HTC made 3 key mistakes – ceding Android race to Samsung, Motorola

Camp Android increasingly looks like a two horse race: Samsung vs. Motorola. I'm guessing that Google's mobility division is reluctantly pleased that team Samsung is venturing daily into those San Jose courtrooms.

HTC headquarters in Taoyuan.
HTC headquarters in Taoyuan.

Yes, HTC is quietly brilliant. It’s also not-so-quietly failing. Big – $1B market gap gone, in just two days Big. While I’m not about to lump it in with RIM just yet (HTC’s products are too good, their name recognition too strong) HTC does have the early makings of a flash in the pan.

Thinking back over the past few years in the mobile space, I realized there were three mistakes that HTC management made that lead to the poor financial performance we’re now witnessing.

Sure, there’s no doubt other missteps- I’m not familiar, for example, with the in and outs of HTC’s supply chain or manufacturing processes. Also, one might argue that they’ve executed as well as they could, and the titans that are Samsung, Motorola and Apple are just too mighty. Could be, but in assessing at least the marketing angle, HTC made several small blunders that took the products down the wrong path, leading to declining sales.

Recall 2009, almost no one knew HTC. We later learned that it was a Taiwanese company. Though the company had a fairly long history of making quality handsets — Palm Treo 650 and HP iPaq included — it was really the HTC Droid Eris that helped gain mass market consumer attention. That phone, along with the original Motorola Droid, were backed by Verizon’s huge “Droid Does” marketing campaign. It was the first salvo in a push that would see Android rise, and eventually dominate the smartphone market, including even the almighty Apple iPhone.

But, there were several non-product related issues that led to a mid-2012 meltdown:

1. Too many handsets, lack of focus

In 2010, HTC released 12 Android phones. That’s roughly one per month. The names — Speedy, Pyramid, Shooter (?), Rider, Ruby… — were all over the map, and each was as virtually indistinguishable from the next boring black rectangular design. The result was customer confusion. With Apple, it’s easy. You want an iPhone? Choose your color. Choose your memory. You’re done. Welcome to the good life. Want an Android? Get ready for a long explanation from a clerk who may or may not even know all the nuances of each device. Along with each new model comes massive overhead: support for each device including training and documentation, collateral, web site updates, channel management, and on and on. Things slowed somewhat this year, as they have for most Android vendors. I’ve said this for years: manufacturers need to follow Apple’s lead and put wood behind the arrow; create “events”, focus on a single model. The new HTC One which has garnered respectable reviews is HTC’s attempt to do just that.

2. Developing skin on top of Android slowed company, consumed resources

I understand why Google’s partners need to develop these skins – bits and pieces of code that customize the look and feel of stock Android. It’s about differentiation. If all licensees just loaded up stock Android, and shipped phones, then price (and to a lesser extent the screen size) would become the key buying criteria. Competing on price, especially in technology, is never a good thing. But in creating HTC Sense — Motorola has MotoBlur, and Samsung TouchWiz — the company becomes both a hardware and software shop. That’s a tough racket. It means a cadre of developers need to code away, and test away, building on top of Android. Why not leave it to Google and stick with the AOSP (Android Open Source Project) natively? Samsung is a different story; it brings experience in software to the table, and is much larger ($170B market cap to HTC’s $30B or so). Plus, its diversification means it can afford to subsidize these development costs if needed from other lines of business.

3. No identifiable brand that consumers can relate to

When you think Apple, “iPhone” and “iPad” come instantly to mind. With Samsung it’s “Galaxy”. With Motorola it’s “Droid” or maybe even “Razr” the new moniker the company successfully rebooted earlier this year. With HTC, on the other hand, the water is muddy at best. That’s because there was no consistent effort to unify messaging around a single brand. As a result retailers stocked a boatload of HTC phones; but not an experience, a lifestyle. In the end mobile is about identity. The phone we carry, the case we use to store it in, and the apps we install say far more about us than any one particular feature. Perhaps HTC is engineering driven, or perhaps the marketing budget wasn’t large enough, but whatever the case, that identifiable brand that we can all relate to (Apple, as we know, is a world beater in this regard) never materialized. In 2012, HTC launched “One” and it’s available broadly on multiple carriers, and for the first time represents a unified marketing push. But is it too late?

