Marc Andressen on Bloomberg

Bloomberg recently TV interviewed Marc Andreessen, the guy who’s famous for co-founding Netscape and currently works as a VC at his own Silicon Valley VC shop, Andreessen Horowitz.

Towards the end of the interview, he was asked what’s big for 2013. After saying that tablet growth would still be huge, he followed up with this quote:

"The other thing I think I'd point to is the $50 Android smartphone is about to hit the market worldwide. Smartphones are about to be put in the hands of another 3 billion people who don't have them. And that's probably the single biggest thing that's happening right now."

In the developed world, we tend to think of Android as Samsung Galaxy S3 and S4, the new HTC One, maybe some Sony, and throw Motorola in for good measure. Yeah, we hear about cheaper hardware, but rarely do we stop to think about what it means to emerging markets.

And, yes, Android is used for some pretty awesome and powerful smartphone hardware. But Android is also about to kill the feature phone. Dead. This means Nokia’s Symbian, and every other less-powerful proprietary feature phone out there.  They are all toast. (Insert BlackBerry and Windows Phone jokes here. But that's not what we're talking about.)

Commoditization is coming

Who’s going to make these phones? There are already lesser-known brands in India and China cranking out cheap Android phones. And then there’s Samsung and LG, who make all sorts of hardware that we never hear about. Same went for Motorola, too.

What we’re talking about here is the commoditization of smartphones at the low end of the market and taking the carriers out of the equation. If you’re old enough to remember how regular household landline phones were sold a couple of decades ago, you basically walked into the phone company’s retail store to buy (or even rent) a phone. Eventually the quality of other products (sold in other stores) improved, and phone companies stopped trying to control the sale of phones. 

I remember 10 years ago talking to my friends in the investing community about how this trend would eventually repeat itself in the land of mobile. But with advancing radio technologies (2G, then EDGE, then UMTS, then HSPA, then HSPA+, and finally LTE), it never really happened. 

In fact, back in those days when a new radio technology was deployed by carriers it was often a year or two before handsets hit the market to take advantage of the technology. Remember how long it took for 3G phones to hit? It was way after UMTS deployment began. 

But today these technologies are fairly mature. And in developed markets where 2G, 2.5G and sometimes 3G are available, the radio code is stable, the chipsets are cheap, and there is no good reason for carriers to be a bottleneck to cheap access to decent smartphones. So it makes sense that in emerging markets, during 2013 and 2014, the next 3 billion people are going to start to become connected to the mobile Internet. The ramifications of this are pretty awesome.  It’s widely known that wireless internet connectivity helps boost a country’s GDP faster than just about anything else. 

A good spot for Google

Some might say that Google (and Android), are playing a big factor in catching these developing markets up to where they should be. I think that’s true.  And I also think it will be very profitable for Google to do this. Its services drive revenue, and Google is pretty much set to dominate in emerging markets.

Think of how tough this must be for Microsoft. When Nokia partnered with the Redmond giant, they HAD to know Symbian was going to disappear at the low end of the market within a few years. They had a chance to push Windows into the low end quickly, to avoid this brutal ending.  But they didn’t do it. They entered the race at the top of the market, and things aren’t going well.

Sadly for Microsoft, I think we’re now seeing a story unfold where Google wins the low end, Google and Apple are winning the top end, and everyone else is fighting for a relevance, or ownership of a niche segment of the market.

 
There are 30 comments

Reader comments

Andreessen: Android poised to explode in emerging markets

30 Comments
Sort by Rating

Don't know if those Firefox phones are smart, but they are pretty cheap too. I wouldn't be surprised if they ran for $50 soon too.

The main mistake Apple and Microsoft folks there up in north are making is lack of ability to understand what this world really looks like. If you are reading western technology websites and magazine those pundits hardly never talk about people of so called 3rd world and not correctly about folks in developing countries too. So called "west" (including Japan and S.Korea) is just about 17% of world population and even there great deal of people are not ready to buy hyped iPads and expensive Windows-devices.

It looks like western technology pundits are living in their elitist bubble with no idea of mobile revolution. This guys and girls have heads full of Cupertino and Redmond hype, wishes. Their intellectual capacity is not great enough understand even patent trolling as a last battle of those western giants like Nokia, Microsoft, Apple etc... Of course there are rooms left for them too but just about 15% of global markets.

