Platforms, Market Share, Profits, and the Future

by Ben Bajarin   |   May 31st, 2013

If anything, John’s column on Android’s market share has stirred a good discussion around the market share vs. profit share debate. Some may argue that this discussion isn’t relevant to end consumers who really don’t care. To that I agree. As an industry analyst these things are of interest to how I study the industry. Data around market share and profit share help shape my perspectives relative to what companies, platforms, and technologies have the best chances of succeeding going forward. Although I agree that end consumers don’t care about market share or profit share, there is a group who does and should care–developers.

Developers Control the Future

Marc Andreesen boldly proclaimed in a 2011 essay in the Wall St. Journal that software is eating the world. He is, of course, correct and in the reality where software is eating the world, software developers control the future. Software developers are the heart of a platform. As long as a healthy software development ecosystem exists, a platforms future is not in jeopardy. Therefore, what interests me in the platform discussion, is what platforms are developers interested in and where is the most exciting software development taking place. I believe wholeheartedly the answer is iOS.

Here in Silicon Valley, where I live and work, I meet many new startups weekly. I talk with venture capitalists investing in the software revolution monthly. The major theme and trend I pick up on in these discussions is iOS first and Android eventually. Most VCs I speak with have invested in many iOS only app startups and they seem to have no problem with this from a business standpoint. Many have also invested in companies making software for iOS and Android but told me that the companies priority was iOS. From my viewpoint iOS is the hot ticket item. And it seems like developers agree. This years Apple World Wide Developer conference sold out in record time, faster than Google I/O for the first time. And it did this despite Android’s 75% smartphone market share.

Below is a chart showing how many minutes it took for each developer conference to sell out.1

Screen Shot 2013-05-30 at 11.28.57 PM

iOS also appears to be the best business bet for a majority of software developers. Distimo released a very interesting study this month highlighting some key metrics related to both the iOS and the Google Play Store. In a section of the report called The Apple App Store is Most Beneficial, Distimo point out:

“The daily revenue (In the US) in April 2013 generated by all applications in the top 200 grossing in Google Play was $1.1M, while the daily revenue of the top 200 in the Apple App Store (both iPhone and iPad) was 4.6 times higher at $5.1M. The vast majority of applications in those two top lists contained free applications with In-App purchases and this business model automatically generates the most revenue in both stores. The higher revenue share in the Apple App Store compared to Google Play was also characteristic for long tail applications and did not apply solely to popular applications.”

As impressive as that US centric data is, I think two clarifying points are necessary. First you will notice that Distimo specifically points out that the Apple app store revenue includes iPhone AND iPad. Why does this matter? First because there are disproportionately more iPad specific apps in the Apple App store than there are tablet specific apps in the Google Play store. In fact, I would be so bold as to say that there are so few tablet specific apps in the Google Play store that it barely showed up as a blip, if at all, in the Distimo app IQ tracking solution.

Second, this breakout which includes iPad, shows how attractive iOS is from both a smartphone standpoint and a tablet standpoint in terms of opportunities to make money for software developers. 2

Now, the above mentioned data was US centric, where we know the iPhone is dominant. So how about the rest of the world? Distimo makes the following observation:

“The Apple App Store was still the larger market compared to Google Play in April 2013 in terms of total revenue. However, Google Play’s piece of the pie has increased significantly over the past six months. While only 19% of the combined revenue came from Google Play in November 2012, this share went up by eight percentage points to 27% in April 2013. The Japanese and South Korean markets were the main contributors for the growth in Google Play’s revenue share.”

Distimo makes a point that the Play Store has increased, and indeed it has. However, they also explain the answer.

“The Japanese and South Korean markets were the main contributors for the growth in Google Play’s revenue share.”

One word. Samsung. One question. Sustainable?3

Focusing on Android Software Development

Indeed, John’s column spurred quite the response from those in the church of market share. Of course Android is relevant and it’s not going anyway any time soon.

The question is can developers make money and sustain a profitable business developing for Android. Interestingly this is exactly what the Distimo report set to find out.

In the report Distimo highlights several developers and apps that have found more or at least equal success in the Google Play Store vs. the Apple App Store. The primary examples were game developer Mobage.

