Why Android’s Market Share Is No Threat To Apple’s iOS Platform

by John Kirk   |   November 29th, 2012


iOS Is Winning The Profit Battles

Everyone concedes that Apple’s iOS is currently winning the mobile profit battles. However, many pundits still contend that Apple is losing the mobile wars because Apple does not have the most market share. How can this be? In almost every industry in the world it is profits – not market share – that matters and profits – not market share – that matters most.

Tiffany’s does not care how much costume jewelry their competitor’s sell. Nor do we judge the sales of cars, blue jeans, steaks or any other good or service soley by its market share. Companies like Best Buy, Radio Shack and K-Mart stand as stark testaments to the fact that the one with the most stores or the one that sells the most low cost items is seldom the one with the best prospects.

Does Platform Matter More Than Profits?

Ah, but apparently in a platform war it is platform – not profits – that matters most because it is platform – not profits – that inevitably leads to profits. And it is market share – not profits – that matters most because it is market share – not profits – that inevitably leads to platform victory.

John Koestier of Venturebeat puts it this way:

“As Android hits 75% market share, can anyone tell me why this is not Mac vs PC all over again?”

Dan Lyons, writing for ReadWrite, goes even further:

If this sounds familiar, it’s because we’ve seen this movie before, only in the original version Apple was losing out to Microsoft in personal computers. Now Google is using the same game plan in smartphones: Come in late with an alternative product and gobble up market share by licensing the OS to loads of hardware makers instead of trying to do everything yourself.

Look, when three out of four phones sold worldwide run your operating system, I think it’s safe to declare victory.

And Henry Blodget attempts to spell it all out:

The reason market share is important is that mobile is a “platform market.” In platform markets, third-party companies build products and services on top of other companies’ platforms. As they do, the underlying platforms become more valuable and have greater customer lock-in.

Building products and services for multiple platforms is expensive, so platform markets tend to standardize around a single leading platform. As they do so, the power and value of the leading platform increases, and the value of the smaller platforms collapses.

iOS Is Winning The Platform Battles Too

Only there’s one little problem with the theory that market share matters most in a platform war. By every imaginable measure and in every way that conceivably matters, it is iOS – not Android – that is winning the platform wars. And it isn’t even close.

A computing platform is made up of any number of attributes. Some examples of those attributes are:

adoption of operating system updates; accessories; advertising revenue; app primacy, quantity, quality and profitability; business adoption, BYOD, commerce; consumer assurance, entrustment and confidence; content revenue; control of the platform; credit card numbers; culture; demographics; developers; ease of use; eCommerce; ecosystem; education adoption; engagement; enterprise adoption; government adoption; in-app commerce; integration; lock-in; loyalty; monetization; profits to developers, content providers and publishers; popularity with teens; re-sale value; reliability; repeat customers, retention; safety; satisfaction; security; shopping; stability; stickiness; store quality; switching costs; trust; usage; video views; web traffic.

In every platform attribute listed, it is iOS – not Android – that is leading and in many cases it is iOS that is dominating.

Market Share Does Not Equal Platform

The pundits got it halfway right. Platform matters. But market share does not equal platform. Not by a long shot.

How can this be? The equation of “market share equals platform” is the foundation of the Network Effect – the idea that the value of a product or service is dependent on the number of others using it. Only here’s the thing. In computing platforms, it’s developers and dollars – not units and users – that count towards market share.

This just isn’t that hard. The two basic realities that matter most to a platform are that developers get paid to develop more and better apps and that consumers get incentivized to buy more apps and pay more for those self-same apps.

When the facts do not fit the theory, you either question the facts or you question the theory. The theory that “market share is all that matters” is flawed because the opposing facts are incontrovertible:

1) Developers are deveoping for iOS first;
2) Developers are making more money via iOS;
3) Consumers are downloading more content and apps, engaging in more eCommerce and consuming more advertising via iOS; and
4) Consumers are spending more on the content, apps and items they buy and the advertising they consume on iOS.

The Network Effect that John Koestier, Dan Lyons and Henry Blodget are banking on is alive and well. But it is iOS – not Android – that is reaping all of its benefits and rewards.

Why Android’s Market Share Is No Threat To Apple’s iOS Platform

Again, from Henry Blodget:

The biggest and most important difference between the PC market of the 1990s and the mobile market today is that many of the most common smartphone “apps” are available on all phones, regardless of platform. These include:

Phone
Email
Web
Texting
Popular games and apps

What this means is that you’re going to get most of your smartphone functionality regardless of which platform you use.

