1 Thing Fueling Google's Android Dominance

Android One creates hardware standards for Android phones, and it's going to help Google prevail in developing markets.

Jun 29, 2014 at 2:31PM

At its developer conference this week, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) debuted a new cohesive set of guidelines, called Android One, for creating inexpensive smartphones for the developing world.

While Android One standards are technically available to any device maker, Google wants to use them to gain a larger footing in emerging markets -- which leaves Apple (NASDAQ:AAPL) yet another step behind in the space.

What is Android One?
Think of Android One as a list of hardware specs that smartphone companies can use to build Android phones. Google says it's helping to streamline the process for device makers by giving them hardware standards to abide by. If they follow suit, then the phones will receive the Android One designation.

This is good to emerging market consumers because the standards will ensure the phones have a consistent (and non-bloatware) experience, while also allowing the software to be easily updated. 

Anrdoir One
Google's Android One being debuted at the I/O conference. Source: Google.

For device makers, Android One may help them build better phones faster and cheaper. The aim is for these devices to be priced less than $200. And just as consumers benefit from updated software, the phone makers can benefit from selling the most updated phones users want.

But make no mistake: The biggest beneficiary of Android One is Google.

How Google wins
Android has long been criticized for being fragmented, and in developing markets, this has been an even bigger problem. Phone makers don't give inexpensive phones any priority for software updates, as they move on to selling newer devices. Though Android KitKat helped with fragmentation, Android One goes a step further by bringing cheaper phones all on a level playing field.

By establishing hardware specifications, and limiting the amount of software changes, Google will be able to offer an unadulterated version of Android that can access the Play store, bringing in additional revenue for Google. But access to the Play store isn't Google's main goal. The company wants to ensure that its software continues to be the dominant smartphone OS in new markets and keep Apple at a distant second.

Iphone

Remember this phone? Apple has used it as its low-priced device in emerging markets. Source: Apple.

Apple continues to play catch-up
Apple is in second place when it comes to worldwide smartphone OS market share, as Android holds about 78% and iOS takes 17%. The developing world is exploding with smartphone growth and both companies want to extend their worldwide positions.

In an report a few months ago, IDC's Ryan Reith said, "In 2013 we saw the sub-$200 smartphone market grow to 42.6% of global volume, or 430 million units." That huge market is what Apple has failed to tap with its high-end devices. Apple has used the iPhone 4 as its secret sales weapon in emerging markets, but as the Android One phones roll out, the iMaker could face stiffer competition.

Foolish final thoughts
I think Google's being smart in its approach to developing markets, as it uses Android One to regain some of its control over its mobile OS. The new guidelines will likely bring Google even closer to closing the gap between fragmented Android phones, as well as bringing in new revenue from sales in the Google Play store.

Though Apple still has a lot of brand enthusiasm in emerging markets, if Android One makes inexpensive Android phones even more enticing, Apple will continue to lose out in emerging markets. And with new hardware and updated software, Android One phones may be too much for the older iPhone 4 to keep up with.

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Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google (A and C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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