By Anam Alpenia
Google-owned Motorola has debuted the Moto G, a sub-$200 device aimed at the final frontier: total dissemination of smartphones. With decent specs (the phone will come to the U.S. equipped with Android 4.4 KitKat) and a price tag lower-income audiences can afford, the Moto G may be the device that brings smartphone penetration global. Through its proxy and subsidiary, Motorola Mobility, Google comes to wield a powerful weapon with which to vanquish competitors in the intense battle for global market share.
Fifteen years ago, Motorola, Nokia and Sony-Ericsson dominated the mobile phone industry. But disruptive technology from Apple and Samsung blew feature and multimedia phones out of the water. The Cupertino- and Seoul-based companies — which now respectively hold 32.1 percent and 12.1 percent worldwide market share, according to Gartner — replaced the original kings of the castle, leaving the fallen mighty to solicit users at the palace gates. Many were surprised when Google decided to pick up Motorola Mobility in May of last year for $12.5 billion. Though the move has irked some analysts as Motorola sustained losses, Google’s long game plan now becomes clearer, as their Motorola acquisition positions them atop a cresting wave about to converge on emerging markets. Belligerent powers now stand at daggers drawn.
Today, mobile demand deemphasizes high-end users and devotes more attention to economical buys, as the deployment of the Apple 5c indicates. Users, especially in emerging markets, are ditching feature phones for smarter tech that they expect at lower costs than Apple and Samsung currently provide. While an iPhone may sell for up to $649, the Moto G delivers premiere elements like an Android OS and HD display at $179, ensuring consumers don’t settle for tech that’s “good enough.” Given its aggressive pricing, Motorola lowers its shoulder to tackle high-profile incumbents, appealing to markets like China that prioritize value and buy based on price. APAC’s sensitivity proves the region’s elasticity of demand, i.e. its measurable, economic willingness to purchase products based on price cuts and by the same token, to pass on expensive items.
According to the International Telecommunications Union’s recent annual report, 6.8 billion people globally have mobile subscriptions. That’s 96 percent of the world’s population. Penetration in developing countries stands at 89 percent, equal to saturation in the APAC region. Further, mobile-broadband subscriptions increased by more than 100 percent in developing countries from 2011 to 2013, up from 472 million to 1.16 billion. Segments brimming with feature- and basic-phone users seem primed for a product like the Moto G.
Motorola would do well to target APAC, South America and the Middle East. And according to the company’s blog, that’s the plan. The device hit parts of Europe and Brazil this past week; will head to the rest of Latin America, Europe, Canada and parts of Asia before year-end; and the Middle East, India, the U.S. and “more of Asia” in early 2014. These markets hold latent potential customers ready to switch from basic to smartphones. In China, 88.8 percent of the population — almost 1.2 billion people — have mobile subscriptions, but less than half (26.6 percent) operate on 3G/4G. India accounts for the world’s second-highest number of mobile subscribers with 60 percent of the population on plans, but merely 7.2 percent run on third-gen tech or beyond, according to Mobithinking.
In the markets where Motorola will roll out the Moto G, phones tend to be either too expensive, or built on shoddy technology. “Emerging markets tend to be underserved with quality products,” Rob Enderle, president and principal analyst at Enderle Group said in a phone interview. “That’s why they are pushing this particular device. In the developed markets we’ve got a lot of phones, at pretty much every price range. In the emerging markets they usually get some phones they can’t afford and a lot of junk.”
Emerging markets are tired of junk — and instead of basic features, they’re now pushing for applications on their phones, something only smart tech can deliver. “Apart from the desire for better or faster Internet access, the main reason for buying a smartphone is to gain access to mobile apps,” states Ericsson research done in developing sectors Russia, India and Brazil. “For consumers, being connected and having access to tools and services is what matters.” Importantly for Motorola and Google, apps increase stickiness as people engage more and come to count on their phones for content-streaming, GPS navigation and online game play. And the connectivity the Moto G provides will prove crucial to low-income subscribers in India, China and other developing markets where users communicate and interact online via smartphones rather than rely on local infrastructure. The phone that brings audiences these capabilities at an affordable price taps a huge opportunity.
Should Motorola win over these markets, challengers and opponents won’t sit on their laurels. The race to attract the 5 billion users who will switch to 3G is under way. “If Google were to succeed, it would be a precursor to others doing the same thing,” Enderle predicts. Microsoft, Samsung and Apple share at least one thing in common with Google: their market capitalization exceeds $300 billion and they are awash with cash hence can wage a protracted war. Since smartphones are the unavoidable entry point to the future they will soon react. Stay tuned.