The rise of Android, another killer ingredient brand

Nielsen data on smartphone share (recent acquirers) as reported in Fortune

When Android first started outselling the iPhone about a year ago, PCWorld said it was no big surprise because: "Two models of the iPhone (the 3GS and 3G) are doing battle with scads of Android handsets in an array of shapes and sizes" (my emphasis).

As you can see from the Nielsen data in the chart, Android has continued to move ahead and now has half of the market of recent acquirers. Even the launch of the Verizon iPhone hasn't slowed down Android's march to the top. Nokia, once the dominant market leader, has been reduced to irrelevance and there's increasing speculation about whether it will be forced to dump Symbian, its own operating system, and join the Android party. Forecasts suggest that there could half a billion people using the Android OS by 2015.

With results like this, Android can lay claim to the title of most successful ingredient brand of all time, challenging the previously unassailable Intel. Like Intel, Android has achieved its success at the expense of its host brands. We talk about Android phones, we don't talk about Motorola phones with the Android operating system. Motorola may have found a new lease of life by adopting the Android OS but its margin opportunities are significantly eroded if it's just one of many manufacturers who can supply Android phones. Any manufacturer that partners with an ingredient brand as strong as an Android or an Intel trades away a good portion of its equity and heads towards commodity status.

One important difference between Android and Intel is that Intel made itself really difficult to extract from its hosts. The significant marketing dollars that Intel has spent both directly to the consumer and indirectly through advertising subsidies to its OEM partners worked their magic. The OEMs became addicted to the money and consumers were trained to look for the Intel mark. Android has take a different route to market, gaining market traction quickly by being offered for “free" and without significant marketing support.

That means that, despite the huge success of Android so far, it's possible that some manufacturers may still be able to liberate themselves from their Android dependency. Indeed, there are reports that Motorola is going to try and develop a new, proprietary OS. There may not be much time left. A future where there's just Apple's iPhone vs. a mass of Android smartphones that compete against each other on price and a few relatively unimportant features (much like current PC’s) looks the most likely scenario.

Reference: Ingredient branding, or, finding your Nemo (Landor.com)

Ingredient branding: perils and opportunities

Photo: Nemo, all grown up by motleypixel (Flickr)

I have a new article on ingredient branding that's been published by ChiefExecutive.net: Finding your Nemo: Surviving the Dangerous Waters of Ingredient Branding. Here's the speed-read summary:

1) What's Nemo got to do with it? As a clown fish living in symbiotic harmony with his sea anemone host, Nemo is a rare example of a win-win in the animal kingdom. But, for every Nemo, there are many, many more predators and parasites. What's true of the animal kingdom is also true in the world of ingredient branding.

2) The allure of ingredient brands: Companies are attracted to ingredient branding, smelling the whiff of opportunity. When brands are weak, bland, or undifferentiated, ingredient brands can add strength, color, and distinctiveness. When brands are commoditized, ingredient brands can add value. And if the ingredient brand is already well known and built by someone else, it can deliver these benefits very quickly.

3) Success! It can work. The Heavenly Bed is a spectacular success for Westin. Hemi, worked for Dodge and Techron worked for Chevron. But note that all these successes were proprietary ingredient brands launched by the companies themselves (vs. a partnership with another company).

4) Intel eats its hosts: Intel is the most famous of all ingredient brand cases. It was a spectacular success for Intel but pretty much a disaster for all the host computer companies. They were hooked and then sunk.

5) Any clown fish-like examples? There are a few: Starbucks coffee stores in Barnes & Noble Stores, the Oreo McFlurry at McDonalds and the Woolmark seal. These are partnerships where the partners have complementary skills and the ingredient brand does not threaten or take away the key brand equities/competencies of the host.

6) Lessons: The main lesson is to be really careful out there. The world of ingredient branding is a dangerous place, often best left alone. Better off to create your own ingredient brands if you can. If you feel the need to go off-reef and partner with someone else, then be especially wary. That enticing light may just turn out to be a nasty Anglerfish.