“In April 2013, Mobage generated more than $5.1M in Google Play in April 2013. The Apple App Store total revenue during April 2013 in the U.S. was $5.6M, which was slightly higher. This equates to a revenue share of 48% for all Mobage apps in Google Play in April 2013, while 52% of revenue came from the Apple App Store (iPhone and iPad).”

Not bad. Mobage has several popular games, Blood Brothers and Rage of Bahamut being two of the main ones. As you can see for this developer Android is a significant contributor. They are also a large publisher with games with strong brand cache.

The other Android highlight was Final Fantasy III.

Screen Shot 2013-05-30 at 11.24.45 PM
Again a game with serious brand affinity. As you can see Android is not a lost cause for developers. However, it does seem there is a template which is required to follow in order to make Android development worthwhile.

Conclusions

Android is a viable market place. However, as we see, it is also highly regional and more often than not success is being found by large developers with name brand apps. Therefore app developers need to be very targeted about the region and strategic about the business model that will work in that region.

The Android market is filled with successes but it also favors the larger more established app developers whose software has a strong and established brand to leverage.

iOS presents the greatest opportunity for the entrepreneur app developer

The data and the evidence constantly coming to light showcases how developers large or small are profiting from iOS development. But in my opinion, iOS presents the greatest opportunity for the entrepreneur app developer. The small to mid-size developer. The person who writes apps in their spare time and has a dream to quit their job and start their own business creating apps. This is where some of the most exciting software development is coming from. This is where the companies of tomorrow will be born.

So here is my advice to the smaller independent and garage software developers looking to build or continue to build their software development business. Follow the strategy being employed by the many silicon valley app startups. Start with iOS, build the business and the brand, then as the business grows expand. It would be foolish to ignore Android. It would also be foolish to start there.4

Screen Shot 2013-05-30 at 11.30.14 PM

I have given this advice to dozens of app developers a month who seek my feedback and opinion. And I am told I am not alone in this opinion. Many remark that this advice is also given to them by their mentors, advisors, and investors (if they have them.)

It is of course true that developers can make money on Android. The Android market will continue to develop and grow. But can it attract and be a viable marketplace for the small software startups? Or for the long tail marketplace which is clearly in Apple’s App stores favor at the moment. I will agree and end with the conclusion Distimo makes in their report:

“We draw the conclusion that although the majority of applications still generate more revenue in the Apple App Store than in Google Play, there appears to be a great opportunity in Google Play in terms of revenue – and (as noted in previous publications) localization is the key.”

  1. I plotted since 2011 since starting that year each conference sold out in less than a day. Each year prior took days not minutes []
  2. It is clear the iPad is a strong component to the strength of the Apple app store. Unless Google fixes this with tablet apps, the imbalance will remain []
  3. I will be doing a deep dive on my thoughts on Samsung’s sustainability long term as a part of a new service we are launching soon. Sorry for the shameless plug []
  4. This is of course my opinion and you are welcome to disagree []

Ben Bajarin

Ben Bajarin is a Principal Analyst at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research. He is a husband, father, gadget enthusiast, trend spotter, early adopter and hobby farmer. Full Bio
  • FalKirk

    Great article, Ben. Chock full of good stuff.

    My article – “Android’s Market Share Is Literally A Joke” – has been misinterpreted, mostly by those who havent’ bothered to read it. I wasnt’ criticizing Android, I was criticizing the use of market share as the sole criteria for measuring success in today’s mobile markets.

    iOS and Android are the two great operating systems of our time. To paraphrase you: It would be foolish to ignore Android. It would also be foolish to overestimate them.

    • benbajarin

      I agree John. I knew where you were headed and of course people only see what they want to see.

      • guest

        including you

        • benbajarin

          Evidence?

    • Rich

      Is it foolish to feel sorry for Windows Phone 8?

      • benbajarin

        Ha! I was wondering how long it would take to mention Phone 8. I figured someone would wonder why I didn’t mention it :) It was intentional..

