Samsung Schadenfreude And The Fall Of The Church Of Market Share

Schadenfreude |ˈSHädənˌfroidə | noun | pleasure derived by someone from another person’s misfortune. ORIGIN German Schadenfreude, from Schaden ‘harm’ + Freude ‘joy.’

Samsung has reported a 60% fall in quarterly profits. Just three years ago, Samsung rose from seemingly nowhere to dominate the global smartphone market. Today, Samsung is being pressured from above and below as Apple steals away its premium customers and Xiomi and others steal away customers from the low-end.


Keep in mind that these numbers come from BEFORE the introduction of the iPhone 6 and 6 Plus. The blood-letting has just begun.

Cheer up, the worst is yet to come. ~ Philander Johnson

The Church Of Market Share

Truth be told, I take no pleasure in Samsung’s distress. It is the pundits who preached the gospel of the Church Of Market share who grind my gears.

I don’t suffer fools, and I like to see fools suffer.~ Florence King

They jeered Apple’s premium business model, all the while cheering Samsung on and on — encouraging them to grow market share faster and faster…


…until the train that was Samsung went right off the rails.

Why Can’t Apple Be More Like Samsung?

Remember when the analysts were saying that Apple should be more like Samsung? Seems like only yesterday. Oh wait! It WAS only yesterday.

Thinking of all the pundits that wanted Apple to be like Samsung (low-end iPhone etc.). They aren’t saying that this morning. ~ Sammy the Walrus IV 10/7/14

Remember blogger turned @WSJ then @nytimes columnist recommending Apple cut prices and give free products to gain market share? ~ Rags Srinivasan (@rags)

Ah, good times. Good times.

Here’s a couple of additional Samsung/Apple predictions/recommendations from the archives just to remind us all of how long this nonsense has been going on for.

(Apple) once stood the undisputed leader of the smartphone arena, but ceded its crown to Samsung in 2012. ~ Poornima Gupta, Reuters, 13 March 2013

How royally stupid does that statement look, now that Samsung is the one that is getting crowned…if you take my meaning.

After spending the better part of yesterday digging deeply into Samsung’s analyst day materials, it has become clear to me that Apple, over the long haul, stands very little chance against the Samsung behemoth. ~ Ashraf Eassa, Seeking Alpha , 7 November 2013

Hmm. It seems to me that your digging created a hole, and you fell right into it.

If you find yourself in a hole, the first thing to do is stop diggin’. ~ Cowboy wisdom

Why Isn’t Apple Suffering The Same Fate As Samsung?

All this bad news for Samsung begs the question: If all these bad things are happening to Samsung, why aren’t they happening to Apple too? I could be all snarky and simply say it is because Apple doesn’t follow easily disprovable economic principles and business practices — and that would be true — but it would make this article way too short.

So, just for funsies, let’s do something that the High Priests of the Church of Marketshare never seem to do. Let’s stop and think.

Never be afraid to sit awhile and think. ~ Lorraine Hansberry

It is neither an accident, nor a surprise, that Samsung is struggling while Apple continues to thrive. Many astute observers predicted it long ago.

Logical consequences are the scarecrows of fools and the beacons of wise men. ~ Thomas Henry Huxley

Why then was this a shock to so many? And what lessons can we learn both from Samsung’s fall and Apple’s continued ascent?

Samsung, grab your sh*tty stylus and prepare to take f*ck*ng notes. ~ not Jony F*ck*ng Ive

Commoditization, Average Sales Price, And Margins


(T)he Apple brand has faltered … And it’s all because Samsung ignored the industry lock-in to constantly focusing on product, and instead changed the game on Apple. ~ Adam Hartung, Forbes, 4 April 2013

…it’s clear that Samsung will brute-force its way into taking more and more marketshare from Apple at the high end while at the same time will enjoy key structural advantages in the low end that Apple would – at least in its present form – not be able to match. ~ Ashraf Eassa, Seeking Alpha , 7 November 2013

This is the “Samsung-is-so-big-they-don’t-have-to-play-by-the-rules” theory of business. Samsung didn’t change the game. Pundits only thought they did because they didn’t understand the rules of the game.

Pundits have predicted, correctly, that hardware would inevitably become commoditized. This, they proclaimed with confidence, would cause Apple’s prices to fall while Samsung, with its good-enough and better-than-good-enough hardware and its lower prices, would usurp Apple’s market share, relegating Apple to niche status. Ironically, commoditization DOES apply to Samsung — the favorite of the Priests of Market Share — but it DOES NOT apply to their favorite whipping boy, Apple. Why? Differentiation.

From Ben Thompson:

Almost all industries have two tenable positions: the differentiated high-end, and the low-cost low-end. The iPhone faces little threat in the differentiated high-end of the market. Suggesting this market is limited in size is fair; counting the days until customers flee for cheap phones is silly. ~ Ben Thompson

What differentiates Samsung?

  1. Hardware? Please. Xiaomi and others are taking a page out of the Samsung playbook by copying Samsung’s designs and making hardware that is more than good enough.
  2. Software? Please. They’re all running the same Android operating system.
  3. TouchWiz? Please. Stop before I die laughing!

Samsung actually DID have some differentiators like scale, time to market, marketing prowess and budget. But none of those is unique to Samsung, and none of them provided Samsung with sustainable differentiation. To put this in military terms, the Samsung army was able to take ground, but they were unable to hold it.


There is no doubt, in my mind, that the whole (smartphone) sector is hugely overstretched. The whole sector is priced as if the average player would sustain 25 per cent margin in eternity. It’s bordering on absurdity. This will end in tears. ~ Per Lindberg, MF Global Ltd, Feb 2009

Well, Samsung and the rest of the mobile hardware manufactures may be overstretched and left in tears, but Apple is doing just fine, thank you very much.


