The Biggest Threat to Apple Inc.'s Dominance Is This $80 Smartphone
"Based on my tests, I can't recommend the Optik 2," Re/code's Walt Mossberg wrote in his review of ZTE's latest tablet.
The Optik 2 is the quintessential cheap Android device -- buggy, prone to error, and loaded with bloat. Not a less-expensive alternative to Apple's iPad or Samsung's high-end tablets running Google's mobile operating system, but a crippled device that barely functions.
The steady market-share erosion of iOS has been met largely with indifference because most of Android's massive market share comes from cheap, low-end devices like the Optik 2 that aren't even in the same league as Apple's products. The stark difference in quality shows up in usage statistics -- despite having a minority of the market, Apple dominates when it comes to things like Web traffic, online shopping, and app revenue.
But not all cheap Android devices are garbage.
Less than $100 now buys you a quality phone
Case-in-point: the Moto G. Right now, consumers can get the device from U.S. Cellular for just $80 off-contract, or $100 for the Verizon version at Best Buy. Alternatively, a completely unlocked Moto G can be purchased directly from Motorola's website for $180.
While the Moto G is lacking in some features (4G LTE connectivity most notably), it's actually a quality phone. Mashable's Christina Warren wrote that it "isn't just 'good smartphone for its price,' it's a good smartphone, period." Gigaom said the Moto G providers users with a "high-quality device they can afford without a contract." The Verge said it's "competitive with many $500 or $600 devices."
Quantifying the Moto G's success is difficult given the lack of sales data -- Google didn't disclose its Motorla unit sales, and with the company now in transition, investors might never get an exact number. Yet anecdotally, there's growing evidence that the Moto G has been successful in the few months it's been on the market. Earlier this week, Indian e-commerce site Flipkart sold out of its Moto G allotment within minutes.
What's a real smartphone?
"I look at the mobile phone market as having three kinds of phones," Apple's CEO, Tim Cook, told The Wall Street Journal last week, "feature phones, smartphones that function as or are used as feature phones, and real smartphones. I care about the market share of that last one."
By creating the category of "real smartphones" Cook is segmenting the smartphone market in a way that is advantageous to Apple. If one defines a "real smartphone" as an iPhone or Android-powered equivalent (Galaxy S4, Xperia Z, HTC One, etc.) then Apple has a much larger share of the "real smartphone" market than it does of the whole smartphone market.
For example, while Samsung sold twice as many smartphones as Apple did last year, it sold fewer of its expensive flagship phones. While Apple sold about 150 million iPhones in 2013, Samsung shipped just more than 40 million Galaxy S4s and about 10 million Galaxy Note 3s. Google's other hardware partners have been even less successful.
That isn't to say Cook isn't justified in drawing that distinction -- a junky Android device with limited memory and a low-end processor isn't capable of performing the same tasks as an iPhone or one of Samsung's more expensive Galaxies.
But the Moto G is.
Locking in at the low-end
It might not be as good as Apple's iPhone 5s, but the Moto G is arguably better than Apple's iPhone 4s, a two-year-old phone Apple still sells for $450. With its faster processor, larger screen, and expanded memory, the $180 Moto G is an easy winner over the iPhone 4s.
And that's ultimately the real problem: Google's dominance has thus far been superficial. Having 80% of the market doesn't really matter when two-thirds of the phones are junk that can barely surf the Web or run an app without crashing. But the Moto G isn't junk. It isn't as great as Samsung's high-end Galaxies but it's "good enough," and certainly good enough for consumers in emerging markets.
Apple still dominates the market for "real smartphones" -- problem is, the definition of a "real smartphone" is changing rapidly.
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The article The Biggest Threat to Apple Inc.'s Dominance Is This $80 Smartphone originally appeared on Fool.com.Sam Mattera owns shares of Best Buy. 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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