Monday, November 5, 2012

The Big Mobile Story of 2012... That You Almost Missed

Last week there was arguably the biggest announcement of the year for the mobile market.  Yet, many people missed the announcement amidst all the clatter about Hurricane Sandy and the presidential election.  What was this announcement?  The iPad Mini?  Something about the iPhone 5?  An update to the Samsung Galaxy S3?  Nope, none of those.  It was Google's announcement of the Google Nexus 4 (and Nexus 10), building on the success they have had with the Nexus 7 tablet which is now selling a million units a month.

Huh?  What is the big news about the Nexus 4?  The Nexus devices are Google's flagship, reference phones and tablets that are meant to set the standard for all hardware vendors in the Android market.  On the surface the Nexus 4 is certainly a highly quality device.  It has a stunning 4.7" 1280 x 768 display, a smoking fast processor, a large battery and a ton of features all packed into a lovely package. It also runs Android 4.2, the latest iteration of the Android operating system.

On the surface the phone can go toe-to-toe with the iPhone 5.  Compared to the iPhone 5, the Nexus' screen resolution is higher, it has about 50% larger battery, it has twice the processor cores, twice the RAM, etc.  Android 4.2 includes location-specific information before you even ask for it and other features that are not available yet on iOS.  On the other hand, the iPhone 5 is a beautiful phone with gorgeous packaging.  While its OS has taken some hits lately (e.g., the whole map debacle and the over-promises of Siri), it still offers a great user experience overall.  Said another way, calling a winner between the Nexus 4 and the iPhone 5 is like trying to call a winner in tomorrow's presidential election - you could try but it is like splitting hairs.

However, there is one element of the Nexus 4 that really broke new ground - the price.  The Nexus 4 is priced at $299 unlocked.  Unlocked means that there is no contract required.  T-Mobile gives you roughly a $20 / month break on your bill if you bring your own unlocked phone.  So with the Nexus 4 you pay $100 more than most high end smart phones on a 2 year contract, but you save $20 / month by having an unlocked phone.  That nets out to a $380 savings over a 2 year period.  For reference, it is believed that Apple is selling the iPhone 5 to carriers at $649, more than double the price of the Nexus 4.

Price does matter!  The U.S. mobile phone market is now roughly 50% smart-phones.  The remaining 50% of the market are people who are less technically savvy and generally more price sensitive.  Being able to buy a top-of-the-line smartphone for roughly half the cost is tremendously attractive.  The same can be said outside the U.S. where much of the growth of smart-phones will likely come from countries like India and China where consumers are likely to be even more price sensitive.  The pricing of the Nexus 4 is likely to tap into broad new swaths of customers.



The price of the Nexus 4 also has the potential to impact technology savvy customers.  Most U.S. customers are on 2 year replacement cycles for their smart-phones because they have 2 year contracts with their carriers.  However, with the Nexus 4 priced at less than half the cost of an iPhone or a Samsung Galaxy S3, you can conceivably move to a one year cycle with your phone at the same cost.  Compare the iPhone 5 or any current high end Android phone to the iPhones / Android phones of a year ago and you will be stunned by the differences.  It is like comparing a Ferrari to an economy car - the displays, the computing horsepower, the network speeds, etc. all have come so far in a year.  Who wouldn't want to turn their phone over every year (environment considerations aside)?

The mobile market has been in a serious state of flux since the iPhone was first launched.  With the release of the Nexus 4, Google is pushing everyone to change again.