The debate du jour in tech circles is Android versus iOS. It makes for a great narrative — two big players duking it out, each with their own strengths. The story to date is that iOS took the early lead, but that Android will be the winner in the long run. So goes the conventional wisdom.

This narrative is an over-simplification that obscures the real issues. Here I’m going to focus on three myths that are at least in part a result of looking at this market develop as a function of mobile OS, instead of focusing on consumer benefits first.

Myth 1: Variety versus Fidelity

Proponents of Android argue that product variety is a major benefit (e.g. “open and choice always win“) and the reason that consumers will gravitate towards the platform. Not only are there many, many handsets on Android, but the openness of the market should lead to more, lower-priced apps to choose from in future.

Proponents of iOS argue that fidelity is the important benefit and that this will draw consumers to the iPhone. Android makes user experience compromises in order to power so many different shapes and sizes of handset, where the iPhone is a beautiful marriage of hardware, software and services. Where fragmentation causes complexity in Android, the iPhone is consistent, simple and safe.

Does that make it a simple matter of whether variety will win out over fidelity? No, and here’s why.

I’m going to simplify and argue that consumers will make their decision in one of three ways:

1. OS first: They are savvy about the existence of Android and iOS and aware that they are making a platform decision. They will end up picking a handset, but first they will decide on the OS.
2. Product first: For these people the OS is just part of the equation. The AppStore is a feature alongside the retina display.
3. Carrier first: Of course, this is the way many people start their decision process, but I will sidestep the issue for now. For the purpose of the argument, assume that iOS will be soon available from all carriers. I will pick up the distribution point later.

The interesting thing here is that if you assume that a consumer is making the decision OS first, then clearly a key factor is handset variety on the platform. Having made the decision to bet on a particular OS you would want to have some good options for your handset and the apps you will purchase later. After all, by choosing handset first, you have reduced your set of handset options.

If you assume that consumers go at this product first, then fidelity and utility are the overriding concerns. Not of the physical handset alone, but of the whole package that includes the industrial design and the availability of cool apps. Handset variety is not a factor in the decision, because the consumer is choosing a handset.

Here is the crux:

1. Consumers can maximise handset variety by making the decision product first
2. When consumers make the decision product first, then handset variety isn’t a factor

Another way to put this: Handset variety as a deciding factor is only relevant to people who have already decided to bet on Android (Google employees, for example, or analysts that are predicting that Android will dominate). Regular people who are picking a phone will not think about handset choice because it is not a feature of the product. It is a feature of the platform.

Now, you could argue that variety wins because it creates products that suit the needs of more individual consumers, but there is a counter example: iPod. There might be parts of a market that aren’t satisfied by the most popular solution (e.g. those wanting physical keyboards on their phones), but those will be satisfied by niche offerings. Also, it is hard to argue that Android will win by being different to the iPhone in the face of the relentless iPhonification of the SmartPhone market.

Coming back to the essential point: variety is not a feature.

Myth 2: PC versus Mac

Thinking about things “consumer in” can also put paid to another popular notion in the Android versus iOS narrative: That we’re watching a replay of the PC versus Mac battle. Apple is making the same mistakes again by going vertical and closed, whereas Android is playing the part of DOS/Windows and will inevitably win.

What were the benefits that made people choose PCs over Macs?

1. Availability: PCs were more easily available with much wider distribution.
2. Apps: Apps for PCs were much cheaper and available in much larger variety.
3. Familiarity: People had PCs at work and wanted the same thing at home.
4. Price: PCs were cheaper.

Only one of these is clearly a benefit of Android today, and that is the distribution network. This will be true as long as the iPhone is AT&T only, and it is the largest threat to iOS. But Apple knows this, and it is highly likely that in the new year we’ll see iPhones at Verizon, and at the other US carriers soon after. Once this happens, the Mobile Network Operator dominated distribution network will neutralize any distribution advantage for Android in the US. Distribution channels in Asia are much more complicated and that topic deserves further analysis (and makes stories like this potentially very significant).

