“If you want to make things better, you have to pay a price, just to keep things as they are, you have to pay a price, and everything has a price.”-Harry Brown
In recent years, the arrival of low-cost, high-spec smart phones has brought about a huge shift in the business model of smart phone sales.
To highlight the most compelling examples, Xiaomi’s initial focus on low-cost phones disrupted the smartphone industry in markets such as India in more than one way. For smartphone buyers with limited budgets, the most direct and obvious change is the wide supply of high-spec, reasonably priced hardware. But there is a cost that must be paid somewhere.
Yes, I’m talking about advertising and bloatware. On mobile phones from Realme to Oppo to Redmi, inflated software is often disguised as useful pre-installed applications. Now, when buying a cheap phone, you can include ads that occupy the lock screen or home screen as part of the transaction.
Cheap hardware has a price, and this comes from software.
With the increasing commoditization of hardware, this problem is further exacerbated. As high-performance components become cheaper and cheaper, the number of smartphone options on the market has also increased.
This race to provide the most hardware for your money is not difficult. For brands, copying models is disgusting, but with some subtle changes, it’s easy. However, cheap hardware requires a price, and this comes from software.
Dhruv Bhutani / Android Authority
Your mobile phone is now only the carrier of the company’s Internet services, and a huge micro-transaction ecosystem is in your hands. These micro-transactions happen in many ways, and usually users don’t realize it.
Of course, the most obvious types of monetization are public advertisements spread on the home screen, lock screen, notification bar, first-party applications, and sometimes even the settings menu. Your idle lock screen or blank area in the app has become the most relevant billboard for advertisers.
The analytical data collected from these advertisements, such as what you click and when you view the advertisement, is more useful to advertisers than traditional advertising spaces. This is real-world, actionable data, and advertisers are happy to pay for it.
In-depth analysis makes your mobile phone a perfect billboard for advertisers.
Smartphone shipments in markets such as India reach hundreds of millions each year. Most of these devices are sold at cruel prices, and hardware revenue is predictably limited. In fact, some brands like Xiaomi are committed to keeping profit margins below 5%.
However, the recurring revenue from advertising makes up for the lack of hardware costs. The profit potential is high enough that even high-end brands like Samsung are now boldly adding advertising to their high-end options.
Some things need to be changed.
The software update is a mess, but how to fix it?
Advertising and inflation are not the only issues at hand. Another important thing is software updates. Although it does not seem to be the case, the problem of poor software updates is directly related to the previous problem.
Smartphone shipments are important to any brand, but they become doubly important when the main source of revenue comes from so-called “Internet services.” The larger the number, the larger the user base, the more advertisements you put, and the more money you make.
A simple way to increase the volume? Lots of small upgrades and changes. The constant push to sell new hardware and provide a large number of options to the market has caused chaos in software updates. From an uncertain timetable to limited or non-existent software support, the best you can hope for seems to be two major software updates on unpredictable dates.
read more: Which manufacturer updates the phone the fastest? (Android 11 version)
Of course, Samsung and OnePlus are getting better and better at providing long-term support for their phones. Unfortunately, the three-year update is limited to advanced devices. It is the entry-level and mid-range hardware that are really affected. For example, the OnePlus Nord N100, although it packs more than repairable hardware, still received a poor single update promise. Simply put, this is not enough.
Unfortunately, companies care about maximizing profits, and the cost of supporting entry-level phones may far exceed any potential revenue it brings. Long-term software support requires a dedicated team responsible for phone calls, testing, and monthly patch releases. Major Android updates require investment in the form of licensing, certification, and deployment costs. Between the number of variants and the costs involved, for many smartphone manufacturers, the mathematics does not add up.
Subscription-based software support may be a solution
However, there may be a solution at hand: an advanced layer that provides an ad-free experience and the promise of longer support can strike a balance between hardware costs and software support.
Before you bite me, there is a precedent. Amazon Kindle comes with out-of-the-box advertising. The $20 fee can eliminate this. For those who don’t care about advertising, this is a hardware price cut. Those who care can choose to buy their favorite hardware without ads, and only need to pay a small one-time fee.
Similarly, desktop software such as Microsoft Office or Adobe Suite usually includes a predefined support period, after which users need to pay to upgrade to the latest level.
Smartphone manufacturers, especially low-cost device manufacturers, can integrate one-time fees or monthly subscription plans in exchange for better software and support. In order to really promote popularization, manufacturers can even add additional features such as cloud storage, as we saw on India’s OnePlus Red Cable Club, or discounts on ecosystem products.
Paying for software upgrades is not ideal, but it is an effective model.
Of course, not every buyer will upgrade to advanced software, but it is enough. If our opinion survey estimates have a basis, most buyers hope to get support for more than three years, followed by at least three years.
Even a small percentage of millions of smartphone buyers can generate enough income to make it work.
Xiaomi made RMB 23.8 billion (approximately USD 367 million) Judging from its Internet service business in 2020, this number is still growing. Brands have no incentive to give up all this money.
However, revenue from premium software subscriptions can pay the maintenance team to process updates while unlocking the cost of an ad-free experience. This will also be an easy PR victory and a possible solution to the image problem of budget-centric brands in India and elsewhere.
David Immel/Android Authority
It’s not ideal, but it’s always great to have options
For better or worse, the advertising subsidy model applies to the Indian smartphone industry. But for the millions of buyers who suffer from the terrible side effects of this model, it does not work well. The subscription model may be the way out. It can reduce the buyer’s cost burden, make high-quality software easier to obtain, and at the same time ensure the manufacturer’s continuous income.
Advanced software comes at a price, and buyers are unwilling to pay.
Actually, do I want this? Absolutely not. In an ideal world, your smartphone should be entirely yours, whether it is software or hardware. However, the state of the smartphone market in India and other regions is such that no brand is willing to risk breaking the status quo. Smartphone buyers have become accustomed to affordable hardware, and trying to get back to higher prices is futile.Take a look at HMD Global; its entire schtick is a fast update and clean software experience, no ads, but it is Almost no dent In terms of market share.
If it provides you with a better software experience and promises long-term updates, will you pay for advanced software services on top of affordable hardware?