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Android's 'Profitless Prosperity' Criticized

Roger McNamee, an investor who's been analyzing the output of Silicon Valley for 30 years, has criticized Android's "profitless prosperity", and that Google's mobile platform is the "equivalent of having a motor scooter at the Indianapolis 500."

"I watch what they have done with Android, and I'm flabbergasted because their market share in units is so high, but look at the profit share," McNamee told Bloomberg TV. "Apple's profit share is like 75 or 80 percent because Android has been managed essentially to make it a profitless prosperity. Right now, if Google is not careful, Android will be Samsung or Samsung will be Android."

He added that consumers purchase Android devices as they're cheaper, not due to brand loyalty. That said, for the first time since the smartphone's inception, the iPhone's owner loyalty declined in recent months.

McNamee also criticized Samsung, who leads the Android handset market and outsells the iPhone by 6-to-1 during recent months.

"Samsung could be what Apple is, but for whatever reason they don't do the value-added to the platform to make the product as useful as Apple," he said. "I am no Apple fanboy, but the notion that Samsung is equivalent to Apple is silly -- Apple's app ecosystem and way everything works together makes it a radically better product...and I think that is an objectively true statement."

The investor stated that Apple's strategy is "close to perfect," and expressed his admiration in regards to recent moves made by Apple CEO Tim Cook. He continued on to stress that Apple can "innovate and transform and rebuild whole markets." Some may disagree with that notion, though.

Prior to the launch of the iPhone 5, McNamee actually criticized Apple's innovation on September 19. "What's really sad is how many companies have given up trying to innovate," he said, referring to the company's latest slate of iPods, iPhones and iPads.

"Apple is increasingly dependent just on software for the retention...because the hardware is not that cool, not blow-away cool the way that the iPhone 4 was. I look at Apple as a shareholder, it's an amazing thing -- there is nothing competitive with them at all today, but they are already, so quick after Steve died, doing the things you expect a dumb monopolist to do."

He also commented on what he believes to be Apple's weak point: "The threat to Apple is that they forget that their power and success comes from selling hardware. If Android gets too much unit volume, it's a mistake." His advice to Apple, which he stressed created a next-generation web with the iOS platform and app ecosystem, is to have "everybody do everything on their hardware."

Earlier in the year, Google said it was generating $8 billion in revenue in 2012 with its mobile ads and sales of Google Play mobile content, as well as spending on Play apps. Apple, meanwhile, has the iPhone to thank for the majority of its revenue. Its smartphone lineup made $74.3 billion in revenue from June 2011 to June, 2012. For perspective, all of Microsoft's divisions generated $73 billion during the same period.

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  • killerclick
    So, he's criticizing Android because Android devices aren't marked up so high as iOS devices and because Android has so many useful free apps, you hardly ever have to pay for any?

    Hmm... seems to me that the customer wins in this case
    Reply
  • vaughn2k
    "I am no Apple fanboy, but the notion that Samsung is equivalent to Apple is silly -- Apple's app ecosystem and way everything works together makes it a radically better product...and I think that is an objectively true statement." - McNamee

    McNamee is just protecting his investment share in Apple, which is now in decline, and he could'nt sell those share at the moment, the reason he have this story (to delay the downtred further...
    Reply
  • drenyx
    ...Because they are cheaper?

    How about if I don't care for Apple products?
    Reply
  • Yes because Android isn't being sold by Google per unit, so there can't be any profit there even if Android devices sell in truckloads.

    This dude obviously haven't tried an Android device and its host of useful free apps...
    Reply
  • cats_Paw
    Is this a troll? Because it sure looks like one. If i am getting this right, he is saying that if you are not greedy like apple you are stupid?
    *FacePalm*
    Reply
  • Shorter version: "Those meanies are dragging my Apple shares down, waaahhhh!!!"
    Reply
  • adrhellb
    "...Apple's app ecosystem and way everything works together makes it a radically better product...and I think that is an objectively true statement."

    Objectively? Thanks for the laugh. :)
    Reply
  • Someone Somewhere
    And he never notes that google makes it's money from ads/purchases. The more android devices sell, the more people buy stuff or use apps with ads, the more money they make. And there's the nexuses (nexii?), which are sold at cost (roughly), again because they make money from people using them.
    Reply
  • wildkitten
    killerclickSo, he's criticizing Android because Android devices aren't marked up so high as iOS devices and because Android has so many useful free apps, you hardly ever have to pay for any?Hmm... seems to me that the customer wins in this caseNo, what he is saying is Google is in a precarious position. They may have more of the market, but 8 billion in revenue is a fraction of Apple's 73 billion. That gives Apple much more capital to innovate with. He also is pointing out that Google could be in danger of Android becoming associated with another brand name like Samsung rather than being with Google.

    I think he is also right about people not as loyal to Android as Apple fans are to Apple devices. I know a lot of people that use Android phones, and I use one myself, and none of us feel a need to have our next device be an Android. In fact, the fragmentation is making me seriously consider a Windows Phone next year. But the people I know who use an iPhone are dedicated Apple fans. That may be made fun of here, but brand loyalty is a huge thing for a company.
    Reply
  • wildkitten
    Someone SomewhereAnd he never notes that google makes it's money from ads/purchases. The more android devices sell, the more people buy stuff or use apps with ads, the more money they make. And there's the nexuses (nexii?), which are sold at cost (roughly), again because they make money from people using them.
    Earlier in the year, Google said it was generating $8 billion in revenue in 2012 with its mobile ads and sales of Google Play mobile content

    Certainly looks like he noted that.
    Reply