How Android Is Transforming Mobile Computing

PHOTOS: History of the personal digital assistant. Ramona Rosales for Newsweek

Nobody ever imagined how quickly the Android mobile-phone platform would take off–not even Andy Rubin, the Silicon Valley engineer who created it. Five years ago Rubin was leading a startup that had just been acquired by Google and was trying to develop software that could power a smart phone. Two years ago the first Android phone hit the market and, frankly, it was a bit of a dud. But the software kept getting better, and top handset makers like HTC, Motorola, and Samsung jumped on board, rolling out dozens of Android-based devices.

What began as a trickle now has turned into a tidal wave. In August Google announced it was activating 200,000 Android phones each day. On at least one day since then, that number surged to more than 250,000, Rubin says. Android now has leapt past Apple to become the biggest smart-phone platform in the United States, the third-biggest worldwide, and by far the fastest growing.

Android is the kind of runaway smash hit that techies spend their careers dreaming about. Rubin, a 47-year-old über nerd–he has a retina scanner on the front door of his house and robotic helicopters cruise his backyard–has helped build a string of tech companies over the past two decades. But nothing he's done so far compares to what's happening with Android. "This," he says, "is the most fun I've ever had."

The software was written by a small team of engineers tucked away in a nondescript building on the Google campus in Mountain View, Calif. While it contains 11 million lines of code, the whole program takes up only 200 megabytes of space, about as much as 40 MP3 songs. Yet despite its tiny size, Android is changing the mobile industry in profound ways, shifting the balance of power from Europe and Asia, the previous leaders, to Silicon Valley and reshaping the fortunes of the world's biggest tech companies.

Android has also transformed Google and its longtime ally Apple into fierce rivals. Until recently, Apple seemed destined to rule the mobile Internet, thanks to the popularity of the iPhone, which was introduced in 2007 and quickly began grabbing market share. But Android has enabled handset makers like Motorola and Samsung to develop credible rivals to the iPhone. This year, as those companies have gained traction, Apple's momentum has stalled. Rubin credits the fact that Android is an open-source program used by dozens of phone makers, while Apple goes it alone, developing its own proprietary hardware and software. In September Apple CEO Steve Jobs got a little hot under the collar of his mock turtleneck and told reporters he didn't believe Google's sales figures. He claimed that if you added together sales of the iPhone, iPad, and iPod Touch, Apple is "ahead of everybody." But by 2014 Android will have 25 percent market share in smart phones, more than double Apple's 11 percent share, according to high-tech researcher IDC. And the first Android-based tablets will begin to ship later this year. (Apple declined to comment for this article.)

This is no mere squabble. The mobile revolution may be the biggest wave ever to hit the world of computing. Just as mainframes gave way to minicomputers, which in turn gave way to personal computers, the PC now is being displaced by smart phones and tablets. By 2013, a decade after smart phones were launched, there will be 1Êbillion of them in the world–roughly the number of PCs that exist today, three decades after that machine's introduction.

These devices will reach into the furthest corners of the world. By next year 5 billion mobile phones will be in service, out of a total world population of about 7 billion, according to Yankee Group, a high-tech research firm. Most of those will be "feature phones" with limited capabilities. But over the next decade the technologies will become so cheap that virtually every phone sold will be what we, today, would call a smart phone. "This is a battle for literally every person on the planet. That's why these markets are worth fighting for," says Carl Howe, a research director at Yankee Group.

Most important, every one of those smart phones will be constantly connected to the Internet. If you own a smart phone, you know how extraordinary that linkage can be. Scott Adams, the author and creator of the comic strip Dilbert, last year argued in an essay that smart phones represent a kind of "exobrain" that augments our regular brain, giving us the ability to store and retrieve mountains of information and to perform tasks like navigating unfamiliar terrain.

So what happens when most of the residents of planet Earth carry a device that gives them instant access to pretty much all of the world's information? The implications–for politics, for education, for global economics–are dizzying. In theory, the mobile revolution could enable citizens to demand greater openness and accountability from their governments. The reverse might also be true: governments could more easily spy on citizens. "You also have the prospect of having 5 billion surveillance points," says Jonathan Zittrain, codirector of Harvard's Berkman Center for Internet & Society.

The proliferation of low-cost handhelds will enable people in developing economies to see the rest of the world–and join it. "I can't imagine anything since the invention of the spinning jenny that will so profoundly change the lives of people in the deepest rural parts of the emerging market. This is the knowledge revolution coming to them, finally," says Sanjay Jha, the co-CEO of Motorola. Jha credits the return to profitability of Motorola's mobile devices–after three years of losing money–to an early bet on Android-based phones.

Geeks like Rubin aren't spending a lot of time mulling the philosophical implications of the mobile revolution. For them the excitement comes from building the coolest devices they can imagine–and tapping into what may be the biggest technology market that has ever existed. Sales of Apple's iPad tablet have already cut into sales of traditional notebook computers. By 2013 the mobile Internet ecosystem–money spent on access fees, online commerce, paid services, and advertising–will be worth more than half a trillion dollars per year, according to Morgan Stanley analyst Mary Meeker. As users keep downloading services and apps, every device sold generates an ongoing revenue stream.