Other factors that played a role in the PC versus Mac battle are either in Apple’s favor today (would anybody argue that there are better apps in the Android marketplace than the AppStore?) or are not a factor at all. RIM and Microsoft might have had an opportunity to transfer their leadership in business to the consumer SmartPhone market, but either that wasn’t possible or they missed the window.

Lower price is one benefit that people are starting to predict for Android, with analysts talking up sub-$100 handsets next year. Unfortunately, this analysis is utterly flawed. Which leads me to…

Myth 3: Cost versus Premium

There is no doubt that the range of Android handsets will include cheap ones and expensive ones. But Analysts are mistaken in believing that handset manufacturers will be able to undercut Apple with low cost products.

Cost in consumer electronics, like many markets, comes down to economies of scale. In this case these economies are driven by the ability of the manufacturer with the largest scale to drive the best deals with component suppliers. The key thing to understand here is this: Google does not negotiate with component suppliers, each of the OEMs using Android do so individually. So when it comes to cost, share of Android versus iOS is not important. It is share of Samsung handsets versus Apple handsets. Share of Motorola handsets versus Apple handsets.

Looking at the share picture from a handset manufacturer perspective, it is immediately obvious that when it comes to purchasing displays, or flash memory or processor SoCs, Apple has a massive scale advantage that is further reinforced by the number of iPods, iPads and Macs that they sell.

The only manufacturers that can hope to compete are the ones that also have components businesses under the corporate tent, like Samsung. But even for these guys it’s not that easy. I have worked closely with Toshiba when it was all about the 1.8 inch hard drive in media players, and with Samsung when it was about flash. In both cases I saw how hard it was for the handset division and the components division to work together in the face of a large customer, with incentives to maximize their individual P&Ls and within regulatory frameworks.

One strategic weakness would be the processor, where instruction set and SoC architecture is key IP that give power to the component supplier, but even here Apple has it covered by bringing the processor design in house. This is another cost advantage to Apple. Other manufacturers have to buy expensive processors from suppliers or fight battles with the processor division in the adjacent building on the corporate campus.

When a sub-$100 market for SmartPhones emerges, Apple will introduce a product for that market. Like it made the Nano and then the Shuffle for the low cost flash based media player market. Given their power over suppliers, and their in house silicon ability, they will (at least) match the cost of these low price entrants and probably also offer better value.

Even where they have higher cost (say, due to better quality materials), their brand, design and user experience will command greater “willingness to pay” and they will be able to offer a comparatively or lower priced product by playing with the margin.

Clash of the Industry Architectures

In the old joke, the drunk is looking under the streetlamp even though he dropped his keys on the other side of the street. Why? Because there’s more light under the streetlamp. The mobile operating system is under the streetlamp. We can see it better, so that’s what we analyse. This in itself is ok because it is worth analyzing, but the problem is that it is given a disproportionate amount of attention.

People do not buy mobile operating systems. They buy products that include hardware, software and services wrapped into a user experience.

Advertisers do not buy operating systems. They buy exposure to, leads for and actions from consumers.

So what, then, is in the dark on the other side of the street?

It is much bigger than a clash of operating systems, or even a clash of strategies. Android and iOS represent different industry architectures. Apple and Google are different kinds of companies producing different kinds of products. Taking revenue as truth, Google is selling consumer access to advertisers and Apple is selling products to consumers. In today’s world, they compete in the same space but their heads are in different industries.

Some questions that immediately come to mind: Will one architecture win out over the other? Will they co-exist in the market? Which player in the value chain will be the winner in each architecture? How will other players (e.g. component suppliers, OEMs, ISVs) fare for each architecture?

This problem is undeniably complex, and the only good analyses are likely to be the a-posteriori ones in Harvard case studies that have the benefit of hindsight. But one way to start chipping away at it is to think about the relative consumer benefits. The benefit of availability, for example, and the ability of a strong vertically integrated OEM like Apple to get good distribution in China where mobile retail is fragmented.

Anything else, like some academic take on the parallels with the PC versus Mac battle, might be a compelling narrative, but it will probably be fiction.