And here’s something else to chew upon. The iPhone 6 Plus is 100 dollars MORE than Apple’s previously highest priced phone model. While the rest of the industry is in a race to the bottom of the pricing barrel, Apple is preparing to INCREASE the average selling price of their phones.

ASP will rise significantly this quarter. ~ Horace Dediu (@asymco) 9/9/14


Here are Apple’s actual margins:


And here is how badly Apple’s critics mis-predicted Apple’s margins:

Apple is focused on defending the high end of the market, and that is becoming harder to do each year. Competitors, such as the Galaxy from Samsung, are starting to catch up. I think it is inevitable that the margin pressure increases.”
Mark Newman, Director of Mobile Research, Informa Telecoms and Media, 26 Feb 2012

And even if the industry just continues as it has for the past few years, with companies like Samsung continuing to build phones that are as good as or better than the iPhone, it’s hard to see how Apple’s profit margin will continue to expand the way it has over the last several years. ~ Henry Blodget, Business Insider, 7 Sep 2012

Overall, the iPhone 5 is a good phone and will probably sell well, but in the long run Apple will have a hard time maintaining its extremely high margins because the iPhone is clearly no longer cut above the rest. Since Steve Jobs is gone, Apple should be honest with itself and begin to dramatically increase its R&D budget to stay in the game. Otherwise, the competition will leave it in the dust.”
Alvin Gonzales, Motley Fool, 17 Sep 2012

Market Share

Apple’s critics obsess over the relatively high price of Apple’s products and insist that Apple must lower their price in order to gain market share.

Bleier believes Apple will have to dramatically lower iPhone prices or risk losing market share to Android-based phones. ~ Scott Bleier,, 24 Oct 2008

I think they should invest more of it in the margin, in the business. Get lower-priced products out there. Stop going after just the premium piece. Get into the real growth engine of the smartphone market, which right now is Android, it’s low-priced phones in China and India, same thing on the tablets. ~ Henry Blodget, CNBC, 3 January 2013

If Apple products remain expensive the company’s penetration rates will hit a brick wall sooner or later. ~ Ishfaque Faruk, Motley Fool , 26 October 2013

I have been left disappointed by Apple’s decision not to release iPhone Lite as I thought this was the most important product for Apple to stop its marketshare decline. ~ Sneha Shah, Seeking Alpha, 25 October 2013

Apple’s already lost. Samsung has taken over the global market share in terms of smartphones and tablets ~ Porter Bibb, venture capitalist, 14 March 2013

These pundits couldn’t have gotten it more wrong.

First, Apple DID NOT lower their prices and their market share has gone UP in important markets such as the United States And Japan.


It’s looking possible Apple will sell more iPhones than Samsung sells Androids this quarter. ~ Benedict Evans (@BenedictEvans)

Second, Samsung followed the pundits advice, lowered their prices…and lost market share anyway.


It appears that Samsung has been cutting prices in order to maintain market share but has lost market share anyway ~ via Charles Arthur, The Guardian


The fetish with Market Share is bizarre. Market share times margins equals profits. Market share and margins are the means. Profit is the end. Market share doesn’t mean a thing if it doesn’t lead to more profits and a better platform.

For example, Sony recently announced that it has been improving its smartphone market share in Western Europe and Japan…and is projecting a £1.3 billion loss.

For what hath a man profited, if he shall gain a whole bunch of market share, and loseth his own shirt? ~ John 09:12

Bill Shamblin explains:

More than a 1-to-1 ratio of profit share to market share demonstrates a company’s ability to differentiate its products, provide more value than its competitors, command higher prices, charge a premium and enjoy pricing power.

Less than a 1-to-1 ratio of profit share to market share demonstrates that a company is buying market share; that the company has not been able to differentiate its product in the market and is likely competing primarily on price.

Pricing to gain market share simply for the sake of market share is a chump’s game. ~ Bill Shamblin

Market share is not the sine qua non of business — profit is. In football terms, market share is the yardage, profits are the points. In baseball terms, market share is the number of hits, profits are the number of runs. In hockey terms, market share is the number of shots on net, profits are the number of goals. Market share, like yardage, hits, and shots, are a necessary means but profits, like points, runs, and goals, are the end. Pretending otherwise for even one second borders on the inane. Continuing to stubbornly believe such rubbish borders on the insane.

To arrive at a contradiction is to confess an error in one’s thinking; to maintain a contradiction is to abdicate one’s mind and to evict oneself from the realm of reality. ~ Ayn Rand



If I had to name just one thing that the pundits got wrong about about Samsung and Apple, it would be their myopic focus on hardware (sometimes called “innovation”) comparisons.

Samsung’s hardware was better, they said. Samsung was out innovating Apple, they said. Samsung was on the rise and Apple was all-but-dead, they said.

(T)he Galaxy S II is remarkably easy to summarize. It’s the best Android smartphone yet, but more importantly, it might well be the best smartphone, period. ~ Vlad Savov, Engadget, 28 April 2011

(I)ncreasingly gadget fiends are tossing away their iPhone 4S to drool over the new Samsung Galaxy S3. ~ Patrick Barkham, The Guardian, 9 August 2012

Samsung has not only surpassed Apple in sales, it’s out-innovating Apple. ~ Edward Zabitsky, ACI Research, 21 Dec 2012

(C)ompetitors have caught up with the iPhone. Some reviewers think Samsung’s new phone is superior to Apple’s latest phone. ~ Henry Blodget, Business Insider, 4 January 2013

We are afraid that Apple has lost its ground in the smartphone arms race against Samsung Electronics. ~ Daniel Kim, Macquarie Equities Research, 15 January 2013

What [Samsung] are doing is they’re innovating faster. just the pace that they’re coming out with [products] is so much faster ~ Gene Munster, Piper Jaffray, 12 March 2013

The competition is increasing its lead over Apple. Samsung’s S5 seems to have enjoyed a strong launch, outstripping the iPhone 5S launch for which Apple bulls were prepared to declare a national holiday. ~ Michael Blair, Seeking Alpha, 4 May 2014

Samsung DOES make superb hardware. But how has all that supposed hardware superiority worked out for them?


