Over the last two years, Google's Android mobile operating system has surged out of nowhere to take a significant chunk of the smartphone market, anywhere from 15 to 25 percent, depending on whose numbers you use.
Now, with Verizon Wireless's announcement that it will begin offering Apple's iPhone, Android faces a new and formidable competitive threat.
The reason? Verizon has been a crucial partner for Google in the Android rollout. The wireless giant poured money into marketing Motorola's Droid and other Android-based smartphones, including $100 million on the successful "Droid Does" campaign.
And because Verizon didn't offer the iPhone, there was a void in the company's product portfolio — a void that Google happily filled with Android.
"A lot of people who bought Android phones were buying it in lieu of an iPhone, because they couldn't get one on the Verizon network," Needham & Co. analyst Charlie Wolf told Ars Technica. "Where the iPhone will have a dramatic impact is on the brand choices of feature phone users migrating to smartphones going forward. The iPhone will suck the wind out of Android's growth on Verizon."
That may be overstating the impact slightly, but it's pretty clear that many, many Verizon customers will opt for an iPhone instead of an Android device. The question is, how many, and will it be enough to halt Android's seemingly inexorable growth?
"We believe iPhone on Verizon will be the first true test for Android, whether its share gains are real or just a temporary phenomenon due to weak competition," Shaw Wu, an analyst at Kaufman Bros., wrote in a research note cited by Bloomberg. He said he expects Verizon to put major "marketing muscle" behind the iPhone, most likely at the expense of the Droid Does campaign.
But Wu cautioned that it's very difficult to predict the Verizon's iPhone's impact on Android in a quantifiable way.
The reason is that Android is such a diversified platform. Every major wireless provider offers Android devices, and there are literally dozens of Android-based phones, from all the major handset-makers. Moreover, Android adoption is occurring at a rapid rate, an astonishing 300,000 handset activations per day, according to Google's Android chief Andy Rubin.
So, even if 3 million Verizon customers (for example) choose an iPhone instead of Android — out of the expected 10 million or so iPhones Verizon will sell in 2011 — Google's open OS is now so entrenched across device-makers and service providers that it will probably weather the blow.
Another factor working in Android's favor is the structural changes happening in the mobile phone market. It's a classic situation of a rising tide lifts all boats. Smartphone adoption is exploding, as millions of people upgrade from simple "feature phones" to more sophisticated smartphones like the iPhone and Droid.
This is one of the reasons that Blackberry-maker Research in Motion has managed to keep market share despite the onslaught from the iPhone and Android. There are so many people upgrading to smartphones that the pie keeps expanding, meaning there are plenty of customers to go around.
Thus, while millions of Verizon customers who might have bought an Android phone will no doubt now choose an iPhone, the Android ecosystem as a whole is so huge, and growing so quickly, that Verizon's iPhone will most likely be a speed bump for Google's mobile operating system.