Ironically, spot on.

The pundits – including Henry Blodget – have it exactly backwards. You don’t HAVE to have a great platform to be successful in mobile. Android is living proof of that. Remember, when Android first emerged, it was iOS that had a 200,000 app head start. If platform was all that mattered – if we were re-living the PC v. Mac wars – then Android would have played the role of the Mac – or worse, the Amiga – and never have emerged from its nascency.

The bottom line is that there are really two smartphone markets. Android is an excellent smartphone. iOS is an excellent platform. Both can, and do, co-exist. And therein lies the answer to the seeming paradox.

The Right Diagnosis But The Wrong Prescription

Let’s re-review Henry Blodget’s argument:

The reason market share is important is that mobile is a “platform market.” In platform markets, third-party companies build products and services on top of other companies’ platforms. As they do, the underlying platforms become more valuable and have greater customer lock-in.

Building products and services for multiple platforms is expensive, so platform markets tend to standardize around a single leading platform. As they do so, the power and value of the leading platform increases, and the value of the smaller platforms collapses.

Henry Blodgett’s diagnosis – that platform matters – is entirely right. His prescription – that market share cures all ills – is entirely wrong. Android can continue its unit and user market share dominance without impinging on iOS’ platform dominance because it is developers and dollars that are the only market shares that really matter.

– It is iOS – not Android – that is attracting the third party companies to build products and services on top of their platform.
– It is iOS – not Android – that is becoming more valuable with greater customer lock-in.
– It is iOS – not Android – that developers, content providers, advertisers and eCommerce sites are standardizing around.
– And it is Android – not iOS – that is in danger of having the value of their smaller platform collapse.

Conclusion

Don’t get me wrong, Apple has plenty of things to worry about. But a flawed theory regarding platform and the Network Effect isn’t one of them.

Let’s stop focusing on market share without context and let’s start focusing on what matters. Market share does not necessarily equal profits. Market share does not necessarily equal platform. And in the long run (and in the short run too), market share that doesn’t ultimately lead to profits is meaningless.

Anyone can get market share. All you have to do is give away your product at cost or, better yet, for free. But you can’t beat Apple’s iOS just by losing money. Somewhere, somehow, sometime you’ve got to make a profit. Let’s stop pretending that market share is the bottom line or the only thing that matters. Profit and platform matter. Let’s focus on them, instead.

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?
  • jfutral

    Well thought out. There is another angle on the market share point as well when comparing MAC v PC and iOS v Android.

    It was never actually PC v mac, it was Windows v mac. And Windows was making MS lots of money. And Windows made hardware makers money. Neither of which is true for Android except for Samsung (who still won’t credit Android as the primary cause of their profits), as you have pointed out multiple times.

    And there were no (until the Home vs Pro era which wasn’t actually forked technically) forked Windows market. Android is forked all over the place, not just in terms of version updates (which is also another area of fail for an Android/Windows comparison).

    So the notion that Android can be rationally analyzed as a single platform, thus compared to iOS vis a vis Windows v Mac is flawed from the start. MS kept much tighter reigns on how Windows was distributed than Google is doing with Android.

    Joe

    • Snake Oil Seller

      Well not even Windows v Mac, it was ‘IBM and IT departmeants’ v ‘everyone else’. When the Mac came out only Commodore with its C64 sold more computers than the iBM PC and it was surpassed by the PC in 1985. Windows won by default when Microsoft said “you want DOS compatability, you buy Windows 9x”.

      Of course the market share effect was alway BS, if it had been true we would all be using Symbian phones.

      • kayeu

        For a long time it was characterised as the IBM PC vs. the Mac. Until it slowly dawned on people that IBM was losing the PC wars. Losing to the onslaught of the cheaper clones. IBM had decided to compete on price and it ended up hoisting itself on its own petard. Why aren’t we hearing more about this? I think in the long term Apple has won. It doesn’t compete on price. It stuck to its guns and never competed on price. It has an incentive to develop more products because it knows it can ask a decent price for them. Everybody else is having trouble making money on hardware. Except Samsung who’s obviously been studying the enemy very closely and has decided to market their expensive phones, like the Samsung Galaxy S3, very aggressively. Kudos to Samsung! That’s how you beat Apple. Play them at their own game. The question now is will Google blunder in and turn it back into a price war by loss-leading its branded hardware.

