Tuesday, December 21, 2010

Is Google Winning the Smartphone War?

As the smartphone industry continues to soar, investors are trying to figure out the best plays. Of course, the obvious winner has been Apple (AAPL).

But as with any dynamic space, the change can be disruptive. In fact, it looks like Google (GOOG) is gaining ground in the smartphone space because of its Android mobile operating system.

Actually, the recent traction has been stunning. For example, a recent survey from Nielsen shows that Google got about 27% of new mobile subscribers in the past six months, which compares to Apple's 23%.

It certainly helps that Android is free -- based on the open source model -- and relies on common programming methods, such as Java. More importantly, the system is incredibly powerful. Just look at the capabilities of the Droid X phone.

OK, so where's the business model? Well, Google believes that Android will allow the company to dominate the mobile advertising space. Basically, the default search system will be Google.

But there are some problems. First of all, mobile search is still in the early stages and it may take several years to get any scale. Also, search is not necessarily a common activity on mobile phones.

As a result, Apple may remain the leader for some time. The company has strong technology, with control over the operating system and hardware platform. And yes, Apple is rolling out its own advertising platform.

So, even if Apple is not the market share leader, it probably does not matter. The company realizes it is most important to capture the most profits.

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