 2014, at 7:31 PM, jhmotfool wrote:

    I'm an android developer. If you get your app in the near future from the google play store it will be fine tuned to run on your specific phone under ART which means it will be much faster and less chance of crashing. For example if I download an app from play store I would get different version than someone with a different type/model of phone.

    Amazon and other app stores won't be able to compete. They will only be able to sell old Dalvik bytecode which is slower. Forks will eventually be only cosmetic. The trade off with google's strategy is that they will have a lot more overhead storing different versions of the same app and it could take longer to install the app if a specific version has to be be created.

  • Report this Comment On April 01, 2014, at 1:01 AM, radar22 wrote:

    the android is for mine and i have athurized .you shud be google is meeting with me thru maneg .. غلى ادارة جوقل ان تعي بان نضام الاندرويد يخصني بالاخص وقفا للحقوق المحفوضه والا سوف نضطر للمحاكم القضائيه بهادا الخصوص alsubaei r t

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Chris Neiger

Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

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