        • steve_wildstrom

          The history of the IBM PC is long, complicated, and fascinating. IBM leadership was deeply ambivalent about the who project and shoved it into a division called Entry Systems is Boca Raton, about as far from the mother ship as possible. IBM did dabble, with very limited success in several efforts, in low-price, low-margin consumer systems, but its real goal was always to fight commoditization. Its big effort, in 1987, was a proprietary PC architecture called PS/2. Unfortunately for IBM, the only part that ever caught on was the round DIN-type connectors for the keyboard and mouse which dominated until displaced by USB in the late 1990s. IBM’s one real business success was the premium-priced ThinkPad, until that business turned sour in the early 2000s.

          Also forgotten by everyone except a few old farts like me was several unsuccessful collaboration efforts between IBM and Apple including the Telligent operating system project, a/k/a Project Pink, and the Common Hardware Reference Platform. IBM also manufactured one of the early Mac PowerBooks, I believe the 2400, for Apple. And, of course, the PowerPC processor was a joint venture of Apple, Motorola, and IBM and the last few generations of chips, including the G3 and G4, were made exclusively by IBM.

          • jfutral

            Hey, I’m old enough to remember all that, too. In the earlier days I recall it being more DOS (I remember using DR-DOS) vs GUI. By the time Apple with the Mac was the only one standing of the GUI makers (such as Atari and Amiga) the transition had already well under way from DOS to Windows on PCs. Apple had not yet realized how much they mucked up the agreement with MS.

            Joe

  • michel

    two important reason’s you seem to forget, and get very little attention in tech press in general:

    1. a very big % of android phones are not at all like iphone or Galaxy SIII, but very cheap phones used to call and text only

    2. a very big % of android is not related to google at all, like nook, kindle, and the whole of the biggest android market in the world: China

    there are to few exact numbers being released by google and android vendors, but i am sure the actual number of phones taking part in the android platform (= Google Play) is barely larger than iPhone.

    • benbajarin

      Thanks for the comment Michel. We do actually point out frequently the Android forks and the need to understand the deep platform fragmentation, particularly at the low end in China and India. I intend to address this again in some new ways in my column here tomorrow.

      Since we don’t actually have specific device sales it is hard to know exactly how many Android devices in the market are actually of benefit to Google. I’d love to create a pie chart showing what percentage of the Android activations are benefit to Google and how many are forks. This when compared to iOS would bring a lot of clarity to the picture if we had that data. I have chunks but there is still too much approximation to be more than generally accurate.

      But when you look at the latest data showing that iOS now has more market share than Android in the US, I think you get a clearer picture that the same will be true globally if we are simply comparing Google’s Android vs. iOS. Not including the forks, I am convinced the platform share is more balanced than people believe.

  • http://www.facebook.com/profile.php?id=100001035136448 Sihan Zheng

    Full Disclosure: I use a Windows Phone
    I believe, that iOS has only a temporary advantage over Android. iOS completely relies on one vendor, one model. And that is iOS’s biggest disadvantage.
    What if the next iPhone flops? What if there is a major issue that demands a major recall? iOS would be heavily damaged. However, with Android, if say the Galaxy s4 flops, I can go to the HTC two x, or the Motorola Droid 5.
    This is the biggest risk with any single vendor OS, all it takes is for one generation to flop, and the OS would be heavily damaged. For example, Palm OS 6, Symbian s60v5, Blackberry 7.

    • FalKirk

      And yet Amazon with the Kindle Fire, Google with the Nexus 4, 7 and 10, Microsoft with the Surface are all moving to the closed model. Kinda makes ya’ wonder (or at least, it should).

    • Snake Oil Seller

      The only company who make Coca-Cola is Coca-Cola, the only company making Toyota cars is Toyota, the only company making IOS devices is Apple. That’s generaly how things work and it works well. You will have to explain why a proven stratergy used by the majority of companies in many different industries is a disadvantage uniquely for Apple.

    • jfutral

      “And that is iOS’s biggest disadvantage.”

      So far that is its biggest advantage. Even with Windows, MS had very tight control on how OEMs utilized Windows. MS was the sole developer of Windows. Try to fork Windows without MS’s permission and see how far that gets you.

      And so far, only Samsung devices can be credited as not flopping. Having all those other flopping device makers has not proved to be of any advantage to Android or Google.

