Lies, Damn Lies, and Android Tablet Numbers

GearDiary Lies, Damn Lies, and Android Tablet Numbers

Image courtesy of Retrevo

I have been on the hunt for over a year for an Android tablet that meets my needs: I have abandoned hope for now that will be anything appealing in the 10″ space, since Android is currently inferior and fragmented for gaming and a non-factor in music production software. But in the 7″ space there are some cool options, yet in spite of trying three different tablets (Galaxy Tab, Acer Iconia and HTC Flyer) and finding that the size is perfect … I haven’t managed to find a device with enough positives that I can accept the flaws until recently. What flaws?

My Three Problems With Android Tablets

There are three basic issues I have with Android tablets:
– The hardware is all about compromises.
– The OS is either (a) oversized smartphone or (b) the worst mobile OS I’ve used since Windows Mobile 6.1.
– The sales figures are all lies. (of course, this doesn’t impact my usage, but as a statistician it drives me nuts and Samsung’s lying impacts my decision-making as much or more than Apple’s Draconian moves)

Problems With Android Tablets: Hardware
The first one makes perfect sense – when you have a massive customer who will ensure a big pile of cash in exchange for guaranteed supply and quality, you would be a fool to ignore it. As an analogy, I worked for a semiconductor materials company through the era when the first 1GHz chips were made – and believe me, those chip makers needed to ensure a constant flow of high quality, fast turn materials to keep output high because yields were dismally low. That meant there were accounts and efforts for ‘Tier 3′ customers (universities, etc), Tier 2, Tier 1 … and THESE guys. That is exactly the situation Apple uses with its’ suppliers now.

Another analogy – in my first job we were working on configuring detector systems for infrared spectrometers using resistors – only where we had specified precision (1% tolerance) resistors our purchasing folks made the decision to save money by getting 3% resistors (less than half the price). Anyone who has dealt with analog components like this knows what that means – ALL the parts from +/-1% are culled from the manufacturing line to feed those willing to pay the premium for the tolerance. So what you get with 3% is really 2 distinct 2% distributions separated by 2% – so on average you will be jumping from +2 to -2 … and NEVER seeing parts within +/-1%.

Again, by securing a huge quantity and the highest quality, Apple has forced everyone else to pick at whatever is left. And they are paying a premium since they cannot ensure the same quantities.

Problems With Android Tablets: Operating System
The second one – tablet operating system – I know is somewhat subjective, but my thoughts seem to echo a general consensus that Froyo/Gingerbread are not really ‘tablet optimized’, and that Honeycomb was rushed out the door to compete with the iPad … and it shows. The longest experience I have had with a 7″ tablet is the Acer Iconia, and rather than adapting to Honeycomb I found that paired with my Droid Pro I bristled more and more each passing day due to the idiocy of the OS. It was half-baked by Google’s own admission, was never released as AOSP (the ‘open source’ apologists have a truckload of excuses for THIS), and will die an ugly death as Ice Cream Sandwich arrives. It is just a lousy system that really doesn’t work well.

In fact, as I say using Froyo on my Droid Pro made me constantly shake my head at the wrong-minded choices of Honeycomb. So when I recently got a 3G HTC Flyer from US Cellular to review, I reveled in the glory of Gingerbread in comparison. It is faster and more efficient, but as Google has always said it is NOT a tablet OS and it shows. Watching the notification screen pull down to full-screen over the course of a few seconds reinforces that.

But Google and operating systems is a pretty ugly tale in general, as shown in this dismal tale of fragmentation and abandonment. But I won’t delve into that here other than to say that I doubt many tablets not named Galaxy will see the Ice Cream Sandwich update. In fact, let me just say that for those looking for performance, support and integration .. right now the best way to get that is through a ‘vertical integration’ solution called ‘Nexus’.

Problems With Android Tablets: ‘Sales’ Numbers

As the recent Google event we heard that there were ‘around 6 million Android tablets out there’. Some have taken this as a statement of market share – comparing that out of context statement with Apple’s fiscal declaration of 11 million tablets SOLD last quarter and awarded Android with ~25% market share.

Those people are idiots.

In fact, as noted here, folks like Strategy Analytics have stopped even trying to pretend they have real numbers. At this point handset manufacturers like Samsung have stopped giving out real shipment numbers, instead giving percent change year-to-year in shipments.

