iOS App Store vs. Google Play: Key Stats and Important Observations

I’ve come across a few stats regarding the iOS App store and the Google Play store that are more than just a little interesting. If you follow the industry closely then you are aware of the narrative that gets circulated that iOS garners heavier user engagement than Android. There are many data points to support this but the below picture outlines where things stand today.

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All of this is important to understand in context. What all data, like the above, showing engagement is tracking are identical tasks. Yet if you evaluate each platform you realize not all time spent on the device are identical tasks. The ones above are common, yet what we don’t know is how much time is spent on other apps and more importantly how much time is spent browsing or shopping in the app stores. This is why I’m more interested in data showing app stores sales and related behaviors than anything else.

I recently came across a new report from Distimo which tracked both Google Play and iOS App store revenues across many different regions. Below is their data of total revenue of each app store in each country tracked.

Screen Shot 2013-08-15 at 8.07.16 PM

So many interesting observations need to be made from this chart. The first is related to the United States.

What this chart shows, and many other data points I’ve acquired point out, is simply how important the US is from a revenue standpoint for developers and for each platform. One could argue that the US is the most important strategic battle ground in many different ways. The US has just over 313 million people of which 191 million currently own smartphones. In Smartphones, Android has a slight market share lead over the iPhone with approximately 95 million users on Android and approximately 88 million on iOS and the rest with either BlackBerry or Windows Phone. ((I say approximately because I know I’m close with those estimates but possibly not exact))

The second is related to Japan. Japan is clearly the second largest app marketplace in terms of total revenue. Japan has 127 million people of which 45% own smartphones. This brings Japan’s smartphone install base to approximately 57 million. iOS has 33% OS share in Japan with just over 18 million iPhone users. Android has 66% market share giving us 37 million users in Japan. The iPhone in Japan is the single best selling device followed by Sharp, then Sony, then Samsung. I highlight this data so you have context when looking at the App store sizes and revenues.

South Korea has an active Smartphone install base of 50 million of which 70% own smartphones. Out of the 35 million smartphone users 90% use Android or 31.5 million people. The bulk of the additional 4.5 million consumers in South Korea use iOS.

Now with those data points in mind, let’s consider the following:

Japan and South Korea are Google Play’s largest revenue generating regions with significantly less Android users in each region. In Korea, and this is fascinating, 35 million Android customers outspend 95 million US customers in the Google Play store. Please don’t forget Samsung is based in Korea as well as LG and both run Android. Now back to my first point. Not forgetting that the US is a critical battle ground for App stores, what about South Korea? Put yourself in Samsung’s shoes. How much leverage does this give them against Google? Google, from a Play revenue standpoint, can not afford to lose South Korea. Yet Samsung is toying with the idea of usurping Play store and developer revenue from Google. And the scary part is that Samsung can do this just for their home country and bring in a pretty penny. Although I believe they have much more grand ambitions that just conquering their home country, which should have just happened by default if you know anything about Korean culture.

the iOS app store shows strong resilience in all the markets in which it competes. With the battle that Both Google Play and iOS are in at a global level, notice what country is not in the chart. China. Google Play will likely never be in China, yet Apple is still planning their attack.

The data also points out that the Google Play market grew 67% in the past six month’s. Mostly thanks to Samsung mind you. During that same period the iOS app store grew 15% yet the Apple app store generate two times more revenue. Much of this thanks to iPad, and keep in mind without any real help from China..

So here again we see the narrative that although Android has a larger install base, from an app economy it has the weakest position. With that we factor in the interesting question Ben Evans raised the other day:

“If total Android engagement moves decisively above iOS, the fact that iOS will remain big will be beside the point – it will move from first to first-equal and then perhaps second place on the roadmap. And given the sales trajectories, that could start to happen in 2014. If you have 5-6x the users and a quarter of the engagement, you’re still a more attractive market.”

He is just making the point of engagement and not around app store spending. So let’s look at the graphic provided from Distimo on App store growth.