      Joe

    • AdamChew

      You have a good point here but I don’t think Apple will allow it to happen because the mobile platform is where they derive most of their bread and butter from. It is also the future and their future.

      I believe after antennagate and Mapsgate they are more careful than ever.

      If I am wrong send me a plate of crows.

      One more thing it is now up to the developers to come up with the next Excel for the mobile platform and Apple’s iPad have the advantage here as their chips get more powerful. I believe complicated photo manipulation will also be possible and maybe video one day.

    • Ted_T

      “What if the next iPhone flops?”

      What if the next version of Android flops? It is past time people understood that software is both more important and harder to build than hardware. “Mapgate” after all was purely a software issue. And Android 5.0 is just as capable of flopping as iOS 7.

      This is where all the “single vendor” BS is exposed as BS: in fact Windows is single vendor, Android is single vendor, iOS is single vendor.

      The hardware? iPhone, Samsung, Nokia all get manufactured at the same FoxCon plants. The competing hardware is all subject to the same potential pitfalls. Android and Windows have no advantages here over iOS.

  • Glaurung-Quena

    Basically the pundits are making the same mistake with Android vs IOS that they made with Windows vs Mac — they’re mistaking a dozen widely different markets for one market simply because they happen to share the same OS.

    To list just a few segments, the windows market consists of enterprise (custom bespoke apps), enthusiasts (gamers and DIY build your own computer people), workstations (pushing the limit of what current computers can do), and non-technical (mostly internet access, photo/music management, and word processing/spreadsheets). Apple is only really competing against the workstation (pro) and non-technical (Imac) segments of the Windows market, and they don’t give a damn about the bargain-basement halves of either segment. Looking at Mac market share vs the Windows market share as a whole is stupid.

    Likewise smartphones are not a monolithic market. RIM made its name in the “all purpose communications device in your pocket” segment, with phones that did email and messaging. There’s also a “one gadget to rule them all” segment, which is about putting together one or more of a phone, a pager, a GPS system, a camera, a portable game machine, and a personal media player together in one package. The Iphone started out in the one-gadget segment, and then with the app store has moved sideways into a new segment Apple created, the “general purpose computer in your pocket” segment.

    Apple is not competing against Android, they’re competing against that fraction of the Android market which services the high end “one gadget to rule them all” and “computer in your pocket” segments. But Android, being free, has become the default OS for hardware makers to put in any and every phone, from extremely low-powered “smartphones in name only” to Blackberry clones to low-end “one gadget” devices. Comparing Apple market share to Android market share, without specifying which part of the android market you’re talking about, is, again, idiotic.

    • http://twitter.com/qka qka

      A novel and interesting analysis of device market segmentation. Thank you.

    • jfutral

      Good points. At least with Windows, however, you were still basically talking about the same OS on basically a similar structured machine, even if specifics varied (bit depth of video or audio card, amount of memory). Neither OS or hardware are comparable in the Android world.

      Joe

    • Marvin Nakajima

      I see your point. However if you see the mid-range and low-range Android devices start matching or exceeding the features and capabilities of iOS devices there will be a larger segment of the Android platform that becomes relevant in comparing the two platforms. As in the past few years each of iOS prior leads have fallen one by one to Android’s sheer numbers. There will come a time (I’d say in the next 2 years based on the speed of the mobile market observed to date) when there will be more profit made in the Android eco-system than in iOS. This is not to say a single company will make a higher profit/revenue than Apple and its partners, Simply that the total profit generated as a sum will be higher by the players involved on Android’s ‘side’. The next ‘step’ beyond that will be a ‘handful’, then perhaps a single company will emerge that exceeds Apple (this last though may not be likely within the decade). The Chinese market is Apple’s current hope to spike up their market share. Seeing as how there are a number of Chinese Android OEMs making the news right now with amazing devices I have doubts as to how effective a global share increase Apple will realize in the coming year.

      • Jamo Light

        perhaps the anticipated release of the “cheaper” iPhones could create a dent on the trend that has been going for the past two years? But you’re right, the Chinese market indeed holds the stakes for Apple.

  • lesiu

    If usage statistics are to be believed then Android is taking over the role of feature phones. These feature phones had other things that customers could take advantage of (crummy email but hey, it was there) that never got any real use. So if someone goes into a Verizon store and just wants a phone and all they can get their hands on (I don’t need a fancy iPhone I don’t want a data plan) or are willing to spend any money on is an Anderoid device then how is it that Android is not any different from the feature phone it’s probably replacing, at least from the point of view of the job the device is actually doing and not what it can do?