By focusing on hardware alone, the pundits totally ignored software and — even more — they totally ignored hardware/software integration. Judging a smartphone by hardware alone is like judging a sailboat by the boat alone. The size, shape and design of the boat is important, but the sails make the boat go. Similarly, the size, shape and design of the phone is important, but it is the software that puts the “smart” in smartphone.

As Ben Thomson put it:

Software Matters – For years analysts treated all computers the same, regardless of operating system, and too many do the same thing for phones. … (Y)ou cannot do any serious sort of analysis about Apple specifically without appreciating how they use software to differentiate their hardware. … (M)any people buy iPhones (and Macs) because of the operating system that they run. … Not grokking this fact is at the root of almost all of the Apple-is-doomed narrative. … (And) for the high end buyer app quality matters as well, and here iOS remains far ahead of Android. ~ Ben Thompson

Here is a video (via Abdel Ibrahim (@abdophoto) of The Tech Block) of Steve Jobs explaining that the iPod is just software in a beautiful box.

AUTHOR’S NOTE: When I see a video link, I generally skip it. But I highly encourage you to follow the link and watch at least the first 90 seconds of the video. I think you’ll find it worth your while.

Some professional reviewers may have voted for the Samsung hardware while declaring Samsung more innovative, but the only reviewers that count — the buyers — voted with their dollars, and when it came to premium phones, they voted 3-to-1 in favor of the iPhone.



The real game changers in the S4 are Samsung’s pace of innovation and the platform it is creating to challenge Apple in this crucial area of innovation – platform economics. ~ Haydn Shaughnessy, Forbes, 18 March 2013

Samsung is innovating on ‘platform economics’? Wow. How wrong could one be? Samsung is currently suffering precisely because it has no platform to help differentiate its products. Samsung’s lack of platform makes it the polar opposite of Apple. Which reminds me of an awful, awful joke:

Samsung’s profits.

No, that THAT awful joke. This awful joke:

Question: Why couldn’t the polar bear get along with the penguin?

Answer: They were polar opposites.


There is an illusion that the current lopsided shipment market share is irrelevant. This idea is completely false. Losing market share is almost always never a good sign. Android is roasting Apple and if things keep going the way they are, Apple will be toast. ~ Alvin Gonzales, Motley Fool, 21 Dec 2012

That was written in 2012 and it got it exactly wrong. Android currently runs on two times as many devices as iOS. TWO TIMES. But it is Samsung, not Apple that is getting roasted.

Sooner or later that [market share discrepancy] ought to make a difference. ~ John Gaffney ‏(@jfpgaffney)

And there it is. Your faith based argument:

“Sure, Apple’s App store is doing okay now — BUT JUST YOU WAIT! Once Android has more market share than iOS, the tide will turn.

Okay, okay, Android has more market share than iOS and the developers haven’t flocked to the Google Play store…yet. BUT JUST YOU WAIT. Once Android has a super-majority, iOS is doomed.

Okay, okay, Android now has twice as many handsets in the wild as does iOS and the Apple App store just keeps growing stronger every day. BUT JUST YOU WAIT! Sooner or later the weight of Android’s market share ought to make a difference.


The bedrock theory upon which the Church of Marketshare is founded, is that the platform with the most market share wins. And that theory is demonstrably wrong.

The great tragedy…the slaying of a beautiful hypothesis by an ugly fact. ~ T.H. Huxley


Absolute numbers matter more than share (percentages).

As of June (2014 there were 886,580,000 iOS devices sold. 1 Billion sold will happen well before this year is out. Horace Dediu (@asymco)

One billion units is hardly niche.

Absolute numbers matter more than percentages – While it’s natural to talk about market size as a percentage, the absolute size is just as important. In the case of Apple, for example, the fact they “only” had 15.5% percent of the market in 2013 is less important for understanding the iPhone’s viability than is the fact they sold 153.4 million iPhones. That is more than enough to support the iOS ecosystem, percentages be damned. ~ Ben Thompson


The collective development opportunities made possible by the fact that Android is Open Source will see to that. (What will) matter to the mobile application developer (is that) there are eight or ten Android handsets shipped for every iPhone. Addressable market will again trump elegance. ~ Brian Prentice, Gartner, 21 September 2009

That’s flat out wrong. Always has been. Always will be.

Developers don’t care about people who spend time on the platform. They care about people who spend on the platform. Platforms aren’t a democracy. It’s not one vote per person. It’s one vote per dollar, and each person is free to vote as often as they can afford to do so.


Perhaps you’re thinking of Metcalf’s law. Metcalf’s law says that the more people you have on a network, the more valuable that network becomes.

Android and iOS are platforms. Nowadays, the internet is the network. Don’t conflate the two. iOS can remain closed and still communicate with the rest of the world via the internet.