Screen Shot 2013-08-15 at 8.57.47 PM

Note that the Apple App store has remained relatively flat while The Play store is trending up. So the question then revolves around whether the trajectory of the Google Play store will catch up with the Apple App store. I maintain that it will not, since the iPhone and iPad are not standing still and the iPhone is still doing remarkably well in every region. Also if you look at Google Play’s biggest markets currently, Japan and South Korea, they both have smaller populations and South Korea already has remarkably high smartphone penetration. So one could argue that the room to grow in order catch up is simply not there given the timeline needed. And as I point out Google has no ‘Play’ in China (pun intended).

One market to watch with regards to Google Play is India. Per capita it is one of the largest growth sectors but this will also take time to manifest in Google’s favor from an economic standpoint. Android is doing well in India but those customers are not spending or investing much in ecosystems at the moment.

With the picture I just painted you can see what it makes sense strategically for Apple to begin to build out an current generation iPhone line of products in order to target different segments and different price points. It is all about getting customers in the door so they can invest in your ecosystems value chain.

Why Apple Should Not Create a Low-End iPhone

For a while now Wall Street backers of Apple have wanted them to create a low priced iPhone and use it to gain more marketshare. They seem to think that market share will drive up profits and expand their reach. A Tech.pinions colleague has done a great jobs dealing with the issue of marketshare vs profits so I won’t go into that here and suggest you read his series on this since it lays out a very good argument that profits are much more important than marketshare.

But if Wall Streeter’s really want to understand why this is a bad idea, all they have to do is look back at Apple’s history and see that Apple tried that once before and it nearly destroyed them. Not long after John Sculley was pushed out of Apple, Michael Spindler was brought in as CEO to try and make Apple more competitive. At the time the Mac had become a niche product, mostly used for desktop publishing, graphics, and engineering. On the other hand, the PC was outselling Macs at least 20 to 1 and pressure from Wall Street pushed Spindler to try and do things to help the Mac gain market share.

So what did he do? First, he made the Mac Look like a PC in design. Second, breaking major tradition, he licensed the OS to a special group with the idea that if there were more companies offering the Mac, it would sell more. And, Apple and the licensee lowered the prices and tried to compete with the PC head on. There was only one problem. The PC clones had access to tens of thousands more apps then was available for the Mac and IT and consumers took the safe route and stayed with PCs. Even the lower prices could not help Apple gain any ground in the PC market.

During this side trip to try and be all things to all people, Apple lost a lot of money and was in the red to the tune of almost a billion dollars when Spindler was forced out. They then brought in Gil Amelio who tried to stem the losses but by that time, it was too late to save Apple. That is when Jobs came back and took it back to its roots of selling the best product they could to their core customers. As he told me in a meeting with him the second day he had come back to Apple, he would lean on industrial design and innovation to try and grow the company again.

If you look at the low-end of the smartphone market, it is becoming a wasteland. First, as long as a smartphone has an OS, some memory and access to apps it is called a smartphone. However, low-end smartphones are now around $99 in China and well over 50% of the smartphones selling in China are white box phones that are sold off the street, in cell phone flea markets and through channels we as market researchers can’t even track. But nobody in that price range is making any money.

The same goes for other markets where these phones cost $99-$139. BOM costs alone make it very difficult for them to have any margins when they sell these products and at these price ranges, profits are slim or next to none. For Apple to try and do a low-end phone for the emerging market might help market share but at the cost of any serious profit. I trust they have learned the lessons from the last time they low balled products for the market and never go after this side of the business.

On the other hand, there is precedence from the past for mid-range priced smartphones. While the Mac for the graphics, DTO and engineering worlds became premium products in their line, Steve Jobs introduced the innovative, candy colored iMacs at prices well below their upper-end Macs. To this day Apple still sells a lot of premium priced Macs but the bulk of their sales comes from mid range priced iMacs and MacBook’s selling well under their premium lines. But what they have not done is chase the low-end of the PC market and with the is strategy they still have solid profits in their Mac Line.

There are rumors that Apple will soon introduce lower priced iPhones, but don’t expect them to priced to compete at the really low-end of the market or be aggressive with pricing in emerging markets. From History, Apple knows that they can still make some good profits with mid ranged priced products and if these rumors are true, Apple new iPhones would be following a proven formula that has continued to help them stay one of the most profitable companies in the world today.