  • Alexcroce@me.com

    Looking forward, Apple has the advantage that they can capitalize on their platform better than Google can. Apple can roll out a game changing new service to a critical mass of more valued consumers practically overnight.
    They have world wide reach and can mobilize their resources to dominate new service models. They are like a huge aggressive army that is attacking on several fronts and it will take coordination amongst their competitors to oppose them.

    • Marvin Nakajima

      I’d have agreed with that in the past. However with more and more of the game changing functionality ending up in the ‘network’ than in the devices, even the iPhone will be a ‘commodity’ platform when faced with that.

  • Jurassic

    “In almost every industry in the world it is profits – not market share – that matters”

    If you give something away for free, you can achieve huge market share… but if you have no profits to show for it (or worse, if it is costing you money to give things away) your business will not be sustainable.

    Not only are corporate profits good for a company, they are also good for consumers. If a company makes no profit (or minimal profit) on the things they sell, then quality and service become unaffordable “luxuries”. But if a company consistently makes a healthy profit, then the quality and service that consumers want (and need) are usually built into the cost of the products.

  • http://www.facebook.com/donald.m.kraig Donald Michael Kraig

    John, I think there is something that you and all of the commenters so far have missed: there is not “Android Platform.” Or rather, there are lots of little Android platforms. Each manufacturer has a different version. Each iteration of Android isn’t backwards compatible even to the previous generation. Windows stressed backwards compatibility. Windows on each computer, no matter the manufacturer, worked essentially the same. This is not true with Android.

    So which Android platform are you talking about? Cupcake? Froyo? Honeycomb? Gingerbread? They’re each different and each non-compatible. Depending upon your counting, there have been over ten versions of Android. Not one is close to the market of iOS.

    • FalKirk

      “John, I think there is something that you and all of the commenters so far have missed…” – Donal Michael Kraig

      There are many facets of this story that I am reluctant to address because the data is so obscure or vague. For example, not even counting fragmentation, I am highly suspicious of the Android activation numbers. As Ben alluded to, above, many so-called Android phones in China (and elsewhere) are nothing more than low-level feature phones stripped of all their platform capabilities.

      There are many, many other issues as well. I chose to focus on that which we know. Even assuming the facts are as stated in the press, there is still no reason to believe that Android’s market share is a threat to iOS’ platform.

      • steve_wildstrom

        Those phones that do not use Google services and do not qualify for the Android logo are never activated and should not count in Google’s numbers. If the activation numbers being given out by Google are not reasonably accurate, Ernst & Young has some explaining to do. Those numbers are supposed to be audited, and with people raising suspicions about them. I would expect the auditors to give them an especially hard look.

        • benbajarin

          We are not told, nor do we know, what an Android activation constitutes. No one knows when Google gives activations numbers if its simply the kernel or if its Google Android devices from an OEM who has passed AFA and is embedding the Google services associated with it. However, I tend to believe the later is not true and the activations are of the kernel and include devices with no integration of Google services. Since China alone has, approximately and generously, at or less than 15% of installed devices that have any benefit to Google. The explosive growth of Android can only make sense if we take into account China devices, which I believe count as activations but largely have no benefit to Google’s version of Android. More on this on my column on Monday.

          • jfutral

            We also don’t know how many systems Google has developed to count activations along the way nor their level of accuracy at any given iteration. A commenter at asymco on the referenced article related a story about that. Of course we have no way to corroborate, but it does at least illustrate how variations and inaccuracies _could_ occur, though not that they did.

            Joe

        • Marvin Nakajima

          You’re quite right. When Android quotes ‘Activation’ numbers it is simply that and is actually an ‘under’-estimate of the total number of actual Android OS devices out in the user landscape that as you point out include some that do not use Google Services.

  • kayeu

    There is something else I forgot to mention. The PC vs. Mac war was really a battle for a “standard”. Lots of people thought, at the time, that it was highly desirable for everybody to use the same thing. Simply for the sake of compatibility. The VHS vs. Beta analogy was dragged out relentlessly. It went something like this. Beta was better than VHS but VHS won because it became the standard. Everybody had to settle for the one standard format. Back in the days when everything was disk based, compatibility was a much bigger issue. Marketshare was seen as reflection of the need to settle on the one platform. Consumers who wanted Macs were warned that they wouldn’t be compatible with the rest of the world. In these days of internet, wireless, cloud-based computing with all sorts of standards and protocols, it’s easy to forget how simple compatibility could have been a huge issue. Apple really messed up because they did not concede that PC disks and formats were the de facto “standard” and it took them years to make reading and writing a PC disk simple and transparent. But marketshare was a means to an end back then. These days, even if iPhone users are statistically a minority, it’s not going to effect the user in any way. There is absolutely no need for a “standard”.