There’s something problematic in the idea that platforms with 1.5 billion users and 100 billion+ 3rd party apps installed are ‘closed’. ~ Benedict Evans (@BenedictEvans) April, 2014


There is a striking difference between the two companies though, Apple produces their own hardware and software, they collect all the money whereas Google licenses out the software and occasionally gets in on the manufacturing of a device. iOS is a closed system, Android is open-source and if history proves to be right time and time again then I’m sure that Android will end up winning the battle. ~ Ash Anderson, Motley Fool, 21 Dec 2012

Once Steve Jobs goes away, which is probably not far away, then Apple will have to make a strategic decision on whether to open up the platform. Ultimately a closed system just can’t go that far … If they continue to close it and let Android continue to creep up then it’s pretty difficult as I see it. ~ Patrick Lo, CEO, Netgear, 31 January 2011

That’s the theory of “Open”. These are the facts.

The Apple App Store has now paid out over 20 billion dollars to developers, half of that in the last 12 months.


The Apple App Store has paid out 10 billion dollars to developers in the past year. During that same time, Google has paid out 5 billion.


In other words, Apple has half the users that Android has but pays out twice as much to developers. That means that an Apple user is worth four times more than an Android user to developers or, conversely, that it takes four Android users to equal one Apple user.

A sobering thought: in order for Google to match Apple’s iOS revenue with Android, they would need 3.6 billion Android users. ~ Ari Najarian (@stickbyatlas) 6/27/14

Arguing that the Android market share is going to sink the iOS platform is like arguing that the Titanic is going to sink the iceberg.


The difference in payout between iOS and Android is telling in a whole different way too. We used to think that Android engagement averages were much lower because there were so many more Android users. It was assumed that high-end Android users were worth as much to Android as high-end iOS users were worth to Apple. The numbers tell us that this is not so.

There are roughly the same number of high-end Android and iOS users. Yet the total payout over the past 12 months was 5 billion for Android and 10 billion for iOS. This means that Android engagement numbers are not lower because of all the low-end users. It means, instead, that high-end Android users act very differently than high-end iOS users.

Either the Apple App Store motivates the high-end user to spend more or the high-end user chooses the Android platform because they want to spend less. Neither bodes well for Android developers.


The Prophets of the Church Of Market Share have had it wrong all along. Market share does not draw developers to a platform. Dollars draw developers to a platform.

And the strength of a platform is not dependant upon the number of users. It is dependant upon the amount those users spend.



Android now commands 80% of the smartphone O/S market and over 50% of the tablet O/S market. Apple, which pioneered the touch screen smartphones and tablets, finds itself increasingly becoming a niche premium player. ~ Sneha Shah, Seeking Alpha, 16 January 2014

Shah treats the role of the premium provider as though it were that of a vulgar street walker.

As the mobile phone market increasingly offers more quality phones at a range of price points, Apple now faces a difficult choice. Does it try to remain a premium product-premium price company, or does it dive into the commoditized lower priced arena? Neither choice is very appealing. ~ Bob Chandler, Motley Fool, 2 May 2013

Why does Chandler think that choosing between being a premium provider and a low-cost provider is difficult? If you can make the choice, premium is the obvious choice to make.

In the fourth quarter of 2013, Apple sold 64% of all the premium smartphones in the U.S. That number will grow in the the fourth quarter of 2014. Yet pundits seem to treat the premium sector as a ghetto that must be avoided at all costs.

Presuming all decisions are based on price is the easiest way to mispredict the future. ~ Ben Thompson (@monkbent)

The pundits seem wholly incapable of understanding two simple facts. First, Apple WANTS to be the premium provider. They are targeting that market. Second, Apple will not pursue additional market share if it endangers their position as the sector’s premium provider.

This is such heresy to the priests of the Church of Market Share that they simply cannot grok it.

The hardest thing to explain is the glaringly evident which everybody had decided not to see. ~ Ayn Rand

Yet it is the norm everywhere in every market! There isn’t a good or service that doesn’t have a premium and a low-end sector and, as a general rule, the premium sector is the place to be.


Samsung makes some truly lovely high-end phones, but by selling a million, bazillion, gazillion mid-tier and low-end phones too, their brand has become diluted.

If I’ve told you once, I’ve told you a thousand times: Resist hyperbole. ~ William Safire

No one mentions of “Samsung” and “premium” in the same breath.


High end buys iPhones. Low end cares only about price. No middle. There.~ Ben Thompson (@monkbent)

Samsung sells high, mid, and low-end phones — which is exactly what the pundits have been urging Apple to do — and Samsung is paying dearly for it. Samsung is losing the high-end to Apple. They are losing the low-end to Xiaomi and others. They’re trapped in the wholly undifferentiated and wholly indefensible middle.

Two Ways To Grow

There were two ways for Apple to broaden its ecosystem – take a chunk of the mid-range or take another chunk of the high-end. ~ Benedict Evans (@BenedictEvans) 9/11/14

Clearly, Apple has chosen the latter. Unlike Samsung, Apple doesn’t WANT to corner the phone market. They want to corner the PREMIUM phone market.

If you want to catch trout, don’t fish in a herring barrel. ~ Ann Landers

And they’re doing it, too. The new iPhone is a direct assault on that part of the premium market still being controlled by Samsung.

(W)ith the iPhone 6 and iOS 8, Apple has done its best to close off all the reasons to buy high-end Android beyond simple personal preference. You can get a bigger screen, you can change the keyboard, you can put widgets on the notification panel (if you insist) and so on. Pretty much all the external reasons to choose Android are addressed – what remains is personal taste. ~ Benedict Evans

Apple Is Doomed Anyway

“Apple is screwed” – 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014. ~ Sammy the Walrus IV (@SammyWalrusIV)

None of what I’ve said will deter the High Priests of The Church Of Market Share from continuing to predict Apple’s doom. If the facts disprove their theory in the here-and-now, they simply fall back upon irrefutable prophesies that will only occur in the here-in-after.

