Does Android have the advantage in the smartwatch war?

Earlier today, ReadWrite ran an article about two new Android Wear-based smartwatches: LG's G Watch R and Asus's ZenWatch. According to ReadWrite, both watches are significant improvements over previous Android-based smartwatches. The G Watch R has a round face, like the Motorola 360, but unlike the Motorola watch, it uses the entire watch face as the display. In addition, it looks more like a conventional watch, uses conventional watchbands, and has better battery life. The ZenWatch is rectangular like the Apple Watch and has an attractive design, but it uses conventional watchbands, has an AMOLED display and runs Asus's ZenUI user interface on top of Android Wear.

Neither of the new watches has all the features of the Apple Watch, but it's becoming increasingly clear that feature parity really isn't an issue. The watch you buy depends primarily on the smartphone you use--the Apple Watch only works with iPhones, while Android Wear watches only work with Android smartphones. Android smartphones had 84.7% of the worldwide market share (in units shipped) in Q2 2014 according to IDC vs. 11.7% for iOS. That means that about 88% of potential buyers are not in the market for an Apple Watch unless they also want to throw away their current smartphone and switch to an iPhone.

Android smartwatches have another, less-obvious advantage: There are several companies making them, and new smartwatches are being released all the time. Samsung, LG, Motorola/Lenovo and Asus are all making Android Wear-based smartwatches, and each company is on a more aggressive release cycle than Apple. Consider that Apple generally only releases a new version of a product once a year. That makes Apple's upgrades predictable, but it also means that it takes a year for new features to reach the market. In the Android world, on the other hand, smartphone makers are releasing new models all the time, often with features that are intentionally experimental, in order to gauge consumer interest. That enabled Android smartphone makers to get big screens and NFC for financial transactions out before Apple.

The Android smartwatch makers could have the same advantage over Apple. Their watches are evolving continuously, as new features and form factors are introduced, while Apple is a monoculture that will probably only release new watches once a year. That means that if a smartwatch vendor stumbles on a very popular combination of designs and features, Android smartwatch makers can clone the designs and features and get them to market faster than Apple can.

In my opinion, the jury is still out as to whether there really is a mass market for smartwatches. However, the Android ecosystem is in a far better position to take advantage of the market opportunity if and when someone comes up with the "killer app" of smartwatches.

When is a watch not a watch?

Apple's announcements yesterday were guaranteed to stimulate feedback from pundits everywhere, myself included. The Apple Watch introduction has generated a lot of interesting feedback, both because it's a new product and category for Apple, and because it's competing in an established market. A few writers have speculated that the Apple Watch spells doom for high-end watch brands such as Rolex, Omega and TAG Heuer. I don't think it does, because the Apple Watch competes in a completely different market than the high-end watches.

Comparing the Apple Watch to, say, a TAG Heuer Carrera Calibre 16 chronograph, is like comparing a Honda Odyssey minivan to a Lamborghini Huracan, or like comparing a food processor and microwave oven with a gourmet kitchen. Neither one is a great analogy, to be sure, but both get the point across. People will buy the Apple Watch, as they buy other smartwatches, to be an extension of their smartphones. Timekeeping is just one of many functions that they expect a smartwatch to perform. Buyers of the Calibre 16, on the other hand, are buying the watch for two reasons: 1) To keep time, and 2) To demonstrate their taste (and that they can afford a Calibre 16.) The TAG Heuer watch, which is relatively inexpensive for a high-end watch, is priced at $4,950. It's a mechanical watch with a Swiss made movement that can run up to 42 hours without rewinding.

Everyone in the watch industry knows that electronic movements are more accurate, more convenient and less expensive than mechanical movements. In fact, the widespread introduction of quartz movements by Seiko and Citizen decimated the mechanical watch industry in the 1970s and 1980s. The mechanical watch makers that survived did so by making their watches more sophisticated and more expensive. Their watches evolved from functional timepieces into collector's items and works of art. Someone who buys an A. Lange & Sohne Tourbillion Perpetual Calendar Handwerkskunst for $357,700 (that's not a misprint) is willing to trade off the inconvenience of winding for the chance to own a gorgeous watch that only a handful of people in the world can afford or appreciate. The Apple Watch, on the other hand, will be an heirloom to be enjoyed until the Apple Watch 2 comes out in a year or two.

The Apple Watch, and all the other smartwatches out there, are gadgets and compete with other gadgets for consumers' dollars. High-end mechanical watches compete in a completely different category. That's not to say that I'd be surprised if Rolex, Omega or Tissot releases their own smartwatch to participate in the category, but it's still not going to compete with their high-end mechanical watches--it will be for people who find the Apple name on their smartwatch to be too pedestrian.