Google, Motorola, and the Future of Android

To hear both Sundar Pinchai, head of Android and Chrome at Google, and Dennis Woodside, CEO of Motorola Mobility, tell it, Motorola is just another Android OEM despite being a wholly owned Google subsidiary. This may be technically true at the moment, but it cannot be true for the long run. And just what Google does with Motorola has huge implications for the future of Android.

Business realities alone say the current arrangement cannot last. Motorola is a hole of at least $10 billion (purchase price plus cumulative losses, less the gain from the sale of the set top box business) in Google’s balance sheet. Although there was speculation at the time of the acquisition that Google was really after Moto’s patents, the standards-essential patents ase subject to fair, reasonable, and non-discriminatory licensing worth much less than many believed. Sooner or later, Moto has to start paying its way.

Woodside himself suggested, perhaps without intending to, that the relationship has to change during an appearance at the D11 conference a couple of weeks ago. Competitors, he noted, are earning 50% margins on smartphones. ((Of course, the only profitable competitors are Apple and Samsung.)) “We don’t necessarily have the same constraints,” he said. “One of the areas that is open for Motorola is building high-quality low-cost devices. The price of a feature phone now is about $30 0n a worldwide basis. The price of a smartphone is about $650. That’s not going to persist.”

The difficulty is that Apple and Samsung, by virtue of their enormous volumes and tightly controlled supply chains, are already the low-cost producers. Motorola is not going to beat them on the cost side. So to underprice them, as Woodside is threatening to do, will require sacrificing gross margins, perhaps selling phones at a unit loss. For a business unit already losing money by the bucket, that would seem to be a suicidal course.

Unless, of course, someone is prepared to subsidize this raid on the business models of Apple and Samsung. And that someone would have to be Google, which certainly has the deep pockets needed for this fight. Taking on Apple, while difficult, doesn’t pose huge problems for Google. Over the past few years, the relationship of the companies has deteriorated from best buddies to frenemies to all-out competitors.

Samsung is a very different matter. The Korean giant is second only to Google itself in importance in the Android ecosystem. It is by far the largest seller of Android handsets, from the iPhone-challenging Galaxy S 4 to low-cost units for emerging markets. And it has to be watching the Google-Motorola relationship with an extremely wary eye.

For now, Google and Samsung are co-dependent. That fact is what lies behind Google’s much trumpeted arms-length relationship with Motorola. But the relationship will be severely tested if Motorola goes at the heart of Samsung’s Android business model. (Microsoft’s OEM partners were very unhappy when it went into hardware competition with the surface and surface Pro, but at least it did not try to undercut their pricing. And, for better or worse, poor Surface sales have largely spared it fallout from entering the competition.)

Samsung has options if it comes to view Google as a competitor in a way that makes the current Android arrangements untenable. It could fork Android, going forward with its own flavor of the operating system and its own services, home-grown or developed in partnership with other players,  in place of Google’s. It could accelerate the development of Tizen, the Linux-based mobile operating system it has sponsored along with Intel. Or, far less likely, it could  move to Windows Phone (unlikely, I believe, because while this might be the easiest course to execute, the fact that it is trading one gorilla dance partner for another will make it unattractive.)

The defection of Samsung from Android would put tremendous strain on Samsung, Google, and the Android world. Software has never been Samsung’s long suit. It can afford to buy a lot of talent, but changing a hardware company’s culture to support the software effort required is very difficult. Android would become largely a Google/Motorola business. The viability of all the profitless Android phone makers is dubious, let along their ability to provide leadership.

If all these hypothetical strategies succeed, we could see a very different phone market: Apple would continue to be Apple, mostly riding above the fray. Samsung  would be slugging it out with Googlerola. And Microsoft and BlackBerry would be trying to squeeze out some gains from the confusion.

 

The Power of The Internet In Your Pocket

Sent from my pocket computer. That is my signature for any email sent from my iPhone. When most people think of their smartphone they don’t necessarily think of it as a pocket computer. Yet that is exactly what this device is.

