As Smartphone Sales Are Peaking, Has Google Finally Caught the Wave?

Smartphone sales are slowing due to growing market saturation. But Google's Android market share is projected to grow, as the following article explains, which means it has the opportunity to generate more revenue and profit from these devices and their use.

The big question is whether the company has finally figured out how to capture that opportunity and turn it into an annuity. JL

Dan Gallagher reports in the Wall Street Journal:

Smartphone sales will grow by an average of 6% annually over the next five years. Android is projected to gain market share over that time, reaching 85% by 2020 from about 80% now. Google doesn’t make money on devices, but on how well they feed users into its lucrative search business and other services.
The global smartphone business hasn’t quite peaked, but growth from here will be harder to come by. Oddly, that could be good for Google.
The Alphabet GOOGL -0.80 % -owned Web search giant already has a commanding position in the business. Its Android mobile operating system powered nearly 80% of smartphones sold last year, according to International Data Corp. Google has already released a developer preview of this year’s version of the operating system, dubbed Android N. A full launch is expected later this year, though the company is expected to showcase the software at its I/O developers conference this week.
Android’s prominence has put Google in the sights of European regulators, creating some long-term risk. And its position might look less impressive given growing signs of an unprecedented smartphone slump.
Global smartphone shipments for the first quarter were flat year over year for the first time, IDC reported. Apple’s iconic iPhone notched its first-ever decline during the period. Samsung, SSNHZ 0.00 % the largest maker of Android phones, also saw total smartphone sales fall as weakness from older phones offset a strong launch of its new Galaxy S7 devices, according to IDC.
That is a harsh comedown for an industry accustomed to high double-digit growth. But the realities of the business no longer favor rapid expansion.

Developed countries are awash in devices, and most people who can afford high-price products such as the iPhone and Samsung’s Galaxy S series already have them. So that segment will now be driven mostly by upgrades and converting remaining feature-phone users. Nearly 80% of the U.S. population now owns smartphones, comScore estimates.
There is still growth to be had in developing markets. These include India, Africa and the Middle East, to name a few. But this sort of growth will be slower in nature, due to network limitations and device affordability.
Yet that still bodes well for Google. Unlike Apple’s high-end devices, Google has exposure across the price range. Almost 60% of Android phones fetch less than $200, according to Neil Shah of Counterpoint Research. No iPhones are priced in that range unless they are subsidized by a carrier.

So Google should still be able to eke out growth for Android in a rapidly slowing market. And scale is important.
Google doesn’t make money on devices, but on how well they feed users into its lucrative search business and other services. There is still room for improvement here. Google’s cost per click, which measures what advertisers pay, is nearly 30% lower on mobile than on desktop, estimates Eric Sheridan of UBS. That should grow as mobile users transact more business on their devices.
IDC projects smartphone sales will grow by an average of 6% annually over the next five years. Android is projected to gain market share over that time, reaching 85% by 2020 from about 80% now.For any Google investors worried about how the company will fare in a slower-growth market, that number should click.