Faith is an oasis in the heart which will never be reached by the caravan of thinking. ~ Kahlil Gibran

Apple’s lack of market share will be their doom, they say. It is going to happen, they say. All we have to do is patiently wait for the day that is sure to come, they say.

CAPTION: Waiting and waiting and waiting and waiting and…

And what the hey, while we’re waiting, we can always have some fun by twisting every story into anti-Apple FUD:

“Is Samsung Sales Disaster Bad for Apple?” ~ an actual headline

Well, of course Samsung’s problems are bad news for Apple. All news is bad news for Apple…in accordance with the prophecy!

My only hope is that the pundits who told Apple to be more like Samsung, shorted Apple and invested heavily in Samsung. That would be some schadenfreude that I could really get behind.

The best way to convince a fool that he is wrong is to let him have his own way. ~ Josh Billings

Market Share Metaphysics

Twice before I have used Aristotle’s concept of “Essentialism” to explain why tablets are “real” computers and why OS X will not be merging with iOS. Today, I go to the well one last time ((…unless I need to go there again in my desire to quench my thirst for knowledge (or drown my stubborn opponents therein).)) in an attempt to definitively and finally put an end to the messianic myth that market share equals platform. Hopefully, we shall never speak of this again. ((Fat chance.))


What attributes make things what they are? Or, what attributes make things not what they aren’t? (Confused yet?)

Aristotle drew a distinction between “essential” and “nonessential” properties. ((Actually, Aristotle called “nonessential” properties “accidental” properties. That’s totally confusing so I “accidentally” changed Aristotle’s wording from “accidental” to “nonessential”. It’s my article, I can do what I want.))

Essential properties are those without which a thing wouldn’t be what it is. Nonessential properties are those that determine how a thing is, but not what it is. For example, Aristotle thought rationality was essential to being a human being and, since Socrates was a human being, Socrates’s rationality was essential to his being Socrates. Without the property of rationality, Socrates simply wouldn’t be Socrates. He wouldn’t even be a human being, so how could he be Socrates?

On the other hand, Aristotle thought Socrates’s property of being snubnosed was merely nonessential; snub-nosed was part of how Socrates was, but it wasn’t essential to what or who he was. To put it another way, take away Socrates’s rationality, and he’s no longer Socrates, but give him plastic surgery, and he’s Socrates with a nose job.

The Elephant In The Room

Baby elephantOne could describe an elephant as being big, gray and wrinkled. But are those essential or nonessential attributes?

  1. Are there elephants who aren’t big? Sure. Baby elephants are small. So were prehistoric dwarf elephants.
  2. Are there elephants who aren’t gray? Sure. There are brownish elephants. There may even be albino elephants.
  3. Are there elephants who aren’t wrinkled? Sure. Maybe. Or maybe not. Who knows.

In other words, bigness, grayness, and wrinkledness all fail Aristotle’s test of defining what an elephant essentially is. Instead, they describe how elephants are, generally and nonessentially.

The Church of Market Share

The Church of Market Share says majority market share is essential for a computing platform to thrive. But is this even close to being true?

  1. Are there successful platforms that aren’t big? Sure.
  2. Are there successful platforms that don’t have majority market share? Sure.
  3. Are there successful platforms that aren’t wrinkled? Uh, maybe. Or maybe not.

In other words, massive market share fails Aristotle’s test of defining what a successful platform is. Arguing market share size makes a platform successful is like arguing being “big” makes an animal an elephant. That’s simply a “whale” of a lie.

What Is Essential

Greek astronomerWhat is “essential” to a computing platform is an operating system which forms the foundation upon which third party developers can develop; developers who create desirable products; and consumers who desire and acquire those products. Bigness may be nice, but it ain’t “essential.”

In other words, bigness, grayness, and wrinkledness all fail Aristotle’s test of defining what an elephant essentially is. Instead they describe how elephants are, generally and non-essentially.

Likewise, bigness, majority market share and wrinkledness all fail Aristotle’s test of defining what a successful platform is. Instead, they describe how platforms are, generally and non-essentially.

This is true only up to a point. Something as small, white, and round as an aspirin cannot be an elephant, and confronted with such an object, we would not be tempted to ask, “Is that an aspirin you’re taking or an atypical elephant?”

Market share as small as Microsoft’s Windows 8 and Blackberry’s cannot be dominant platforms. Confronted with such a platform, we would not be tempted to ask, “Is that an insubstantial, unfounded stereotype you’re swallowing whole and without critical analysis…or an atypical platform?”

The point is that bigness, grayness, and wrinkledness are not precise enough terms to be the essential qualities of an elephant. Likewise, bigness, majority market share and wrinkledness are not precise enough terms to be the essential qualities of a platform.

It’s a certain size range and a certain color range that, among other qualities, determine whether or not something is an elephant. It’s a certain size range and a certain market share that, among other qualities, determine whether or not something is a successful computing platform.

Wrinkledness, on the other hand, may be a red herring, or perhaps a “whistling herring”.

The Wrong Question Will Get You The Wrong Answer

    Abe: I got a riddle for you, Sol. What’s green, hangs on the wall, and whistles?
    Sol: I give up.
    Abe: A herring.
    Sol: But a herring isn’t green.
    Abe: So you can paint it green.
    Sol: But a herring doesn’t hang on the wall.
    Abe: Put a nail through it, it hangs on the wall.
    Sol: But a herring doesn’t whistle!
    Abe: So? It doesn’t whistle.

Microsoft’s Windows platform was big, a monopoly and it whistled (or it didn’t whistle). But that doesn’t mean that it was or is the one and only way to create a successful platform. And anyone who says it is, is telling you a fish story.