This is nothing new. In our Eurocentrism we seldom remember that in normal times 80% of global business has always done in a China- India- Africa triangle. They, not we, have been mostly the biggest players of markets. Please tell these stupid and arrogant western media pundits that America and Europe are not the "whole world". Please bring them back to reality. 90% of consumers (especially in future) of IT has more or less dark color of skin, he/she is not rich and he/she will never buy 500 € mobile devices. If western pundits can got this vision they would better understand why Linux will dominate global IT markets from now on. Free software is the future of IT. Especially Microsoft must understand now that it has lost the dominance for ever.

And to think that just a couple days ago, some Apple shill was predicting "peak android" in the mainstream press.

I've often mentioned that consumers would be be better off buying phones from Best Buy or Amazon than from a carrier. The can offer financing just as well as a carrier but would provide more freedom.

I think people just like to say things to get clicks. I mean looking at the market model Android obeys, there is no way it is peaking, or would peak soon. It is more likely that the market will continue to grow, Android would most likely have most of the market share. It is highly probably that Apple would still have second place in terms of world wide market share (which I imagine might get smaller in number, as the market itself grows) for a few years too. Third place will be fought over by the other two "big" boys, with higher probabilities to MSFT as they are entering the low end game as well with their recent push on cheaper phones in emerging markets.. I think that is a reasonable forecast.

So now when those sad commercials showing starving children in third-world countries, the child will be shooing endless flies from his bloated belly with one hand and texting his BFF with the other?

I don't think the author realizes what real poverty is like. The developing world needs condoms, not smartphones.

We shouldn't postpone potential development because another country/continent is behind. Development in technology is taking us closer to an answer of how to fix the problem in areas of poverty. New phones are improving communication, not to mention it creates competition which forces companies to invest into better technology and speed up development.

Your opinion seemed filled with some preconceptions, so I will try to be quick:

1- Third world is an outdated expression which presumes a second (i.e., communist) world. Since the 90s, social scientists have been favoring "developing world".

2- Developing world = Africa + XYZ.

3- Africa is not just bloated belly children shooing endless flies. That may be what penny hunting commercials show in Seattle to touch those who have it in spare (which is fine), but still. Even war torn areas (Tchad, South Sudan and whatever) are not all like that. Countries with lots of poverty (where they need organizations like MSF the most) are not all like that.

4- You'd be surprised at how much cutthroat the mobile competition is in some African countries, and how much this is spurring commoditization of plans and devices, and commercial freedom for small entrepreneurs (which are booming). Small farmers checking auction price of the cattle and choosing the proper market to sell, in the middle of Ethiopia, to name just one example very low in the market chain. Cheap Android smartphones are empowering those people already. Today. To some point, deregulation and an all-GSM infrastructure enabled people to switch carriers on-the-fly (by changing the SIM) to the one with lower costs, benefiting everyone and lowering costs even more. I wish I could tell the same about Brazil (where I live, which is USA to them as USA is to us, proportionally), or you could tell the same about the mess that is the american market (700 MHz LTE soup, anyone?) and regulation in general (you can sell your device, and now you can't).

5- In remote areas of the Amazon jungle, Google worked with indians and activists to use smartphones, technology and some programming to track deforestation. It helps the communities and provide some education, lowering the digital divide that plagues our world.

6- And let's not get started about all the political implications about ubiquitous connectivity. We have seen that a lot already.

All that said, please reevaluate your conceptions about the developing world. You'd be surprised. Andreessen was spot on, and that's a good thing.

Best regards to all my american friends!

When I read Scottj's contribution I was poised to educate him about the so called "third world" and the misconceptions which many Americans have about it. After seeing your post I no longer need to since you eloquently stated what I intended to. Well said my friend.

Nobody addressed my point. Cell phones should be very far down the list of things that these folks need. Even Bill Gates gets it. That's why he's trying to use money and technology to do things like eradicate malaria. He didn't take his fortune and buy every African a cell phone. He's got the priorities correct.

By the way, I knew what the definition of "third-world" is. It doesn't matter if the PC police have declared it verboten. It's still how the majority of people refer to these countries.

