Are Users Set to Abandon Android?

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- The multiple of "anecdote" is "statistics." Where am I going with this?

If you are interested in the smartphone wars, you will note two things about the Android platform and the U.S. market for smartphones in particular. Android took off in the U.S. starting in November 2009 with Verizon's ( VZ) launch of the first Droid model. As of July 2011, a staggering 550,000 Androids were activated world-wide daily. In the U.S. market, the vast majority of Android activations have taken place on two-year contracts, the first of whom are coming due in the next five weeks.

Having over-taken Apple's ( AAPL) iOS (iPhone, iPad, iPod Touch and Apple TV) in terms of unit volume, what will happen when these two-year Android contracts roll over? Will something happen even before they do, such as when the iPhone 5 is expected to become available here in October?

Here is when the multiple of anecdote, i.e., statistics, enter the picture. I have not conducted a scientific survey on this subject, let alone a statistically significant one. I have only asked approximately 100 people I know who have been Android users for anywhere between one week and two years. In addition, I have been paying attention to comments from numerous other people on message boards and hearing from friend-of-friends.

A few months ago, all of these anecdotes started to develop a clear pattern. Let's be blunt and get to the bottom line: A very large share of Android users are unhappy to some degree, and intend to switch platforms either when the iPhone 5 becomes available, or when their two-year contracts expire.

Battery Life

So what kind of complaints are we talking about precisely? One particular complaint appears to dominate almost completely: battery life. I can't recall a single Android user I've talked to who doesn't complain in a very angry tone about battery life. Basically, they love the smartphone's capabilities, but it is a useless brick when the battery goes out.

Many Android users not only know that they are experiencing unsatisfactory battery life, but also that some of the competing platforms such as iOS and BlackBerry typically offer much better battery life. They know it when they go out for the evening and the Android is dead after three hours or less, whereas the iPhone and BlackBerry devices carried by their friends are still going strong five or 10 hours thereafter.

Other complains about Android appear far more scattered and uneven. Some find the interface a bit complicated. Others don't like the media options when compared to iTunes. Overall system stability and consistency may be an issue. And so forth.

This isn't to say that Android doesn't have strong advantages as well. After all, something attracted the consumer to Android to begin with! Some of these pluses include:
  • 1. Superior and free navigation.
  • 2. LTE availability on Verizon today, and soon on AT&T.
  • 3. Unmatched variety of form factors, including screen sizes, cameras, etc.
  • 4. Availability on all carriers, with at least some pre-paid options.
  • 5. A cheap initial purchase price.
  • 6. Excellent integration with all of Google's great cloud services.
  • 7. No need to sync over a cable; full cloud activation.
  • 8. Ability to root and install custom ROM.
  • This list makes it clear that there are compromises no matter which platform you choose. There is at least one point or two where each of Android, iOS, BlackBerry and Microsoft have an edge over their competitors. No one platform is best at everything. Every consumer has a sub-optimal trade-off to make.

    The fact that each platform has both strengths and weaknesses, however, doesn't mean that market share gains and losses will remain the same over time, or across geographies. For example, Android has exploded progressively across almost all geographies in less than 24 months. BlackBerry has recently lost a lot of market share in North America, but continues to gain strong ground in many international markets ranging from Malaysia to Nigeria and Philippines.

    Speaking mostly from a North American perspective, I hear a very large percentage of Android users looking to change relatively soon. I don't hear any of that from iOS, and BlackBerry is somewhere in-between, ranging from frustrated users in need of better media and apps, to fans of the basic typing productivity experience.

    The other peculiarity of the U.S. market is this combination:
  • 1. High subsidies for the iPhone, leading to a relatively small price difference against the other players. Outside North America, iPhones typically cost closer to $900 including taxes.
  • 2. Apple offers its complete set of software, services and store assets in the U.S. to the greatest extent anywhere in the world. This means Apple is uniquely strong, relatively speaking, here in the U.S. compared to in most or all other countries.
  • What does all of this mean? It means that outside of the geek world in which users tinker with their devices, many are fed up with poor battery life and perhaps another lesser issue or two, and will switch to the iPhone 5 or other devices within the next two years.

    Enter iPhone 5

    Given that we are on the eve of the iPhone 5 with its new iOS 5.0 and the new iCloud improvements to the iOS ownership experience, it is natural to believe that Apple will take all of the gains resulting from Android's losses. This may very well be largely true in the near term.

    However, Microsoft is finally entering the market with a competitive product built on hardware by HTC, Dell, Samsung, LG and others. The new BlackBerry Bold 9900 series is also a very strong step forward and could lure some people away from Android who simply prefer something that "just works." Then in 2012, we expect RIM ( RIMM) to launch its next-generation BlackBerry smartphones based on the all-new QNX operating system, which will have some Android app compatibility -- but presumably without the bad Android battery life.

    This phenomenon should be far less pronounced in particular in Asia, for the reasons outlined above. Purchase price matters a lot more, and it appears that the Asian gadget psyche may be more in tune with the more complicated Android interface and customization capabilities. Europe may be somewhere in-between North America and Asia in this regard.

    Google ( GOOG) is not sitting still with Android, and is also on the cusp of the next major software release, 4.0 Ice Cream Sandwich, probably here in October and availability by November or so. It appears that Android 4.0, however, may be a less of a step forward when compared to the major step forward that Apple is taking with iOS in going from 4.3.5 to 5.0.

    If you are skeptic about my assertion in this article -- that Android will lose market share in the U.S. over the next year or two -- conduct a small survey of your own. Ask how many of your Android friends are fed up to the point where they are eager to switch, and then do the same for your iPhone friends. I think you will find that it's not a close call. Furthermore, I think you will find that battery life is the #1 standout on the list of reasons.

    Bottom line: I think a much larger share of the U.S. market than is usual in a product cycle will leave Android in favor of the iPhone 5, and perhaps even some to BlackBerry's new products or the new Microsoft Phone 7.5 smartphones.

    At the time of submitting this article to publication, the author was long AAPL, GOOG and RIMM.
    This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

    Anton Wahlman was a sell-side equity research analyst covering the communications technology industries from 1996 to 2008: UBS 1996-2002, Needham & Company 2002-2006, and ThinkEquity 2006-2008.

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