This would mean that since we know that Samsung claimed 1 million Galaxy Tabs SHIPPED in Q4 2010 (which we know actually resulted in under 100,000 SALES), if they claim a 40% increase in Q4’11 we will see people adding in 1.4 million as a number – even though the 1 million was already debunked!

Kevin Tofel clarified the numbers with Strategy Analytics recently, and he was told:

”Yes, the press release refers to shipments, not sales. All sub-versions of Android are included. Yes, the B&N Nook Color tablet is included in the tablet figures.”

So they are using estimated shipments of the Nook Color in addition to the estimated shipments of actual Android tablets. People who have looked deeper use Google’s own numbers to estimate that fewer than 3.5 million TOTAL Android tablets have been SOLD … which is very different from the 4.7 million shipped LAST QUARTER.

In advertising, there is a term called ‘puffery’ which has legal implications, and is defined as “promotional statements and claims that express subjective rather than objective views, which no “reasonable person” would take literally”.

Let’s just say that Android Tablet sales numbers are puffery and leave it at that. In fact, according to reports, Android smartphone numbers – like the ones used to ‘show’ how Samsung outsold Apple last quarter (which I think is true, just not based on these numbers) – are also puffery.

Why does that matter?

Puffery gets companies in trouble because it has been shown that consumers respond to those claims with money by purchasing ‘leading’ or ‘effective’ products. So if Samsung had a commercial claiming ‘#1 Smartphone Maker’ without the distinction of ‘based on comparing units sitting in warehouses to actual sales of other phones’, they might get in trouble. But by releasing these misleading numbers to the tech press, makers get someone else to do their propaganda work for them.

And my point is that the impact isn’t just on the Android/Apple/Microsoft/RIM battleground. Even within the Android field, the fictitious Samsung numbers had the immediate impact of making them the ‘#2 tablet maker’ and ‘first real iPad challenger’ … when in reality they had the same dismal sales as the Xoom, Playbook and (pre firesale) TouchPad. Suddenly Asus and Acer and HTC are battling uphill to be taken seriously against Samsung.

Problems With Android Tablets: The Amazon Problem

In spite of all this stuff, most serious-minded people have come to the rather obvious conclusion that “Apple Has Obliterated Android Tablets”.

Actually, I wouldn’t say it that way – I would say that Apple has DOMINATED Android tablets.

Amazon, however, is poised to OBLITERATE them.

How? Well, let’s just list them out:
– Amazon already has more PRE-ORDERS for an unreleased product than ANY Android tablet has in FULL LIFE SALES.
– Amazon is selling the Kindle Fire for $199, a price very difficult for others to match without significant losses.
– Amazon has a built-in ecosystem to help recoup the low price. Everyone else … doesn’t.

Before we get to sales, let’s look at the pricing model:

A preliminary virtual estimate conducted by the HIS iSupplu Teardown Analysis Service places Kindle Fire’s bill of materials (BOM) cost at $191.65. With the addition of manufacturing expenses, the total cost to produce the Kindle Fire rises to $209.63. When further costs outside of materials and manufacturing are added in—and the $199 price of the tablet is factored along with the expected sales of digital content per device—Amazon is likely to generate a marginal profit of $10 on each Kindle Fire sold.

Basically, this means that Amazon will LOSE $10 per Kindle Fire, but based on the baseline estimate of $20 per Kindle user in revenues they expect to earn $10 profit. Let’s set aside the content for a second and consider this – Amazon is LOSING $10 per device … and that device is essentially a BlackBerry Playbook with a customer UI and the camera and SD card slot removed.

What sort of business model is this? Certainly NOT a hardware makers model – it is a ‘razor & blade’ model. This isn’t new – early this year Amazon stocks tanked on low earnings, and part was due to estimates that they were losing money on the Kindle 3G when it sold for $189.

So we know that the Kindle Fire is the razor … but what are the blades? There have been plenty of articles written about ‘how Amazon makes money on the Kindle’.

And as BusinessInsider says:

The Kindle Fire is a way for Amazon to sell more things: Media, like books, apps, movies and songs, and also sell merchandise, thanks to its potentially revolutionary Silk browser and an Amazon-centric tablet experience.

This is where content comes into the equation. The assumption – even from the Wall Street Journal and others – is that while digital content is nice, the real value of the Kindle brand is simply bringing people within the Amazon ecosystem where they are likely to buy physical goods.