Camp Android increasingly looks like a two horse race: Samsung vs. Motorola. I’m guessing that Google’s mobility division is reluctantly pleased that team Samsung is venturing daily into those San Jose courtrooms. Though the resulting decisions will no doubt impact the entire industry, Motorola has quietly been able to observe from the sidelines while readying the “Razr HD.” Now who’s quietly brilliant?

Follow Stark Insider on Twitter and Facebook. Join our 11,000 subscribers who read SI on tablets and smartphones on Google Newsstand. Prefer video? Watch us on Amazon Prime or subscribe to Stark Insider on YouTube, the largest arts & travel channel in San Francisco.
  • brandnew234

    The points in this article are very good, and I completely agree, but I don’t see HTC dying, they’re just having a slow quarter. I believe they’ll always have a nitch: Android media. HTC also has a premium build quality and are most reliable with OS updates. Though it’d be sad to lose the media focus of HTC, I won’t be buying their next phone (for financial reasons). But I do think they shouldn’t be counted out yet, they ARE going to release a new phone for Verizon (and internationally?) before the years end, and with the chipset it’s packing, it should be a best seller! Maybe even better then the RAZR HD.

  • casualsuede

    I don’t agree with points 2 and 3. 1. A study from a competitor was recently shown to me saying that most users liked Sense over plain Android and it lagged only behind iOS. And HTC has been on the forefront of software updates, they were the first, other than Nexus to upgrade to ICS. Samsung is no better than HTC. 2. They don’t have the brand, but I don’t know where the author is getting off putting Motorola into the mix. HTC outsells Motorola and they have little brand presence outside of RAZR, which is old horse. DROID is not a Motorola brand, it is a Verizon Brand. IF Verizon decides that HTC will own the Verizon brand next year. Motorola has nothing. Atrix and Photon as names have no name value. HTC needs a common name and ONE hasn’t moved the needle. Not because the product wasn’t good or the product proposition wasnt good, it was because the marketing execution was so poor. They spent no money (at least not Apple/SS money) for a brand that was supposed to reinvent them and hence they fell off the map. They even lost the goodwill with being first to market.

  • Dave Lewis

    1) Samsung have a good name with the Galaxy handsets. But they’re now abandoning it for tablets in favour of the Note name because the Galaxy Tabs are under fire from litigators (Apple). They also had about 4 times the number of handsets (with different brands or minor changes from the prior model) than HTC did last year, so the whole “they had too many brands” argument falls flat. HTC’s big selling brand over the last two years was, obviously, the Desire series which was hugely successful.

    2) Sense (which was one of the first skind for Android) was based on the Manila skin for Windows Phones. HTC aren’t exactly new at developing software – they’ve been selling devices with custom skins since 2002. Bare-metal Android is OK and quite usable, but Sense, TouchWiz, etc are better. And let’s face it – TouchWiz and Blur are OK, but they’re nowhere near as good as Sense.

    3) Motorola are a non-entity in the Android stakes (ironically), the “Droid” brand isn’t theirs and the “RAZR” name is older than God. When I think HTC, I think Sense, Desire and – most recently – Beats Audio. Of course, the danger for these two Android behemoths isn’t Motorola (at least not for a few years it wont be) but the smaller players with deep pockets and long views. Companies like ZTE, Huawei, Asus, Acer and LG – all of whom are making some beautiful kit at bargain prices.

    Where HTC have come to grief though is a combination of factors (in no particular order): a) Pissing off a section of Desire owners by leaving them languishing on Android 2.2; b) Not getting their flagship handsets to market until after the S3 had raked in over 9 million pre-orders and many more after-launch sales; c) Cannibalizing their own sales with so-so handsets such as the Sensation; d) Aggressive marketing of the Samsung handsets by Samsung and the networks; e) Networks forcing 24 month contracts and so lengthening the upgrade cycles ODMs rely on.

    Reading this “article” I have to wonder what planet the author has been on for the last decade and how he feels even vaguely qualified to offer this opinion if he can’t even do a little basic research.