Android v. iOS Part 2: Profits

on August 28, 2012
Reading Time: 3 minutes

RECAP

Yesterday we looked at Android and iOS mobile operating system market share. Today we look at mobile operating system profit and profit share.

ANDROID HAS WON THE MARKET SHARE BATTLE BUT…

On the strength of market share alone, TechCrunch has (and many others have) declared Android the inevitable victor of the mobile operating system wars.

“The latest numbers are in: Android is on top, followed by iOS in a distant second. There is no denying Android’s dominance anymore. There is no way even the most rabid Apple fanboy can deny that iOS is in second place now. Android is winning.” – Android Is Winning

However, a funny thing happened on the way to the Android victory parade — they forgot to bring along the industry’s profits.

…IOS HAS WON THE PROFIT WAR

“However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill

— Apple made 77% of the entire mobile industry’s profits in the second quarter of 2012. (Source) The Android operating system may be outselling the iPhone 4 to 1, but Apple’s iOS operating system is out profiting not just Android but the entire mobile industry 3 to 1.

— iOS second quarter 2012 revenue was approximately $28 billion.

— iPhone revenue in it’s five years of existence is over $150 billion. (Source)

— iPhone, by itself, is worth more than all of Microsoft. (Source)

— Apple’s stock has soared in comparison with Google’s stock since the launch of the iPhone. (Source) In fact, Apple is now worth one Exxon more than Google. (Source)

— Not only has iOS made Apple the most valuable publicly traded company in the world, (Source) but if the iPhone were split off as its own company, it is probable that it would be, all by itself, the most profitable public company in the world. (Source)

SOME QUESTIONS

— If Android has won, then why does Apple have all of the profits?

— If Android has won, then what exactly have they won?

— Which is more important, market share or profit share?

— Isn’t profit literally the bottom line in business?

MYOPIC MARKET-SHARE MADNESS

Market share is a means, not an end. Profit is the end for which market share was meant. Without profit, market share is meaningless.

Honestly, what is up with our fixation on market share? This simply isn’t that hard. Ask any business person whether they’d rather have market share or profit share – whether they’d rather sell more product or make more money – and they would, without hesitation, take the latter every single time.

Every CEO knows this. Every business owner knows this. Every entrepreneur knows this. Every mom working out of her home knows this. Every guy working out of his garage knows this. Every teen working out of his mom’s basement knows this. Heck, even the kid down at the corner selling Kool-Aid off of a folding table knows this. Ask that kid if they would rather sell more Kool-Aid or make more money and, “duh”, they’d say “make more money.”

But hire that kid to work for Google or write for TechCrunch or provide analysis of the tech industry and boom! They lose their minds. They reverse themselves and declare market share all important and profit share a mere side show. It’s as if these pundits were metaphorically drinking the market share Kool-Aid.

IS THERE MORE TO THE STORY?

If this were any other industry, the analysis end here. In no other industry does anyone seriously contend that market share is more important than profit share. However, this isn’t any other industry. This is computing and this isn’t just the sales of goods and services. Android and iOS are platforms and this is a platform war.

Clearly iOS is winning – in the short run. But in a platform war, is market share more important than profit share? Does market share lead to platform dominance, which eventually leads to industry wide dominance, which eventually leads to profits? Tomorrow, we’ll take a look at those questions and more.

Coming Tomorrow: Android v. iOS Part 3: Network Effect

Android v. iOS Part 1: Market Share
Android v. iOS Part 3: Network Effect