Wednesday, November 28, 2012

South Korea has about 0.7% of the world’s population and is smaller than California, yet it was responsible for two instances of world domination in 2012.

The first was Gangnam Style‘s Psy’s frenetic juggernaut of a viral video that, by November, had become the most-viewed ever on YouTube. The second was Samsung.

Psy can perhaps be dismissed as a one-shot novelty act, but Samsung’s success is no fluke. The company has been around in one form or another since 1938, first as a grocer and now a chaebol that makes everything from apparel to medical equipment to ships. However, in 2012, Samsung became a top-tier player in mobile computing and the only serious rival to Apple in the segment.

The Stats

Samsung’s commanding position in the market is best illustrated by this chart. By the third quarter, Samsung had sold twice as many smartphones as Apple worldwide, according to IDC.

To get a sense of what kind of achievement that is, consider that Samsung had just 3.3% of the market in late 2009 and Android only had around 5.2%. You could argue that Samsung just bet on what would become the predominant mobile OS, but Samsung hedged its bets with its own mobile OS, Bada. Well before the first Android phone release in September 2008, Samsung had also released the first of many would-be iPhone killers, the Instinct.

Clearly, Samsung was hell-bent on breaking into the smartphone market. It wasn’t the only one. Recall that that first Android device was actually manufactured by HTC, which, in 2008, looked like a rising star while Samsung was shaping up to be an also-ran. In fact, things looked that way this time last year, when HTC was still making huge profits and growing at a rapid clip. What was HTC’s problem? In part, the company was getting crushed in China, where Samsung was cutting prices.

In addition to dominating market share for smartphones, Samsung managed to also unseat Nokia as the world’s top manufacturer of cell phones, period, after that company’s 14-year reign. The combination makes Samsung the rare company that leads both the top and the bottom of the market.

The Marketing

Samsung has a reputation for being able to out-produce its competitors, but Rob Enderle, principal analyst with The Enderle Group, notes that the company has always suffered from “under marketing.”

You couldn’t say that this time around. In addition to running the brand’s first-ever Super Bowl ad, Samsung also scored a bona fide viral video with the ad below, a savage attack on Apple fanboys waiting for the iPhone 5 to be released.

Attacking Apple wasn’t a novel strategy. Microsoft had tried it before on behalf of its laptops and Zune MP3 player. Motorola also went after Apple with its own Super Bowl ad in 2011. However, Tim Bajarin, principal analyst with Creative Strategies, notes that the pre-Google Motorola didn’t have the marketing budget to continue to challenge Apple the way Samsung has. (Of course, that doesn’t just extend to marketing, Samsung has traded lawsuits all over the world with Apple over patent claims related to the iPhone and iPad.) However, this wasn’t just a case of Samsung throwing money at the market; the ads clearly struck a chord with many people fed up with Apple’s hegemony and its legion of rabid fans.

Another, more subtle example of Samsung’s growing marketing acumen, Bajarin says, is the Galaxy sub-brand. “They branded Galaxy across multiple devices,” Bajarin says. “That’s Samsung saying, ‘We’re going to provide a whole series of products of the same quality of our Galaxy S III.” Samsung’s annual Galaxy releases are now anticipated and embraced the way Apple’s iPhone upgrades are.

The Design

Like a schoolboy who suddenly realizes he can throw a punch as well as the class bully, Samsung seems to have gained confidence that it can design products and innovate just like Apple does.

Exhibit A is the Galaxy S III, a worthy iPhone challenger that sports a number of cool features including a front-facing camera will track your eyes and keep the screen from timing out if you’re still looking at it, a voice-activated on switch and a “groupcasting” feature for sharing pics and presentations with other phones as long as those phones are also Samsung Galaxy S IIIs. Another great feature: Auto-tagging for photos based on facial recognition. (Unfortunately, the tags don’t yet translate directly to Facebook.)

In addition to those exclusive features, the Galaxy S III also sports a physical design that, as the company likes to point out, is all curves no straight lines anywhere. In addition, there’s a single button below the screen, a feature many Android manufacturers avoided to discourage comparisons with Apple. (That feature must have caused lots of discussion within Samsung, given the company’s various legal battles with Apple.)

While the Galaxy S III was Samsung’s flagship device in 2012, Samsung also experimented with a Galaxy camera and the Galaxy Note II, a smartphone with a giant 5.6-inch screen.

Enderle says that such products show that Samsung is no longer aping Apple. “They did the same with Sony,” Enderle says of Samsung. “They learned from and they did the same here. They started by copying Apple pretty closely but if you look at S III, they’re really not. That’s their mode of operation: Emulate and once they have they have that down, they’re the new market leader. it seems to work as a strategy.”