Apple gets its mojo back...for now

Earlier today, Apple held a multi-product announcement at the Flint Center in Cupertino. I'm going to skip the product specifications and discuss what it all means, at least to me:

iPhone 6

The long-rumored iPhone 6 was announced, in two flavors: The iPhone 6 with a 4.7" display, and the iPhone 6 Plus with a 5.5" display. Other than display size, the two phones are functionally identical to each other. The big news, obviously, is the bigger screens. Prior to today, if you wanted an iPhone, you could choose between a 4" display and...another 4" display. Android smartphone vendors have successfully competed against the iPhone with bigger phones--in fact, some analysts attribute a fair portion of the decline in iPad sales to substitution of bigger smartphones for tablets.

With the deliveries of the iPhone 6 models in September, Apple will have its own "phablet" to compete with big Android and Windows Phone models. The iPhone 6 Plus, in particular, is likely to cannibalize sales of iPads and iPad minis, but Apple would rather steal sales from itself and keep customers inside Apple's ecosystem than lose sales to competitors and risk having customers switch to Android or Windows Phone.

Apple has also adopted Near Field Communications (NFC) for use in financial transactions. The company's new Apple Pay service enables customers of five of the largest U.S. banks to make credit and debit card payments without taking out their cards. Apple says that over 220,000 stores are already equipped for Apple Pay transactions. Again, this is an area where Apple is catching up with competitors; the first NFC-equipped Android and Blackberry phones were released in 2011. NFC hasn't taken off in the U.S., largely because a relatively small number of customers had compatible smartphones, and partly because not enough banks and merchants were supporting it. Apple Pay goes a long way to cutting the Gordian Knot by bringing Apple, payment networks (American Express, MasterCard and Visa,) banks and merchants together. However, Apple Pay only works with the iPhone 6 and iPhone 6 Plus, so for quite some time, the vast majority of iPhones in customer hands will be incompatible.

From all appearances, the new iPhones are well-built, well-designed smartphones that compare well with the best phones from competitors. However, the key features that differentiate the iPhone 6 and iPhone 6 Plus from earlier iPhones, particularly the iPhone 5s, are features that competitors have had for some time. With today's announcement, the top iOS, Android and Windows Phone smartphones are largely at parity.

Apple Watch

Today's Apple Watch announcement (really a preannouncement--I'll explain in a moment) finally brought to an end most of the speculation about the "iWatch"--speculation that began in late 2012. Many, if not most of the current assortment of smartwatches from Pebble, Samsung, Motorola, LG, Sony and others, owe their genesis to a desire to get into the market ahead of Apple. Apple isn't in the market quite yet--they announced the Apple Watch with two different display sizes and three models, but didn't discuss the actual screen size, resolution, storage space, RAM size or battery life. We also don't know when the Apple Watch will ship, other than some time in early 2015. The prices was specified at "starting at $349" in the U.S., which suggests that the three models will be differentiated by screen size, bands, and possibly memory. (We've since learned that the models are also likely to be differentiated by case materials.) So, we know a lot about the Apple Watch, but if we don't know when we can buy it, how much it'll cost or how it's equipped, it's a preannouncement.

People have criticized Samsung for their tendency to throw everything but the kitchen sink into their smartphones, whether or not the features are actually going to be used or work very well. I felt the same way about the Apple Watch feature set. Some of the features, such as using a GPS-based time server to maintain the correct local time, and the ability to use the Watch as the "front end" for texts, phone calls and email, make a lot of sense. The exercise features make the Watch an effective substitute for a fitness tracker. However, some features, like the ability to draw on the crystal with your finger and to send your heartbeat to another Watch user, go into the "What were they thinking?" category.

It feels to me like no one--not Apple, Samsung, Motorola or the rest--knows what the real use cases for a smartwatch are. Of course it has to tell time; otherwise, it's not a watch. But anyone can buy a perfectly adequate watch for telling time for $25. How do you justify spending $250 or more for a smartwatch? One way is to let it act as a "front end" for the smartphone for the most common uses--phone calls, texts and emails. Using the watch for maps and navigation is also nice, and fairly common. And, of course, if the smartwatch can do everything that a fitness tracker can, you don't need the fitness tracker. But here's the problem: Other than telling time, the smartwatch doesn't do anything as well as a smartphone. The screen is too small, especially when people want smartphones with bigger and bigger screens. Fitness trackers aren't selling well, and many people who bought them have stopped using them. Will they use the fitness features longer or more regularly if they're part of a smartwatch? Perhaps. Will they want to feel someone else's heartbeat? Maybe once.

I don't think that anyone, Apple included, has as of yet either 1) Justified the prices of their smartwatches, or 2) Figured out the right feature set to make them a mass market item. At $349, I expect a watch that's a smartphone, not a watch that has to be connected to a smartphone in order to do anything more than tell time. Maybe at $199, smartwatches with comparable functionality to the Apple Watch will sell in big numbers, but at $349, or even the $249 that most Android Wear watches are priced at, they're going to be niche items.