  • http://www.pcweenie.com/ Craig Prall

    Has Apple added any vetting process for becoming a member of the Apple Developer program? I haven’t been a member for years, but it used to be pay some small amount of money and answer some questions about the type of Apple development I was doing. There was no verification of anything. The one and only time I went to the Apple WWDC, I was disappointed that quite a few people there were not developers of any kind – Apple or otherwise. This was before there even was iOS or an iPhone, so maybe that’s changed. I hope so.

    • steve_wildstrom

      I’m an Apple developer and I don;t develop anything. Apple has two programs. One just requires you to register and it just gets you access to a bunch of online developer resources. The real developer program just requires you to pay $100 a year and it allows you to submit apps to the App Store.

      I am also a paid Microsoft developer because MSDN/TechNet membership gets you access to a lot of software.

      • http://www.pcweenie.com/ Capricorn1

        It was the second one I was thinking of. Does that now require any sort of proof that any development is taking place?

        I’m in the MAPS (Microsoft Action Pack Subscriber) program for the same reason you are in MSDN. I don’t need the compilers or other development tools, but having the latest desktop OS, server OS (and server suites) and Office tools on the multiple machines I have is very handy. While I am a developer, and I develop mostly on a Windows-based machine, I don’t do any Windows development per se. Still, that one requires I have either a Microsoft certification of some type or that I pass a Microsoft course every other year. I choose to do one of the offered online courses. I did notice that a lot of those seem marketing oriented not developer oriented, so I suppose it’s pretty easy for non-developers to qualify there as well.

  • Rich

    WWDC sold out in less than 2 minutes this year? What’s going to happen next year, it sells out in 17 seconds? No, probably not – that much traffic would crash the servers. Then again, maybe Apple will be ready and can handle the traffic.

    In 2016 WWDC reaches a causality reversal and it sells out *before* it goes on sale.

    • Glaurung-Quena

      More likely, Apple will limit how many tickets can be sold at once so those who want to attend but aren’t able to camp out on the website and buy tickets the instant they go on sale will still have a chance to obtain tickets. Or at least that’s the sensible and fair response to this year’s ridiculously fast sellout.

      • Rich

        Darn, I wanted to see the causality reversal so I could tell Ray Kurzweil about it. He’d want to know.

      • http://twitter.com/qka qka

        Or a lottery? You sign up over a limited period, and then Apple draws from that pool.

        Would have made sense this year, given how fast last year’s WWDC sold out.

    • unhinged

      http://marco.org points out that there were probably crashes from the traffic this year and it sounds like the event would have taken longer than two minutes to sell out.

  • AhmadZainiChia

    Indeed, studying the “Developer Scene” in a each platform is an essential way to judge a platform’s health – yet it is not given enough attention most of the time. In this age, Apps make or break the platform: Windows Phone 8 being an example. I’ve tried and tried recommending WP8 to people (who don’t use a lot of apps) but even they just won’t budge because of the app situation.

    The way I see it, right now iOS is healthy because, well, because it is a nicely grown and curated walled-garden: and so gardeners (developers) can happily grow their plants there, and visitors (users) can go there and happily enjoy the plants (apps).

    But Android, by gaining huge market share, has huge potential, I think. If Google can significantly mitigate their main problems (fragmentation, low user engagement) then Android as a platform can improve very, very quickly. Apple is in no immediate danger, but they should be wary of this, and I think they are. Tim Cook did say “I don’t have my head stuck in the sand” at D11 :)

    • http://twitter.com/qka qka

      Android’s biggest problem – malware and the attendant security risks.

  • James King

    This is a great article in that it contextualizes John Kirk’s article very well. Though immaculately written and substantiated, it is easy to pass off Kirk’s article as partisan. But inaccuracies in tech journalism make such articles relevant. The media gets it wrong a lot and is often content to feed the egos of the most rabid and religious, particularly in tech and politics. More perspecive is generaly a good thing.

  • http://twitter.com/qka qka

    On your time to sell out graph: Three points do not make a curve; you’re implying more than the fact state. That’s why Horace Dediu uses so many bar graphs.

  • normm

    A comment about the time-to-sell-out graph: It might be worth mentioning that both conferences are held at the same place (i.e., are of similar size), and that the WWDC conference sold out so much faster even though it’s a lot more expensive.