Feel free to steal this argument and use it since I essentially (not accidentally) stole it, er, borrowed it from Thomas Cathcart: “Plato and a Platypus Walk Into a Bar.”

Of course, a link to this article would be nice…

…just not “essential”.

Market Share Is Like A Bikini…

Market Share is like a bikini. What it reveals is suggestive, but what it conceals is vital. ((Inspired by a quote from Aaron Levaenstein))

Market Share by itself means nothing. If it’s not taking you where you want to go, it’s worse than nothing – it’s destructive.

Trading profits for market share is like selling your car for gas money.

The Missionaries of Market Share are the pro wrestlers of analysis. ((Inspired by Rick Overton)) In fact, calling them analysts is like calling bald a hair color.

Facts do not cease to exist because they are ignored. ~ Aldous Huxley

You can always pick out the Ministers of Market Share by the glazed look that comes into their eyes whenever facts begin to wander into the conversation. ((Inspired by Michael Wilding)) The Church of Market Share — like any revealed religion — eschews facts and is largely made up of prophesies. ((Inspired by H. L. Mencken))

Market Share Maniacs staunchly maintain you can’t have a viable platform without market share. When you point out iOS — the minority player in smartphone market share — runs on 95% of enterprise apps and Apple’s iPhone is the most coveted smartphone brand in the developing world, they smugly fall back on scripture:

“Microsoft won with market share. Thus it was, thus it shall be again.”

Great. Just great.

If you gave a Market Share Historian a penny for their thoughts, you’d get change.

Arguing what Microsoft did in the Nineties has to happen again — that the market today is in any way similar to the market in 1995 — is just flat out wrong. There is simply no evidence to support it.

It is better to know some of the questions than all of the answers. ~ James Thurber

Instead of looking solely at market share, we should be looking at what each company is trying to accomplish.

— Apple wants to make profits and build a premium platform. Are they doing that? Yes they are.

— Google wants to sell eyeballs to advertisers. Are they doing that? On the desktop, yes. On mobile, not so much.

— Microsoft wants to sell licenses and build a platform. Are they doing that? No they’re not.

Apple doesn’t need a lot of market share, they need a lot of the premium share of the market. Google doesn’t just need market share, they need the kind of market share willing to open their wallets and buy their advertisers’ products. Microsoft DOES need market share both because they’re a distant third in the race to create a smartphone platform and because their licensing model — unlike Apple’s vertical model — thrives on volume.

Yes, market share matters, but it matters differently to different companies because they’re using a different means to accomplish a different end. Saying market share matters is like saying water matters. Of course it does – but it matters a lot more to a farmer than to a city dweller and it matters even more to a fisherman. Market share without context is like most anything without context — meaningless.


Skeptical scrutiny is the means, in both science and religion, by which deep thoughts can be winnowed from deep nonsense. ~ Carl Sagan

Of course, there’s not much use arguing with the true Market Share Believers. As Mark Twain put it: “You can’t reason someone out of something they weren’t reasoned into.”

Not to know is bad not to wish to know is worse. ~ African Proverb

Faith based arguments are not subject to reason. Nevertheless — as Agatha Christie put it: “Good advice is always certain to be ignored, but that’s no reason not to give it.” So here’s my wholly unsolicited advice for those who insist on making fact-free arguments:

If you don’t think too good, don’t think too much. ~ Ted Williams

It’s Tough Competing With the iPhone

Understanding what is happening in smartphones is all a matter of perspective. It is easy to get caught up in the OS market share statistics and lose sight of the big picture.

comScore has recently updated their MobiLens and Mobile Metrix, data for US smartphone subscribers in August 2013. Many in the media picked up the point that iOS gained on Android during the month. While this is true, it has actually been going on for almost a year now. In November, 2012, Android peaked in the US at just over 53% share. Since then it has slowly declined. During that same time iOS has been slowly growing.

Screen Shot 2013-10-08 at 12.18.03 PM

That is, of course, all very interesting and important to know as we try to get a picture of what is happening with smartphones in the US. When we look at browser share between iOS and Android in the US we see a very different picture.

Screen Shot 2013-10-08 at 12.21.10 PM

–US Mobile browser share by type from NetMarketShare

In this picture, the iPhone leads all other platforms in web usage. Android is steadily gaining and that is an important takeaway. But as much as we like to generally compare iOS to Android, the uninformed mistakingly compare apples to oranges in doing so. The iPhone, at this point of time, is not competing against the entirety of the Android offerings in the US. The iPhone does not compete with the low-end, extremely low-cost, Android devices offered free by carriers or on pre-pay plans from retailers, which is why comparing the iPhone to the entirety of Android is a mistake. Rather, to get a holistic picture of what is happening, we must compare the iPhone to similarly priced products. More specifically we must compare the iPhone’s market share to that of other vendors’ products at the same price points. When we do that, we get a clearer picture.

Below is the iPhone’s share against other devices costing greater than $400 wholesale (or offered at $99-$199 subsidized). This chart is based on sell through estimates that I am extremely confident about.

Screen Shot 2013-10-08 at 12.29.16 PM

As you can see, the iPhone dominates the premium segment of the market. These estimates are prior to the launch of the iPhone 5c and iPhone 5s. For that reason, I specifically included devices as low as $400, even though the wholesale cost of the iPhone 5c is an estimated $549. I added that price point because I’m convinced that the iPhone 5c will continue to take share from devices — even those devices in the $400 wholesale range — which are generally priced at free by the carriers. I’m also convinced that this will happen in regions beyond the US, as well.

If I were to include only devices which cost more than $500 wholesale or priced at $99 to $199 on contract, the iPhone’s share would jump to well over 70%. As you can see, the iPhone outsells Samsung’s devices at nearly a 3-1 ratio and other devices at a ratio of 5-1 or higher.

