Over the last six months, more people in the U.S. have bought a smartphone that runs an Android operating system than either a BlackBerry or an iPhone, according to data published today by the Nielsen Company.
BlackBerry still holds the dominant share with 31 percent of the market, followed by 28 percent who have Apple iPhones and 19 percent with Android devices.
Still, the growth of Android is a trend that VCs have unsurprisingly seen coming, and it’s been factoring into many of their mobile-related decisions. I talked with a few investors recently, and their perspectives were illuminating.
Here’s some of what they discussed, edited down for length:
Dana Stalder, General Partner, Matrix Partners
Related investments: free text messaging startup GOGII, mobile payment service provider Zong
The iPhone truly did change everything from an innovation standpoint. It enabled third-party innovation on mobile, and as a result, innovation in the mobile category has exploded. VCs have been looking at mobile plays for a decade but the promise couldn’t be realized until the iPhone.
Now Google is really creating the alternative to the iPhone platform, and they’re doing it in a very real way. In fact, I believe there are more Android handsets being shipped today than Apple handsets around the planet. Apple still offers a more refined consumer experience, but that gap is closing quickly.
Venture investors have been looking at a whole slew of mobile companies that have emerged over the last couple of years to build applications for the iPhone platform. But [now] every single one of those companies is doing development for Android, too, or figuring out when they’ll start development on the Android platform. The iPhone still has the larger installed base, so anyone new is probably starting with the Apple platform then looking at Android as an obvious extension of that platform. But I think that will change as the installed base shifts in time. If I had to guess, I’d say that will happen about two years out. Then, app developers will have a real decision to make–out of the gate–about whether they start with Apple or Android or both.
John Albright, Founder and Managing Partner, JLA Ventures
and Co-Managing Partner, BlackBerry Partners Fund
Related investments: mobile advertising startup Nexage, mobile content distribution startup PocketGear
On a macro basis, we want to invest in mobile companies that address all the major platforms in the marketplace, so it’s Apple, BlackBerry and Android. Those are the three that we push our portfolio companies to write their product to, though we don’t tell them which should go first. That’s a management call, depending on the app or solution. If they think writing to the Apple platform should be done first, we won’t demand that they do BlackBerry first.
[If] you want to write product, it might be easiest to write it into the Apple platform. It’s one device, one marketplace, one platform, it’s easy use for consumer; that’s why it’s enjoyed such success as an entertainment device. But [which platform to address first largely depends on whether a startup is focusing on] an enterprise, entertainment, communication, or commerce application.
For a commerce platform, we’d push [a startup] to write to BlackBerry or Apple. I’d say you have to have both of them covered. The Android platform and the devices out there have a poor commerce solution. You have to go through Google checkout and to do that you have to register with Google and most users aren’t registered. So if your solution is dependent on or driving commerce, don’t do it for Android.
Also, if the application is material to users, if they’re going to care about privacy, then I’d say again that Android is inferior to BlackBerry and Apple because it’s an open platform, and there are pros and cons to open platforms. On the one hand, it’s nice because anyone can write an app to it and Google doesn’t really say whether it’s good or bad, [unlike] when you’re dealing with Apple and Blackberry, where apps have to be cleared. [That could] result in thousands of developers dedicated to the [Android] platform. But you might get lower quality developers because they don’t have to clear any quality or security hurdles. It’s also a lot easier for hackers to get in to Android [because of its open platform].
Further, a top objective for Google is to maintain the ubiquitous nature of the platform, but the [different manufacturers with which it’s working, including HTC, Motorola, and Samsung] want to differentiate to make their devices better than others, so if I’m a developer on Android, my app doesn’t work on multiple devices. It loses the Android system. And I’m not sure if Google will be able to maintain its strategy and push them back or it will becomes really fragmented. I think latter will happen. They’ll end up with a bunch of different platforms. You take Android running on all carriers in a ubiquitous form, divide it by four manufacturers and 450 carriers around the world, and it [becomes] a real headache.
Rich Wong, Partner, Accel Partners
Related investments: mobile app store GetJar, mobile advertising startup AdMob (acquired for Google)
Android will be massively important over the next five to seven years of mobile startup investing. You can see it in terms of the pressure that’s being put upon Nokia and RIM. You see it in terms of Motorola, whose dominant Android strategy suddenly has it doing well again. So I think it’s an incredible wave, and I think we’ll see a lot of incredible companies around the Android ecosystem.
From an investor point of view, there are certain challenges to building a big breakout company if you’re operating a closed ecosystem. If you’re iPhone only, it’s hard to know how Apple might change the rules in one to five years. If you’re building your app on iPhone only, it’s organized to their credit, but they make all the rules. In some ways, because Android is less tightly controlled, it requires more thought to [develop the] business model to make it successful. But because it’s open, there’s more potential to build a big startup business.
[John Albright makes] valid points but exactly those points are the business opportunities. [If you need] a better security framework for enterprise apps, you build a company around mobile security perhaps. So these gaps, these business challenges, are in and of themselves business opportunities.
I’m a proud BlackBerry user but when you have this level of shipment momentum, well, it’s the most impressive change I’ve seen in the mobile ecosystem, save for the iPhone. It’s radically changing the handset landscape. And that growth and potential, we’re just not seeing on a BlackBerry today. They haven’t created the developer excitement or ecosystem for BlackBerry.
Android’s challenges are real. Discoverability is a problem. The payment models are a problem. There are security problems. But within [those problems] are great opportunities.