And while I think that is very true, I believe that in the case of the Kindle Fire there will be considerable pull for digital content – much more than any other Kindle device, or any other Android tablet. Amazon is providing a free trial membership to Amazon Prime, which is likely to get people hooked on all the great free movies and video – and wind up with a number of folks opting for the $79 annual membership.

Some are referring to the Kindle Fire as a ‘super eReader’. And that is true – yet it is much more. With ‘only’ 8GB of storage (which Dan addressed here) you will depend more on streaming than storage, yet 8GB is still a decent amount of space for a moderate amount of digital content.

Folks will definitely load up on some music and movies as well as their ebook libraries, but there are also apps. I have already confirmed with a couple of vendors (most notably Nitrodesk whose TouchDown is a critical app for me) that their apps will work on the Fire, and we also have confirmation from Amazon that they are ensuring that apps added to the Amazon Appstore for Android will work on the Fire. So out of the gate I have over 100 apps and utilities and games for the Fire.

There is still much we don’t know about the Kindle Fire. While the performance of the Playbook is on par with the original iPad, we don’t know how the Amazon UI or underlying Android kernel will impact that. We also don’t know about battery life, and just how well the UI will bring it all together. Perhaps it will be the most successful flop in recent memory …perhaps it will just be a massive success.

We will know in a couple of weeks … which should make it clear that the Kindle Fire is the tablet I put into the ‘until recently’ slot. I am willing to give up the camera and SD card in order to get a properly integrated experience, just as people are willing to deal with some annoyances of various smartphones to get the benefits of that experience.

What Does This Mean for Android Tablets

Regardless of how the Kindle Fire performs when it lands, the message to Android tablets is clear: you’re screwed.

Why? Look at the #1, #2 and #3 tablets of the ‘iPad Era’. Also in the top 5 or 6 is the BlackBerry Playbook, whose hardware the Kindle Fire shares, but which has already been declared a massive failure. #3 is the HP TouchPad, which is only in that slot due to being fire-sale priced at $99/$149 for the 16/32GB models. So forget about that. #1 is the iPad, which single-handedly created the *current* tablet market as it looks today. It is massively vertically integrated with single-vendor OS, hardware, and store. Developers flock to the money generated by the store, and accessory makers have a huge market reach to a single product design.

Now we have the #2 yet unreleased Kindle Fire. It has a single design (so far), massive sales, a huge ecosystem behind it, and is massively vertically integrated with single-vendor UI, hardware, and store.

That makes things pretty clear: Android tablets all have tweaked out versions of the Android OS, anywhere from OS 2.2 (Froyo) to 2.3 (Gingerbread) to 3.0, 3.1 or 3.2 (Honeycomb variants). They ALL have different hardware designs, and disparate ecosystems. The ability to run software, use mods, get updates and so on are completely unknown. Accessory makers can’t count on a design for accessories, and software makers need to prepare for dozens of hardware variants. It is the wild west – which is great for some, but not so great for most.

The Android experience has failed to catch on with tablets like it has with smartphone users for one simple reason: the user experience is different. It has already been proven that those who called the iPad ‘just a big iPod Touch’ were both simple-minded and wrong – yet that is essentially all Android tablets can offer.

Where Android smartphones excel – Google email/maps/docs integration – are places tablets see less usage. And in areas where people want to use tablets – games, movies, etc – Android tablets are performing woefully.

Of course, the other reason Android tablets fail is price: the Motorola Xoom started out as a $800 WiFi-only tablet. I know, RIGHT?!?! Android makers simply don’t have the economies of scale of Apple, the vertical integration of Apple and Amazon or the ability to use a device as a razor to sell some other content as Amazon is doing.

I have no doubt that we will see better Android tablets in the future, but unless they can somehow provide a full end-to-end value proposition that works for customers they will continue to be bit players watching from the sidelines.

What are your thoughts on Android Tablets, the Kindle Fire, vertical integration, and the future?


About the Author

Michael Anderson
I have loved technology for as long as I can remember - and have been a computer gamer since the PDP-10! Mobile Technology has played a major role in my life - I have used an electronic companion since the HP95LX more than 20 years ago, and have been a 'Laptop First' person since my Compaq LTE Lite 3/20 and Powerbook 170 back in 1991! As an avid gamer and gadget-junkie I was constantly asked for my opinions on new technology, which led to writing small blurbs ... and eventually becoming a reviewer many years ago. My family is my biggest priority in life, and they alternate between loving and tolerating my gaming and gadget hobbies ... but ultimately benefits from the addition of technology to our lives!