In 1949 Popular Mechanics famously stated: “Computers in the future may weigh no more than 1.5 tons.” What once fit in a rather large room, now fits in everyone’s pocket.

Have we yet wrestled with the implications of this reality? I don’t think so.


1 out of 7

Today, approximately 1 out of 7 people on the planet own a smartphone. That comes out to just over a billion smartphones in use in the world. You may think 1 out of 7 sounds like a lot but in the big picture we still have a long way to go.

Bringing a computational device in the form of a smartphone to every person on the planet is a potential reality and the promise of the future. But even more profound and perhaps even more important to future of humanity be these devices to the Internet. I would argue that the Internet is the most valuable feature of any smartphone. By bringing the Internet to every person, by way of a smartphone, will drive it to be the primary computational device for more people than any other piece of hardware. For the masses in the developing world a smartphone is not just a pocket comptuer, it may be their only computer.

Over the last decade, the Internet has already transformed the developed world in ways never imagined. It has transformed how we communicate, how we learn, how we play, how we work, and how we are entertained. All these and more will continue to undergo radical transformation. But most of the innovations we can point to are all coming from first world perspectives and solving first world problems. Often, innovation from a first world perspective is generally more about convenience. From a third world perpsective, innovation will play a key role in survival.

When the developing countries get their hands on the profound power of the Internet in their pocket, it will not transform how they work, play, and learn, it will revolutionize it.

Knowledge is Power

There is simply nothing like the Internet. The collection of knowledge and information on the world wide web is unparalleled. Of course the web contains its share of stupidity but it also contains quite a bit of valuable knowledge which is more readily accessible today than at any point in history.

It is fascinating to look at this by using the analogy of good old fashioned libraries. Once upon a time in history the library (a storage facility of valuable information) was reserved for kings, nobles, and high class citizens. Over time they shifted from private access to public access. The printing press drove this shift and mankind entered into an era where knowledge became accessible in ways it never had before. I believe when the masses have the Internet in their pockets, it will have as profound of an impact as the printing press–perhaps even more.


Think about all the free knowledge we can glean from the Internet. I myself have been amazed at the things I have learned and experiences I have engaged in that came from the web alone. Things I would most likely never have ventured to try or do without the Internet at my fingertips. For example, I learned how to roof an addition on my house all to contractor code. I learned how to milk a goat, play the drums, string a tennis racket, how to tie fly fishing flies, and a plethora of other things.

Today, pocket computers are already transforming key parts of the developing world. In some cases they are providing a new tool in the fight for survival. For others they are transforming how they do business or engage in local commerce and even banking.

Agriculture is another area the mobile web is revolutionizing rural parts of the world. It is fascinating how smartphones are being used in Africa to negotiate prices for certain crops, get seasonal growing advice, and learn how to better manage their crops and grow new ones.

The health industry is being transformed as people can get treated or diagnosed remotely where doctors are scarce via the web and a pocket computer. In some areas doctors are even remotely training and sharing information about how to fight disease and promote better health among villages.

Remember the Arab Spring? A civil uprising by freedom fighters was powered by the mobile web. What kind of activism will pocket computers empower as more and more people get the Internet in their pockets?

A first class education can be brought to any person. Or they can simply glean knowledge as I did on subject matters of interest which is freely accessible online.

On every continent the mobile web is positioned to revolutionize banking, health, activism, disaster management, education, communication, and even entertainment.

Future generations from every part of the globe will grow up drastically different then the generation before them. Some parts of the world have gone from poverty to at least middle class luxury in less than 10 years. Many of them have been in China. Parts of India and Africa are equally undergoing drastic changes and accelerated growth thanks to technology. Many of us will watch as before our very eyes some of the largest populations and societies will be transformed by pocket computers and the Internet which will power them.

The Internet revolution will cause more profound global change than the industrial revolution ever did. And the crazy thing is, we have barely started this quest to bring the Internet to everyone on the planet and give them the power of a PC in a device that fits in their pocket.