Smart Machine Market Saturation Benefits Google to Boost Its Growth Potential

The Wall Street Journal’s online version published an analysis saying that although the smart machine market is becoming saturated, Google can benefit from it. On the one hand, due to Android's dominant position in the smart machine market, Google has become the "eye of the EU" regulatory authorities. With the growth of the smart phone market slowing down, Google’s dominant position may no longer be as conspicuous as before. On the other hand, unlike Apple, which depends on high-end machines, Google Android covers a variety of product prices. The smart phone market in developed countries tends to be saturated, but there is still room for growth in developing countries. In a fast-slowing smart machine market, Google is still able to maintain the growth of Android, increase the cost per click and other indicators.

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The global smart phone business has not yet reached its peak, but the growth of this market has become more and more difficult. The strange thing is that this may be good for Google.

As an online search giant of Alphabet, Google has dominated the smart phone market. According to data from market research firm IDC, nearly 80% of smart phones sold worldwide last year were running Android systems. Google has released a developer preview version of Android N for this year's new Android system, which is expected to be officially released later this year, but Google should demonstrate this new system at this week’s Google I/O Developer Conference. .

Mitigating EU concerns

The dominant position of Android has triggered the review of Google by European regulatory authorities, which has brought long-term risks to the company. There are growing signs that the smart machine market may experience an unprecedented decline. In this case, Google’s dominant position in the smart phone market may not be as conspicuous as before.

IDC's data shows that in the first quarter of this year, global smart phone shipments remained flat year-on-year. Apple's iPhone sales for the second quarter suffered its first year-on-year decline in its history. Sales of Samsung’s total smartphones, the world's largest Android mobile phone maker, also fell, due to the weak sales of older models that offset the strong sales effect of the new Galaxy S7.

Global smart phone shipments have been declining

This is a serious decline for an industry that is accustomed to double-digit growth. However, the reality of the smart machine industry has been difficult to support rapid growth.

Users in developed countries already have a variety of devices, and most users who have the ability to purchase high-priced products such as iPhones and Galaxy S phones already have these products. Therefore, the smart phone market in developed countries will now rely mainly on mobile phone upgrades. Functional machine users will use smart machines to drive growth. Market research firm comScore predicts that nearly 80% of Americans now have smart machines.

The smart machine market in developing countries still has growth potential, including India, Africa and the Middle East. However, due to network restrictions and limited equipment purchasing power, this increase will actually slow down.

Low-cost phones promote Android growth

However, for Google, this is still a good sign. Unlike Apple, which relies on high-end devices, Google's Android system covers a variety of product prices. Neil Shah, an analyst at market research firm Counterpoint Research, said nearly 60% of Android phones sell for less than $200. In contrast, the price of an iPhone model can not reach this level unless the operator provides subsidies.

Therefore, in a market with rapid growth, Google should still be able to maintain Android's growth. The scale is very important.

Android share will reach 85% by 2020

Google does not rely on equipment to make money, but it will provide users with lucrative search and other services. Google also has room for growth in this area. Google’s cost-per-click (CPC) is an indicator of how much advertisers pay. UBS analyst Eric Sheridan estimates that Google’s cost per click on mobile is nearly 30% lower than on the desktop. As mobile users do more business on their devices, Google’s cost per click should increase.

IDC expects the average growth rate of smartphone sales in the next five years to be 6%. Over time, the Android system will gradually increase its share. By 2020, Android’s market share will increase from about 80% today to 85%.

For investors worried about how Google is developing in a slow-growing market, the above data should be able to reassure them.