Mid-term viability of Android ecosystem

Android market share is eclipsing all competitors increasing from 2% two years ago to over 50%. Android Market has over 500k apps. Andy Rubin twitted this month that about 800k Android devices are activated every day. Android has been a billion+ dollar business for Google for 1.5 years. The business is good, right? While the short term gains are very impressive there are 4 fundamental problems with Android ecosystem which raises questions about its future.

·        Patents and insufficient of intellectual property portfolio. The main Android value proposition to OEMs was free license. Now increasingly OEMs, such as HTC and Samsung, are paying patent royalties to Microsoft higher than licensing fees for Windows Phone. OEMs also pay royalties to Apple and in selected markets was banned. Most recently courts ruled in favor of Microsoft against Motorola Mobility which is being acquired by Google. Android is no longer free. To maintain margins at the same level OEMs will have to cut cost at the expense of hardware, which will diminish user experience. OEMs will no longer have incentive to favor Android when Windows Phone is a viable option.

·         Fragmentation. Second biggest value proposition was Android openness. Anybody can take the source code and change it to fit their needs. Leading OEMs, such as Samsung, HTC and Motorola have blended their brands and color schemes into Android devices. They also have changed source code making apps not compatible across different devices. It frustrates developers and users. Google has tried to control that to some extent which received cold reaction from the ecosystem stakeholders.

·         Security. Android Market has no barriers of entry for malicious software makers. Scammers can have an app published within minutes and Google does not verify if the app is legitimate or even works. Google has been very proactive removing malware postpartum, which is often too late - damage is done. Competitors, such as Microsoft are using it to lure away the Android users burned by scam artists. Sooner rather than later Google will face "Toyota problem", when strong brand known for quality was hit by nemerous safety defects losing it's global leadership in car sales as a result.

·         Slower market share growth. When a product has a lion share of the market (Android commands over 50%) the remaining half is much harder and takes longer to acquire. When you reach the bell curve the market segment is very different and requires different approach.