The top companies in desktop computing–Apple, Google, and Microsoft–must shift their focus to mobile devices to remain competitive. But that pits them against traditional phone makers like Nokia and Research in Motion. Nokia, which has developed its own smart-phone software called Symbian, remains the industry gorilla. There are already 1.3 billion Nokia phones in use, and 200 million of them are smart phones. The huge customer base is a big advantage, according to Tero Ojanpera, an executive vice president at Nokia. By collecting location information from mobile phones, for example, Nokia can make traffic predictions. "There is a huge opportunity for us to create a feedback loop and provide data to consumers," Ojanpera says.

But Google has a few advantages of its own. Instead of trying to modernize an older system originally created for voice-centric phones, Rubin and his engineers started with a clean slate, developing a modern mobile operating system for a new kind of device–a small computer that happens to make phone calls. Unlike older operating systems, Android was created to be good at rendering Web pages and to run many applications at the same time.

Google also counts the very nature of Android as a strength. The company does not make money from Android directly. It gives the software away to hardware partners. Google reckons that Android gets more people onto the Internet, where Google can show them ads. Google CEO Eric Schmidt says Android-based phones already generate enough new advertising revenue to cover the cost of the software's development. Google could make money in other ways too, for example, by opening an online store to sell music and videos to Android users. Schmidt envisions a day when there are 1 billion Android phones in the world and notes that if Google could get just $10 from each user per year, it would be a $10 billion business. That's real money even for Google, whose revenues this year will be $21 billion.

In addition to making Android available for free, Google also lets phone makers change the code and customize it so that an Android phone made by, say, Samsung has a different user interface than an Android phone from Motorola. Rubin believes this open-source model gives Google an advantage over rivals selling closed systems, like Apple, which also operates its own online stores. Apple's tight control enables it to deliver an exceptionally smooth user experience, where everything works seamlessly together.

The Android model is messier, but by putting Android into so many hands at so many companies, Rubin believes he has created an accelerated form of evolution, where the species diversifies and improves at hyperspeed. The struggle between Google and Apple today looks a lot like the battle between Apple and Microsoft in the PC era. Back then, Apple leapt out to an early lead with the Macintosh, whose revolutionary operating system ran only on Apple machines. But Microsoft came up with a version of Windows that could compete with the Mac. Because Microsoft licensed its software to all of the world's computer makers, it eventually controlled 90 percent of the market. "The industry is repeating itself," Rubin says.

Oddly enough, Rubin worked at Apple from 1989 to 1992, the years when Apple was losing its edge to Microsoft. He later cofounded a company called Danger, which developed the Sidekick smart phone. Rubin was CEO of Danger but resigned in 2004 after agreeing with the board that the company needed new leadership. He was hanging out on a beach in the Cayman Islands when he came up with the idea of creating an open-source operating system for mobile phones. Back in Silicon Valley, he was looking to raise venture funding when Google cofounder Larry Page heard about Android, loved the idea, and acquired the company.

At Google, Rubin has access to virtually unlimited resources from one of the richest companies on the planet, and no need to generate revenue, at least not in the conventional sense. Rubin won't say how many engineers work on Android, only that "it's much smaller than you would think." Some of the work is done by HTC, Motorola, and Samsung engineers, who work alongside Google engineers.

One of the top priorities right now is to improve the user interface to catch up with the iPhone. A bigger challenge is making sure that the same open-source model that has led to Android's rapid growth does not also become its undoing. If phone makers do too much tinkering and customization, Android could splinter into many different versions, none of them completely compatible with the others. Such fragmentation has been the Achilles' heel of every open-source project. To counter it, Rubin and his team have created a compatibility test suite, a list of things a phone must have in order to carry the Android brand and to run Google applications like Google Maps. Rubin believes this will induce phone makers to keep all Android phones fundamentally compatible.

Microsoft, meanwhile, is hoping such fragmentation will be the undoing of Android. It is betting that phone makers will prefer its own new mobile operating system, Windows Phone 7, which is due to arrive in the next month or so. Phone makers must pay license fees to use Windows Phone 7, and they can't tinker much with the code. Microsoft is pitching it to the same companies that have embraced Android, claiming that Windows Phone 7 is more polished and will give phone makers a better tool for competing against Apple. Also, Microsoft last week sued Motorola, alleging its Android phones violate Microsoft patents. Similarly, Apple has sued HTC over its Android phones, and Oracle has sued Google, alleging Android itself violates Oracle patents. If nothing else, the lawsuits demonstrate that rivals recognize Android has become a serious threat. Right now Rubin's engineers are putting the finishing touches on the next version of Android, code-named Gingerbread, which is scheduled to ship before the end of this year. They're also developing a version of Android called Honeycomb, which is designed to run on tablet computers and will follow on the heels of Gingerbread.

For now, Rubin is enjoying the geeky thrill of being out in public and hearing the sound of an Android phone when it starts up and says "Droid," in its little robotic voice. "Every time it happens, it makes me smile," he says. Sure, nobody knows how this will play out. But who can blame Rubin for that crazy grin on his face?