Based on all the data I am seeing from demand and sales trends, it is hard not to conclude that iOS will overtake Android in the US in the near future – possibly as soon as the end of the calendar year. But perhaps the most important thing about the iPhone’s share in the premium devices sector is that other competitors have only been able to made weak inroads against it. Samsung, for example, has been spending hundreds of millions of dollars in US-based marketing, yet their share of the premium market has peaked and been trending downward on weaker-than-expected sales in 2013.

All of this is specific to the US. The US market is key for many reasons, not least of which because its one of the most profitable. I am, however, keeping a keen eye on Europe and Asia as well.

The key question in my mind for the US, or other regions for that matter, is whether anyone can legitimately compete with Apple in premium. I think we will observe that Apple can legitimately compete with others in the middle of the market. But whether anyone can challenge Apple’s dominance in the high end is yet to be seen.

Who’s The Gorilla And 8 More Questions About the iPhone 5C

Question #1: Is The iPhone 5C coming?

Sure looks that way. The rumors have grown so loud that they’ve become deafening. Let me put it this way: If the iPhone 5C is NOT announced on September 10th at the upcoming Apple event, it will be the non-announcment heard ’round the tech world.

There’s nothing in this world more instinctively abhorrent to me than finding myself in agreement with my fellow-humans. ~ Malcolm Muggeridge

Question #2: Why The Change In Apple’s Strategy And Why Now?

It’s hard to say who gets criticized the most, the successful person, or the failure but it’s mighty close. ~ Joe Moore

Apple definitely considered doing a mid-range phone years and years ago. They opted, instead, to continue manufacturing their one-year and two-year old phones and sell them at lower price points. That strategy has been successful, but it also may have run its course. For a good read on this topic, I commend you to Rene Ritchie’s article entitled: “Why iPhone 4C didn’t make sense but iPhone 5C just might.”

The hardest thing to learn in life is which bridge to cross and which to burn. ~ David Russell

Question #3: How Will Apple’s Corporate Philosophy Shape Their Decisions On The iPhone 5C?

Do what you feel in your heart to be right – for you’ll be criticized anyway. ~ Eleanor Roosevelt

When thinking about the iPhone 5C, we need to keep in mind that Apple is unique. First, Apple has always been about making the best, not the most. ((Tim Cook: “For us, winning has never been about making the most. Arguably we make the best PC, we don’t make the most. We make the best music player, we wound up making the most. We make the best tablet, we make the most. We make the best phone, we don’t make the most phones.”)) Second, Apple is not afraid of cannibalizing their own products. Third, Apple believes in simplicity — less, but better. Fourth, Apple’s strength is in its ecosystem. Any tactical decision that diminishes the cohesion of Apple’s ecosystem would be strategically counter-productive.

The man who follows a crowd will never be followed by a crowd. ~ R. S. Donnell

Question #4: Is Apple Introducing the iPhone 5C In Order To Standardize Their Technology?


Logic merely enables one to be wrong with authority. ~ Doctor Who

This is definitely one of the most compelling reasons for the move to the iPhone 5C. It will allow Apple to simultaneously retire the iPhone 4 and 4S and move its new customer base to the newer iPhone screen size and to the newer iPhone Lightning power cords. This is not the only reason for the move to the iPhone 5C, and it may not be the primary reason for the move, but it is entirely consistent with Apple’s doctrine of simplifying their product lines and consolidating their ecosystem.

Question #5: Is Apple Doomed If It Doesn’t Add More Market Share?

Get a grip.

Apple’s market share is bigger than BMW’s or Mercedes’ or Porsche’s in the automotive market. What’s wrong with being BMW or Mercedes? [2004] ~ Steve Jobs

The iPhone is America’s most profitable product.
— Apple Computers, iPads and iPhones were just named the top three brands of 2013.
— Apple easily out-profits both Microsoft and Google.

Rule Number 1: Never lose money. Rule Number 2: Never forget rule Number 1. ~ Warren Buffett

If Apple is doomed, then what does that say about the respective state of their rivals?

Profit is one of the nine reasons to be in business. The other eight are unimportant. ~ John Kirk

Apple is doing just fine. Turns out that selling a differentiated premium product is a sustainable business model. Who knew? ((Ben Thompson: It turns out there are two sustainable positions in an industry (and to be clear, this isn’t exactly rocket science. Again, business school…). The low cost leader – Samsung – and the highly differentiated one. See, Apple already did “transform the industry with a revolutionary design.” And while Android has made significant gains on the hardware, software, and even ecosystem fronts, the overall package offered by Apple is still highly differentiated. The evidence bears this out: Apple charges the highest prices for phones, happily subsidized by carriers (especially in the US), because customers will change carriers to get the iPhone. This results in by far the highest margins in the industry with only a small portion of the overall volume.)) (Most every knowledgeable business observer, that’s who.)

We learn from history that we do not learn from history. ~ Georg Wilhelm Friedrich Hegel

Those who do not know their history insist that history is about to repeat itself – that Android is about to become the next all-encompassing Windows monopoly. But if you know your business history, then you know that Windows was an aberration, not a precedent; the exception to the rule, not the rule.

We’re seeing history repeat itself all right. Just not the history most have mis-remembered.

“History is a very good teacher, but (it) has very few students.” ~ Wael El-Manzalawy

Question #6: But Didn’t Steve Jobs Say That Apple Needed Market Share, Not Profits?

“What ruined Apple was not growth … They got very greedy … Instead of following the original trajectory of the original vision, which was to make the thing an appliance and get this out there to as many people as possible … they went for profits. They made outlandish profits for about four years. What this cost them was their future. What they should have been doing is making rational profits and going for market share.” – Steve Jobs, 1995

Whenever Apple’s market share comes up, so does the above Steve Jobs quote. But when you’re re-reading that quote, keep these things in mind.

