Phones Get Smarter: RIM, Apple and Google Lead Smartphone Surge

Apple's iPhone, left, and Motorola's Droid phone, are among the products boosting smartphone sales far beyond those of regular feature phones.
Apple's iPhone, left, and Motorola's Droid phone, are among the products boosting smartphone sales far beyond those of regular feature phones.

New market data released Wednesday confirms what mobile evangelists have been saying for years: In the not-too-distant future, we'll all be carrying computers in our pockets.

Today, feature phones still dominate the mobile space, accounting for roughly 8 out of every 10 phones sold. But the number of people using smartphones -- advanced devices that offer Web browsing and other applications -- is growing much faster than the number of people using so-called "feature phones" -- more basic devices that lack the bells and whistles of their fancier and more expensive mobile brethren.

Global smartphone sales increased 48.7% in the first quarter of 2010 to 54.3 million units, far outpacing overall mobile-phone growth of 17%, according to research firm Gartner. "In the first quarter of 2010, smartphone sales to end users saw their strongest year-on-year increase since 2006," says Carolina Milanesi, research vice president at the firm.

Good News for RIM, Apple and Google

And as in any fast-moving, highly competitive marketplace, the mobile-phone industry will yield both winners and losers as a result of the smartphone shift. The big winners so far? Clearly Research in Motion (RIMM), Apple (AAPL) and Google (GOOG), according to the Gartner data.

In the first quarter of 2010, smartphone sales made up 17.3% of all mobile-phone sales, up from 13.6% in the first quarter of 2009. That trend is likely to continue throughout the year, as new RIM Blackberry and Google Android phones hit the market, not to mention Apple's iPhone 4G, which is expected to launch this summer.

"This quarter saw RIM, a pure smartphone player, make its debut in the top five mobile-devices manufacturers, and saw Apple increase its market share by 1.2 percentage points," Milanesi says. "Android's momentum continued into the first quarter of 2010, particularly in North America, where sales of Android-based phones increased 707% year-on-year."

Android's percentage increase is a little misleading because the platform didn't see a major uptick in adoption until last fall, when Verizon Wireless unleashed a massive marketing campaign behind the Droid. But there's no denying that Google has made impressive gains in the smartphone market.

The data also reveals one clear loser: Microsoft, which saw its platform market share decrease 3.4% as it lost the No. 4 spot to Android.

Mobile Ad War Heating Up

The surge in smartphone adoption helps explain mobile companies' ferocious competition for mobile-ad platforms. Google, which is hoping the Federal Trade Commission will approve its $750 million AdMod acquisition, and Apple, which launched its own mobile ad platform called iAds, are girding for an epic battle for supremacy.

Ironically, Apple's aggressive push into the space may ameliorate FTC concern over the AdMob deal by demonstrating that the space is competitive, thus reducing the need for government intervention. An FTC spokesman on Wednesday declined to comment on the agency's AdMod probe.

What happens next? In an attempt to find out, all eyes will be focused on Apple as the company prepares to launch the next generation of its immesely popular iPhone device.

Milanesi expects the company to present its new phone at its Worldwide Developer Conference in June. The phone "will be the first to feature the latest release of the iPhone OS that includes welcome improvements for developers and users, such as multitasking," she says. "The second quarter of 2010 will be a very important one for Apple."