    • steve_wildstrom

      This is a very important point that tends to get overlooked. A single videotape format was forced by video rental stores, which only wanted to stock one type of cassette. As Beta lost ground in market share, stores devoted less and less space to Beta tapes, making the format less desirable. (By the way, the technical superiority of Beta is grossly misremembered. It had a slight edge in video quality, but VHS could hold more on a single tape. But that’s another story.)

      Similarly, in the 1980s Mac/PC wars, compatibility was a real issue. File compatibility was bad and physical media compatibility much worse. Application developers were forced to choose between vastly divergent requirements. Apple made lots of mistakes, and once DOS/Windows gained the edge, it was very hards to reverse the trend.

      But today that sort of compatibility is vastly less important. I routinely work on two Macs, a couple of Windows machines, and an iPad and move content among them

  • JDSoCal

    Actually, Apple won Mac vs PC as well. It just took 36 years to figure it out. Macs have a 5% worldwide market share of PCs, but 53% of the profits. IBM bailed, and HP – the worldwide PC market leader – loses money and is dying. MSFT is walking dead due to the mobile revolution, but just doesn’t know it yet.

    But Apple now makes half the money in PCs. So all these race-to-the-bottom, razor-margin companies hurt themselves, not Apple.

    • Marvin Nakajima

      You can thank MS now for helping Apple come back from their ‘troubled’ times. :D

  • Claudio

    naive analysis, sorry to say. all my friends (over 20) updated their phones this year, and the choice was 100% android, samsung III a favourite. apple already lost the battle for 2013. if they don’t come up with a new innovative product or service, their margins have to move south. Acer, HTC, Samsung selling competitive products at 30-50%, Nokia discounting even more – tough challenge for Apple. I’d love to see them coming back, my guess is that’s not going to be 2013 though.

    • Marvin Nakajima

      Agreed.. Apple investors are getting anxious.. $539 today down from their high of just over $700 a few months ago. Google is just a few bucks shy of returning above $700.

  • Claudio

    Thanks for moving my message to the bottom of the list John … Hard to take some feedback that’s not absolutely positive ? Think again, otherwise your article’s credibility drops to 1 out of five, while I still think it deserves a 2.5 out of 5. Lots of us like Apple, but some of us like to keep the eyes open.

    • benbajarin

      Moderators can’t move messages up or down. Disqus does this on its own with logic unbeknown to me.

  • Tom

    This article is sound reasoning for a given snapshot of time. Profit is the way we measure a company’s success and iOS is winning in that arena, FOR NOW. His focus purely on market share as the relevant parallel to the Windows vs Apple race of the 80s, is missing some other key components.

    The real reason Microsoft won the battle in the 80′s was flexibility for programmers and end users. Apple refuses to relinquish control of its devices and the software that runs on them. This makes for good quality control and consumer experience in the short run, but lacks the flexibility to attract corporations and those in need of complete software customization or completely custom security. A recent example is the department of defense launching their own customized android phone that met the security requirements they demanded. This also goes back to the profit motivation he discussed earlier. Carriers like the ability to customize the OS with their own software tweaks to generate revenue for them. (yes, this pisses me off just like it does everyone else, but it is about profit)

    Speaking of profit, you can’t really quantify the profit Google is making on android. Google is making money on android indirectly by keeping users in their search engines and viewing their paid advertising. So they may able to tell how many adds are being clicked on in android, but they can’t tell you how many of those users would defect to another platform with non-google powered search. Google makes their profit on SEARCH, plain and simple. Android is just a tool to help keep their market stranglehold on search.