The article speaks of emerging markets which are developed nations with all the comforts we enjoy here in the US. Markets like Latin America, Africa, Caribbean, etc all fall under this grouping. In most of these markets BlackBerry still dominates as the most popular smartphone hence an affordable android phone would do well. In the pockets of the world where Gates is fighting malaria and polio are not considered emerging markets since they are stricken by poverty. This is where the term third world fell out of favor because uninformed persons like yourself figured every one of these nations are filled with bloated belly, fly covered, starving children. Instead of speaking from a position of ignorance I suggest you use your smartphone and the internet to learn about the world around us. You will be surprise by the quality of life people are living in the third world.

There have been a couple articles in the past that demonstrate the use of smartphones to save individuals in these countries money, by knowing about crop issues, passing information along to one another for their everyday life. It is useful knowledge and actually brings them more money from using them in the long run. Savings in countries and regions such as that benefit from it.

"Nobody addressed my point. Cell phones should be very far down the list of things that these folks need. Even Bill Gates gets it. That's why he's trying to use money and technology to do things like eradicate malaria."

Hasty generalization. These "folks" are different folks, and part needs vaccines through philanthropy and others need smartphones and basic technology through normal business, to "keep walking". I didn't address that point because I wasn't denying the fact that they need vaccines. I said these countries ALSO need smartphones.

"He didn't take his fortune and buy every African a cell phone. He's got the priorities correct."

Sorry, straw man and false dilemma. Nobody wants or expects the B&MGF to do that, nor that excludes the possibility of other businesses selling smartphones and other folks buying them, especially in those very unequal societies. Priority does not mean exclusivity.

"By the way, I knew what the definition of "third-world" is. It doesn't matter if the PC police have declared it verboten. It's still how the majority of people refer to these countries."

You don't need to act like that when I was talking to you in a very amicable way.

Weasel words and populum arguments. That's basic semantics, and it's good practice to name things accordingly to their nature regardless of how the layman wants to name them. In this case, the political context is completely obsolete, as people who devote their lives to these studies have demonstrated.

How you want to name is all your choice and I have nothing to add, but don't take the way I named as political correctness because that only ignores the knowledge about the subject being discussed.

Regards.

Population of Europe: 740 million
Population on N.America: 350 million
Population of Africa: 900 million

New people born in Europe: 7 million
New people born in N. America: 4½ million
New people born in Africa: 36 million

Western world is aging, old and tired. Markets are moving to east and south.

The developing world needs condoms, clean water, but also more education, smartphones can help, at a very cheap price, my Hindu brothers and sisters have achieved 90% literacy. We have 400 million middle income, a 20 billion dollar free food a year program. Half a million Indians are in Africa, now at 10% growth, smartphones won't slow them from developing free food programs. Wealth is a more powerful contraceptive than anything, the less children die the more you want less to devote more resources to each, such as education. I've been disabled all my life, lived below the poverty line for 30 years, and I have given $20 a month to development aid for 7 years. Smartphones have been a great comfort to me and I want them for my people. Cheap, low power drain, low infrastructure costs, part of why emerging economies are worth more than developed ones. 800 million middle income Chinese shouldn't be denied smartphones, one fiber optic line connected 4G tower can bring knowledge to 100,00 Latin Americans.

This is awesome news. Putting responsive, stable and cheap technology into the hands of the likes of 3 billion people will bring a great surge of growth everywhere worldwide not just to these new regions.

"Sadly for Microsoft, I think we’re now seeing a story unfold where Google wins the low end, Google and Apple are winning the top end, and everyone else is fighting for a relevance, or ownership of a niche segment of the market."

Ha! Ha! Microsoft is winning anyway you spin it Mr. Analyst, just check out the Microsoft's Android patent collection estimates: http://bit.ly/11U7VQ6

...then compare it to the massive sums of money they are losing on the mobile division and you see the real picture.

They are not losing anything, they sold 7-8 Million windows phone last quarter with profits around $500M and its only increasing every quarter. Infact its Google who is losing massive sums of money on Android and they make most of their money on windows in the PC world and Apple ios in the mobile world.

"currently works as a VC at his own Silicon Valley VC shop"

forgive my ignorance, what does VC stand for?