One of the amazing things about human beings is how opinionated we are. Everyone has an opinion on something and many times, we disagree on a variety of things yet seem to coexist with one another. There are always exceptions to a rule, however. If there is one thing that we can all agree on it is that we as a collective human society hate advertisements. In the pre-internet age, we would wait for our favorite show to go to commercials before grabbing something to drink or going to the bathroom. We would preoccupy ourselves with something else as opposed to being subjected to an advertisement.
In the internet age, this is what popularized the mere idea of a streaming service like Netflix or Prime Video. The idea of being able to watch a favorite show or movie without being interrupted by advertisements is incredibly appealing to us. This hatred of advertisements has shaped the landscape of cable television, with the concept of cord-cutting becoming a mainstay in our minds. And this all started because we hate advertisements. Why is it then that more and more ads have crept into our smartphones? More and more manufacturers have implemented ads throughout their operating systems in recent years, mostly Chinese brands that we never encounter here in the US. However, it seems that Samsung is now adopting this trend and it is setting a precedent for other companies to follow.
Made In China
Keeping track of all of the new phones and phone manufacturers based in China has become an exercise in confusion in recent years. Companies such as Huawei, Xiaomi, Vivo, Oppo, and RealMe to name a few that many people in the US have never heard of (see the full list here). These are the companies that are pushing the limits of what we thought to be possible that companies like Google, Apple, and Samsung will implement down the line. Oppo recently announced that it is releasing a charging technology with its phones that will fully charge the device in as little as 20 minutes for example.
The complexity of running a phone company in China that caters primarily to the Chinese and Indian markets as these companies do is one of pricing. There are so many options in these two markets that pricing is beyond competitive. Imagine the amount of selection of phones we have at our disposal here in the United States and triple it. That is the selection that is available in the Asian phone market. All of these companies are under pressure to innovate and to compete, this forces margins to be thinner and thinner.
Yet companies like Vivo and Xiaomi are for-profit companies and not charities. As profit margins become slimmer in the name of aggressive competition, there needs to be an area where these companies can make some of that money back. The answer? Advertisements throughout the operating system. Xiaomi puts ads everywhere it possibly can throughout their Android skin MIUI; ib the app drawer, in the notification shade, and throughout its suite of native apps. In addition to this Xiaomi, in particular, is also pushing its subscription services like its Mi Cloud services. This is the way that Xiaomi can sell phones for so cheap but still be able to make some money from phones.
A quick visit to any video reviewing a phone priced close to $1,000 will almost assuredly have a comment saying something along the lines of “I can get the same specs for $500 on a Xiaomi”. The reason for this is that a company like Xiaomi can sell their phones with razor-thin profit margins since they can rely on advertising revenue and subscription services. There is an experience argument to be made in this regard. Is the raw power all that matters to the end-user? Or does having an uninterrupted software experience priced at a slight premium matter more?
Crossing the Line
Samsung as a phone manufacturer has always taken the approach of positioning itself as a more premium brand. While it pushed many of its services like Bixby and Samsung Notes on Galaxy users, it generally stayed away from the Xiaomi model of advertising within the confines of the operating system. The company has often positioned itself as the alternative to Apple, a high-end experience at a variety of price points that offers more than their rivals in Cupertino. Yet it would appear that this is changing.
As was detailed here by Max Weinbach in an Android Police article, Samsung has started to push ads throughout the experience. This encompasses the phone app, various Bixby experiences, and the notification drawer. All of these are core experiences of a smartphone and Samsung is raking in advertising dollars off of general phone usage. In the case of Xiaomi, this is more understandable as they are selling top of the line hardware for $500. Samsung putting this on phones that cost well over $1,000 like the Galaxy Z Flip just comes across as greedy.
So why is Samsung doing this? It can’t be slim profit margins as is the case with Chinese manufacturers. The Samsung Galaxy S20 Ultra retails for $1,400 but according to this report costs $528 to manufacture. That is a 62% profit margin on every single phone. The reason that Samsung does this is that it knows two things to be true. The first is that for many markets in the world, Samsung is the default option for Android phones. They are everywhere in carrier stores and advertisements on the internet and television. The second is that Samsung is desperately trying to move beyond hardware. Moves to align itself with Microsoft and push its apps and services so that the company is no longer reliant on hardware alone.
The Open Internet Model
Samsung is trying to fashion smartphone as a replication of the in-browser internet experience. Think about how we experience our favorite websites and social media. There are advertisements everywhere. Google search results yield a couple of sponsored listings, every 3 posts on Facebook is an ad listing, and news websites are littered with banner and pop up ads. Perhaps Samsung felt that this could be a new revenue stream that could be utilized since people are already used to seeing advertisements everywhere on the web. This is a conclusion that seems very naive and shallow in its assessment.
There is no shortage of companies that make Android phones here in the United States. Apple is of course the gold standard. The company that others that sell in the US emulate. Not many companies that are prominent in the US and Europe are trying to emulate what Oppo or Vivo do. Yet it seems that Samsung is trying to emulate Apple and Xiaomi at the same time with these advertisements littering their OneUI experience. If a company like Google or LG decided to influx all these advertisements in their phones, it would effectively be product line suicide.
There is an understanding in the realm of premium smartphones, that you the consumer are paying $1,000 or more to get the best experience possible. That this money is being spent to see the best of what these companies have to offer. This means a software and hardware experience free of the compromises of lower-end phones. If Samsung had decided to do this with its budget A series of phones that start at $179, they could have been excused. The profit margins on those devices are much lower than the companies flagship models. But by doing this on higher-end models, Samsung comes off as incredibly greedy and has forced itself into a decision that it has to make about the future direction of the company.
That decision is whether Samsung wants to continue to be the Apple of Android and continue on the path of expensive but ad-free phones or if it wants to aggressively price their devices like Xiaomi to appeal to the spec hunters. Ultimately this is the experience versus horsepower argument that Samsung internally must come to grips with. It cannot do both, and it would border on toxic arrogance if it tries to do both. The Galaxy name has been synonymous with high quality and a staple of the Android world for years, it would truly be a shame if Samsung threw all of that brand recognition and respect away just for a few extra dollars in ad revenue. Here’s hoping that the company makes the right decision.
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