The cost of third-tier Android phones

17/365 - Phoning it in.

So Android has great market share, but much of that market share was achieved by selling low-cost, second- and third-rate Android experiences.

These bad experiences have consquenties, however. Android handset markers consistently receive much lower scores on consumer satisfaction surveys than Apple does with the iPhone, the profit-share leader in the mobile handset market. While it is hard to tease out the data fully, I suspect much of this is due to non-top-tier Android phones.

I’ve already seen several family members and friends switch from Android to the iPhone and others will be doing so when their current contracts are up. None of these people owned top-tier Android phones, like the Nexus S or the forthcoming Galaxy Nexus (consider this a hint as to which Android phones I would go with). What many people received was a really poor experience that turned them off from the platform. These people are itching to switch to a better experience, and are often not willing to consider another Android phone, even if that Android phone could provide them with the experience they desire.

I have to wonder what the long-term effect of these low cost, low quality phones will be on the perception of Android in the minds of consumers. Is Google gaining marketshare today at the expense of market share and profits tomorrow?

Apple has finally gotten into the low-cost smartphone game with the free-with-contract iPhone 3GS. The 3Gs may be more than two years old, but it’s still a good smartphone and not a third-rate phone like many of the cheap or free Android phones. AT&T has already said that they are seeing very strong demand for the new 3GS, and I expect this new price point to cut into Android sales.

Eventually Apple will have to sell a pre-paid iPhone to be able to compete with Android in emerging markets. That day will come in a few years, but for now Android will continue to gain more marketshare by selling more phones at lower prices points. But more phone sales now won’t necessarily translate to more phone sales tomorrow.

I do not believe the mobile market will play out like the the desktop PC one did. No one will truly own the market. Thus, I don’t put that much stock in strong market share today if that market share is coming from selling products that users are unhappy with.

Netbook sales were once the darling of the PC industry, but these devices were largely poor user experiences. The delight that users felt by the low price point of netbooks was quickly soured by the poor user experience. It’s not a surprise that the netbook market is cratering after Apple released the iPad, because the iPad is a much better user experience at these lower price points.

Does Google really want its good phones to be tainted by phones that aren’t anywhere near the quality that an Android phone can be? I recognize that the open source nature of Android can lead to these issues, but the satisfaction rate of Android users isn’t near the level of iPhone users.

While 89 percent of iPhone users said they were likely to buy another iPhone, only 39 percent said the same of HTC, one of the major makers of Android phones. And HTC was second in the rankings to Apple.

The people that I know who really like there Android phones almost universally got one of the top-tier Android devices that cost $199, $299 or more with a two-year contract. These phones are real iPhone competitors. Those who purchased Android phones because they were cheap or free are considerably less happy with their purchases.

When it comes to free-with-contract phones, the iPhone 3GS is probably the best of the bunch. It’s not as fast as the latest iPhone and doesn’t have as good of a camera, Siri and some other features, but it does many things quite well. It runs the latest version of iOS, provides a good experience, runs a lot of apps and in general is a great phone for first-time smartphone buyers.

An entry-level smartphone should provide a good, user-friendly user interface and a good email, Web browsing and text messaging experience, complete with a good third-party ecosystem. The bells and whistles beyond that — high resolution displays, video conferencing, fast CPUs/GPUs for games, high-end cameras, digital assistants, LTE, etc. — don’t need to be there for entry-level users. But the basics do.

Maybe Google needs to make a spec for lower-end phones that focuses on the basics. Maybe it will be a less open experience (from the user’s point of view). Maybe it will be tighter controlled and have less functionality.

The people who buy cheap or free smartphones don’t care about “open” or power user features. That’s for the geeks who buy the latest and greatest. If Google doesn’t find a way to solve this entry-level issue, I fear they may find themselves receiving more bad results from user surveys, and ultimately lost users, particularly at the high, profitable end.

Many entry-level users will one day become buyers of top-of-the-line smartphones. If their experience with Android is a cut-rate experience, they won’t be looking to Android when they upgrade.