The App War is Brewing: What Google’s Nexus One Really Means

Compete will be at CES 2010 sharing additional and complementary data to what you’ll read below. If you would like to set up a meeting with Compete to discuss, please email Danielle Nohe at dnohe@compete.com or Greg Carter at gcarter@compete.com.

Google announced its mobile phone, the Nexus One, on Tuesday, December 15th and as one website put it "the world went crazy". The industry is all abuzz talking about what the device means for everyone from service providers to Apple, but what really struck me about the announcement is what this could potentially mean for the future of mobile applications.

At Compete, we take the pulse of the smartphone industry every quarter with a product called Smartphone Intelligence. This quarter we looked at application usage across the various mobile device platforms. Applications have been vital to the iPhone’s success and Android devices are proving to be no different thus far. In fact, that’s one factor that has separated the two brands from other smartphone makers, as seen below.

As you can see, the majority of iPhone users (54%) spend at least 50% of their time using apps vs. the web browser on their device. 44% of Android users said the same. Yet only 21% of Palm, BlackBerry and Windows owners are using apps the majority of the time.

Currently, iPhone applications appear to dominate the landscape. 100K applications available and 1B downloads is certainly nothing to shake a stick at. But Android Market recently announced that it had reached 20K available apps, which is considerable given that Android device adoption is still far behind Apple’s iPhone. At Compete, we’ve been watching a similar trend: Android Market is gaining on Apple’s App Store. In Q2, we found that only 37% of Android owners had ever visited the Android Market. In Q3, that number jumped to 74%. While still behind Apple’s industry-leading 91% of owners visiting the App Store, Android is gaining momentum.

It’s likely to gain steam too, with devices by several manufacturers launching in the next six months. But the Nexus One could be the Android Market’s real big break. I have no doubt that Google will put its full marketing weight behind the launch of the device, and that could easily mean doubling or tripling the number of Android devices currently in the hands of US consumers. In terms of applications, that should mean more developers creating more applications and creating a bigger / better experience for users. And while the Android Market may not match Apple’s App Store in sheer app volume just yet, it doesn’t have that far to go to reach parity with Apple with respect to the app store experience.

The category in which Apple really excels over Android is in the selection of applications available. But if Google’s Nexus One can take the Android Market to the next level, then we may all look back on its announcement as the "shot heard "˜round the world" in the great applications war of 2010.