Why Droid will hurt RIM more than the iPhone
By now I’m sure you’ve seen Verizon’s aggressive “idon’t” campaign to compete against the iPhone with its new Motorola Droid. This is Verizon’s second attack on the iPhone after the first attempt with the Blackberry Storm failed miserably. Despite the Storm, AT&T continued to add new subs on the strength of the iPhone. Just last quarter AT&T added another 3.2 million new iPhones, 40% of whom were new customers to AT&T (a 2 year trend now).
Although Verizon desperately needs to counter the iPhone, I believe this latest attempt will hurt RIM much more than Apple. In other words, it will backfire cannibalizing more Verizon RIM devices than AT&T iphone devices. Here are two reasons why:
1. Droid Takes Advertising Dollars from RIM
RIM was until now Verizon’s flagship smartphone partner. If we ignore the ailing Windows Mobile platform, RIM has virtually the only competitive smartphones in Verizon stores. In the past Verizon poured most of its advertising dollars in the smartphone category to promote RIM Devices. But that is about to change. Not only does RIM have to share Verizon’s ad budget with Droid, Droid will get the better part of it. Verizon has said publicly that it will promote Droid with its “biggest marketing campaign ever.” This is going to hurt RIM. Although other carriers in the US carry RIM devices, Verizon is the only operator where RIM enjoys flagship status. AT&T’s flagship device is the iPhone of course. Sprint’s flagship devices are now Palm and Android devices. And T-Mobile is pushing Android of course.
2. Droid’s Target Market Overlaps more with RIM’s than the iPhone’s
The second reason is a bit more subtle, but perhaps more significant. Droid’s feature set will appeal more to the traditional RIM user than to iPhone’s target market. This means that Droid will naturally attract more would be RIM users than would be iPhone users. Let me elaborate.
Roughly speaking, there are two main clusters of smartphone users: those users who optimize for communications features and those who optimize for entertainment features. Users optimizing for communications features need good quality voice service, great email and Exchange support, and a preferably physical keyboard for typing lots of emails. Users optimizing for entertainment want a great gaming experience and great music and video services, including media synchronization (i.e. iTunes). Although these two segments are increasingly overlapping, they are still distinct. It’s no mystery that the iPhone dominates the entertainment segment with its great music player and iTunes integration. When it comes down to it, the iPhone is a great entertainment device and not that great voice phone (which users who optimize for communications demand). Unlike a voice phone, the iPhone has no physical keyboard. And running on the AT&T network, iPhone users often complain about dropped calls but put up with the problem because they favor the entertainment features.
I know many of you are thinking that the iPhone is a good email device too. Although the iPhone is making clear inroads into the communications space with Exchange support for example, this is not the iPhone’s sweat spot. RIM of course optimizes around communications capabilities. With the best support of corporate email systems, a great physical keyboard for typing lots of emails, and a good voice phone.
Droid is a better communications device than it is a good entertainment device. For this reason, Droid will hurt RIM more than Apple. Droid comes with the Verizon network which offers better voice service and fewer dropped calls. Droid is made by Motorola, who makes better phones and radios than Apple. Droid featurs a physical keyboard that many RIM users will demand before switching to a new platform. At the same time, Droid is missing key entertainment capabilities such as VCAST music, iTunes support, or any other good media synchronization service.
It will be interesting to watch what happens, but for these reasons, my bet is that Droid will hurt RIM more so than the iPhone. This is despite such aggressive Droid marketing campaign attacking the iPhone directly.
What do you think? If you are an iPhone user, would you switch to Droid? If you are a RIM user, would you?