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How Tizen Could Capture Android's Market Share

By Adrian Campos - Feb 27, 2014 at 6:00PM

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Learn why Samsung is developing its own mobile operating system, and how the company plans to capture Android's market share.

A common feature among successful companies in the mobile world is the ability to develop an addictive ecosystem through a collection of devices and apps connected by one operating system. With nearly 79% of smartphone market in 2013, Android, Google's (GOOGL -0.14%) mobile operating system, is the most popular mobile platform. Google, which reported revenue of $16.86 billion in the most recent quarter, uses Android as a trojan horse for Google services, which generate revenue by showing advertising.

Apple (AAPL -0.29%) has also been able to create a successful and profitable ecosystem with iOS. Recently, iOS has been losing market share to Android, but it is still a massive source of revenue for Apple, which sold more than 120 million smartphones last year. Inspired by Google and Apple, Samsung (NASDAQOTH: SSNLF), the world's largest manufacturer of smartphones, is supporting the development of Tizen, its own operating system. But, does Tizen stand a chance of capturing Android's market share?

Tizen and Samsung
Samsung, which sold a record 86 million smartphones in the most recent quarter, is the most successful Android device manufacturer. However, the company is also highly dependent on Android, which runs not only on Samsung devices, but also has been used by HTC, Lenovo, Huawei, and even Nokia. Android allows Google to gain traffic due to the number of Google apps that come pre-installed on new devices.

To reduce its Android dependence, Samsung began developing Tizen in cooperation with Intel and other developers in 2011. Like Android, Tizen is an operating system based on Linux. To provide a flexible, open environment for application developers, the project is also open-sourced, which means anybody can see the source code and create or suggest a modification. That being said, most of the project is controlled by Samsung, just like Google controls most of the development efforts in the Android community.

The Samsung plan
 In theory, Samsung could replace Android for Tizen as the pre-installed operating system on its devices. This would cause an immediate, major change in the industry, as the company accounts for 63% of all Android shipments. However, in practice, any change in the industry will likely take years to evolve, as the Korean giant probably isn't willing to risk losing customers to other competitors.

Remember that the number of apps a given operating system can support is a key success factor. It is not a coincidence that Android is the most popular system with the most apps. Likewise, the low number of apps available for Windows Phone and BlackBerry is likely the main reason why these systems are not as popular.

To promote the development of original applications for Tizen, Samsung has offered millions of dollars in prizes and funding. Of course, it will take years before Samsung can build a strong community of Tizen developers. Samsung may gradually push Tizen into new products, while keeping Android as the pre-installed, default operating system for its flagship Galaxy devices. For example, Samsung is releasing a new version of its Gear smartwatch, which will run Tizen instead of the Android operating system.

This is a savvy business strategy, as there are fewer apps for wearables. Most Android applications will not work on wearables due to the smaller screens and other technical limitations.

Final Foolish takeaway
Samsung could obtain a new revenue source by creating its own mobile ecosystem. Due to the enormous amount of apps available for Android, any change in the industry will likely take years to happen. Aware of this, Samsung is gradually pushing Tizen in wearables, a relatively new segment. At the same time, the company is promoting the creation of an active community of developers. It is too early to know if Tizen will be "yet another mobile system." However, so far, Samsung's efforts seem to be aimed in the right direction.

Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. 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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