    Finally, market share does matter going forward. Developers have not caught up with the rapid growth in the android market because they are already committed to iOS just because it was the first on the scene. That will change over time. How do I know this? It is simple. Why do people pay so much to advertise during the super bowl? The answer is eyeballs. It is all about eyeballs. That is what marketing is, getting your product in from of consumers’ eyeballs. You can break those eyeballs down all you want into profitability, but many companies are using marketing for brand awareness. Take a company like coca-cola. They are not hoping you will click and buy a coke online, they want you to think about how good coke is next time you are at dinner. Furthermore, the fastest growing market, globally, for cell phones is the budget low end cell phone market. This is why many analysts thought apple was going to launch a cheaper iphone, but that never happened. Android has offerings at just about every price point, even free with contract. So the 75% market share will be more like 85% or higher by the end of next year. I don’t care who makes up that 85% or what metrics for profitability that group has, developers and advertisers are not going to ignore that large a segment of any industry. They will find ways to extract more revenue from those users, such as ad-revenue sharing, micro-purchases, and other innovative ideas. Go ask Wal-Mart how much money can be made by selling to a lower class, lower income market

    So while this article sounds reasonable given the specific temporary set of facts he points out, it neglects the rest of the facts and the scope of time. He also is very hung up on technology and forgets some simple lessons he could have learned in business or business school. What is the bigger and more profitable company, Ferrari or Toyota? You don’t have to sell to the most profitable markets to make the most profit. Ask Toyota and Walmart or at least stop playing with your tech toys long enough to take a business course, before you start writing about the future of tech ecosystems and the billion dollar companies that back them.

    • jfutral

      “You don’t have to sell to the most profitable markets to make the most profit. Ask Toyota and Walmart or at least stop playing with your tech toys long enough to take a business course, before you start writing about the future of tech ecosystems and the billion dollar companies that back them.”

      I certainly hope you extend your business savvy to the rest of tech-writer/analysis land as well since they are the ones Falkirk is riffing on. Everyone else seems to think this “market share” strategy magically converts into profits. So far that isn’t the case nor does it show any sign of ever occurring, except for Samsung.

      “You don’t have to sell to the most profitable markets to make the most profit.”

      Certainly true enough. but equally true in any business education is that the point of a non-not for profit entity IS profit. So if the point of Android is not to make a profit or at least help the profit making process of Google, then it is a distraction and needs to be disbanded before it costs anymore money.

      “So the 75% market share will be more like 85% or higher by the end of next year. I don’t care who makes up that 85% or what metrics for profitability that group has, developers and advertisers are not going to ignore that large a segment of any industry.”

      But the smart business will investigate if they will actually be or even have the potential of addressing that 75-85% or at least a large enough portion of that to make it worth their time and money. That is where fragmentation and segmentation rear their ugly head. With Android’s current condition there is no way of that ever occurring. Heck, even Google doesn’t address the whole Android market. And that is the big problem.

      Even with Windows there was no way of addressing 100% of the Windows market. Android is already far more segmented than Windows ever was. Especially if one is already serving a vertical market, there is no way of knowing if enough of your market is using Android devices of the same configuration, much less enough Android devices in general, to make it worthwhile.

      Joe

  • Neil J. Squillante

    Another astute Kirk analysis. I have an even simpler explanation. Even though Android is “wining” the market share battle the market is vastly larger than the PC market of the 1990s. Thus, iOS has plenty of users to attract developers despite its “puny” market share.

  • jfutral

    Not meaning to rant here, but I am totally baffled. I just had to read these articles again. It is amazing the lengths people are willing to go through to justify Google’s Android strategy (what strategy?). I just finished a round where the original article tried to say Android’s market share will lead to profit share leaving Apple in the midst of the 1990s again. I tried to point out that, arguably other than Samsung (who still won’t cop to Android’s help to the bottom line), no one is making profit from Android. All I got was an earful of why Google doesn’t need to make money from Android and that was never their intent, only to stop Apple from dominating mobile. So now Google is not all that caught up in making a profit, they aren’t even trying to make a profit from Android. They just want user data.

    I have an increased profound appreciation for the voices of reason here.

    I just don’t get it,
    Joe

  • Razvan

    Apple fan article :))) Blinf ofc ;)

  • Struga

    I am a bit confused here, so many people say “Android taking Apple” This is some what true, but the last time I checked, there are like 5 different companies making cell phones for Android and one iPhone. That is sad if you want to compare Apples to Apples. Also I hear Samsung is selling more phones then iPhone, but there is like 4 or 5 different type of cell phones Samsung sells, and one iPhone. Now please explain, because I can not see how Apple is losing here.

  • Ted_kazynski

    Nice and arrogant, just like Apple.

  • Jamo Light

    This is a very well-versed analysis on misconceptions and ironies about the mobile platform market. I THANK YOU.