Moto X is Motorola's chance to break free of the middle

The ugly duckling in Google's technology portfolio risks doubling down on a strategy to be just OK

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The case for being middling
Sarcasm aside, there's a reason Motorola may want to aim so squarely for the middle. There's a large contingent of industry and financial analysts who believe the era of the high-end smartphone is over, that iPhones, Galaxys, and Ones have peaked as enthusiast users are now fully saturated as a market. Meanwhile, poorer people -- especially those outside the United States, Canada, Europe, Japan, Taiwan, Hong Kong, Singapore, and South Korea -- are where the sales action will be, and they can't afford high-end devices.

Evidence for that belief are the growing sales of really cheap (and cheaply made) Android smartphones throughout Asia, the slight shift in iPhone sales to lower-cost older models, and high but not sky-high sales of the Galaxy S 4.

It's the McDonald's phenomenon: Many more people buy cheap fast food than middle-priced fare like that of a Macaroni Grill or Applebee's, much less than that of a high-end French or Japanese restaurant, à la Hubert Keller or Masaharu Morimoto.

Apple is in the business of making money, so it takes in about three-quarters of the mobile industry's profits and half the PC industry's profits, despite its small market shares. But other companies are in the business of market share, taking thin margins on huge volumes. That's long been Samsung's strategy (its Galaxy devices were a change in that approach), and it appears to be Google's and Motorola's plan. They'd rather be Macaroni Grill or Applebee's than a celebrity chef.

If the goal is to get as many people as possible to use Android, so Google can make money off them through ads and privacy-stripping information services, the middling strategy makes sense. I suspect that's exactly the reason for the middling Nexus and Motorola product lines.

But if pervasive sales is the goal, it would make more sense to be McDonald's, not Macaroni Grill or Applebee's. Google's middling Nexus line is a great example. Sales figures for most of its devices are hard to come by, which means they're small, but the Nexus 7 tablet that reenergized the 7-inch tablet market a year ago (and for which a new, higher-quality version debuted last week) sells about 800,000 units a month, according to date from its manufacturer, Asus.

It also inspired's Kindle Fire HD, which seems to have similar sales figures, though no one but Amazon knows for sure, and it's not telling. By comparison, all iPad models sell about 5 million units a month combined. No one knows how well other Android tablets sell, although worldwide Android tablets are estimated by IDC and Gartner to outsell iPads 2:1, mainly due to very cheap ones sold in Asia.

In other words, middling tablets aren't outselling high-quality units, much less blowing them out of the water, even though the Macaroni Grill business model says they should.

If the goal is near-universal adoption, Google and/or Motorola should be making truly cheap ($100 with no subsidies) Android smartphones, and/or figuring out how to lower cellular data costs, which at about $500 per year in the United States is the true financial barrier to entry for poor people. After all, Google is trying to break the broadband monopoly's pricing with efforts like Google Fiber. Why not with cellular, which is the sine qua non for mobile adoption?

Even if near-universal adoption is the goal, having a flagship or two that inspires people to want the brand is important. Apple knows that, and Samsung and HTC have learned that lesson as well: People talk about the Galaxy or One, even if they end up buying a lesser model due to budget. The (flawed) Chrome Pixel and the new Nexus 7 seems to indicate that part of Google at least understands that as well -- they have high-quality components that can, on paper at least, compare to Apple's products or Samsung's high end.

The reason for the middling-only product strategy of Motorola isn't clear to me. Motorola's unhappy history under Google, as well as Google's poor showing with most of its Nexus products, doesn't give me hope that those executives have figured out something the rest of us haven't. But maybe they have. Moto X is the chance to prove it.

This article, "Moto X is Motorola's chance to break free of the middle," was originally published at Read more of Galen Gruman's Mobile Edge blog and follow the latest developments in mobile technology at Follow Galen's mobile musings on Twitter at MobileGalen. For the latest business technology news, follow on Twitter.

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