First, Steve Jobs was still running Apple when the current iPhone pricing policies were set. It’s unlikely that he forgot his own advice.

Second, the iPhone has been gaining market share in key global markets.

Third, pricing to gain market share simply for the sake of market share is a chump’s game.

Apple already has 65 percent of the mobile phone profits with only 6 percent of the market share. How much more profit share can Apple reasonably hope to acquire?


Fourth, Steve Jobs wasn’t talking about ALL market share, he was talking about acquiring the RIGHT market share. Some customer’s are simply not worth having.

The question is one of price elasticity: How much more profit, if any, will Apple garner by lowering the price of their phone? ((“Price elasticity” seems to be way beyond the pay grade of most pundits and analysts who follow the mobile sector, but what it essentially means is that when the price of something goes down, sales almost always go up, but the rate of that sales increase depends upon the price elasticity of the product. In other words, dropping prices may increase sales but the increased sales may result in disproportionately larger or smaller profits. Unless we truly understand the price elasticity of the iPhone, we really shouldn’t be calling for Apple to drop its iPhone prices.)) And will the market share that they acquire be desirable?

Question #7: Is Pricing The Key To The iPhone 5C?


(The price of the iPhone 5C) is the only thing that deserves analysis ~ Horace Dediu

I respectfully disagree.

The success of the iPhone 5C depends upon valued differentiation. The key is not to make the phone cheaper, it is to make it more valuable EVEN THOUGH IT IS CHEAPER. (Perhaps Apple should call it the iPhone 5 “V” instead of the iPhone 5 “C”.)

Many companies foolishly try to differentiate their products by price. This is always a mistake. If the lower priced item is more valuable than its price, then it cannibalizes its premium sibling. If the lower price is achieved by crippling the value of the product, then poor sales and user dissatisfaction ensue. (See, for example, Windows RT).

The key is to differentiate without disabling the product. You want to create a product that is, yes, lower priced, but the lower price is merely the icing on the cake. The “cake” is that the lower priced product is actually MORE VALUABLE to its intended audience than its premium priced cousin.

Take for example the iPod Nano and the iPad Mini. In both cases, they were lower priced than their premium siblings. But in both cases, the features that the products were missing (size, for example) actually ENHANCED their value to their target audience. Apple needs to do the same with the iPhone 5C.

A satisfied customer is the best business strategy of all. ~ Michael LeBoeuf

Question #8: How Will Apple Differentiate The iPhone 5C From the iPhone 5S?

I don’t know.

I used to be indecisive but now I am not quite sure. ~ Tommy Cooper

— They could do it by making the phone only work in certain geographic locations, like China.

China is a big country, inhabited by many Chinese. ~ Charles de Gaulle, former president of France

I don’t think that’s likely.

— They could do it via specs: lower memory, storage, processor, no LTE antennas, no NFC, no Siri…

…no way. This is crippling the product, not enhancing it. The new iPhone 5C will certainly have lower specs, but those lower specs – as with the iPod Nano and the iPad Mini – should be consistent with the job the product is being asked to do. Artificial differentiation should be avoided at all costs (see what I did there?).

People want economy and they will pay any price to get it. ~ Lee Iacocca

Apple’s goal is to CONSOLIDATE their ecosystem, not fragment it. ((Tim Cook: “And I would just add to that, because we are not fragmented like our competition, we can update an iOS with a major release and a substantial percentage of our customers will update to the – to our latest offer. We’ve made that very elegant and very easy. Also because the usage for iOS is so much higher, when we integrate things well, people use them a lot more and so just those concepts by itself are huge advantages from a customer experience point of view and from a more of the metrics that you’re thinking about point of view.”)) Nothing should be “missing” from the iPhone 5C that will be “missed” by any of its intended audience.

Power is not revealed by striking hard or often, but by striking true. ~ Honoré de Balzac

Question #9: Who’s The Gorilla?

Competing in the market is like wrestling a gorilla. You don’t quit when you’re tired, you quit when the gorilla is tired. The question is, who’s the gorilla in the smart phone space – Apple or Apple’s competitors?

Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window. ~ Peter Drucker

We may find out who the Gorilla is on September 10th.

“Android Dominance” Is An Oxymoron

Alarm Bells Should Be Ringing At Apple: It’s Getting Absolutely Creamed By Android, Which Now Controls ~80% Of The Smartphone Market ~ Jay Yarrow, Business Insider

No, it’s not.

Definition of an oxymoron:

A figure of speech in which apparently contradictory terms appear in conjunction

Fact #1: No version of Android dominates mobile OS market share.

“Android Dominance” is an oxymoron. No single “slice” of the Android “pie” is equal to the 93% of iOS users who have upgraded to iOS 6. iOS 6 is the world’s most popular mobile operating system.


Fact #2: Historically, iOS customers have been quick to update to the latest OS version. ((iOS 6 Adoption At Just Over One Week: 60% For iPhone And 41% For iPad | TechCrunch))

Fact #3: Apple’s iOS users have even more reasons to rapidly upgrade to iOS 7.


A recent developer survey revealed that 95% of developers are updating their apps for iOS 7.

More importantly, 48% of those developers intend to make their updated apps work only on iOS 7.

With so many new and updated apps working only on iOS 7, iOS users are going be strongly motivated to upgrade to iOS 7 as soon as possible.

Fact #4: OS Versions matter.

Apple, arguably, has higher-quality apps because developers still focus on iOS first. The reason they focus on the App Store is that it generates more revenue than Google’s Android store, and users are more engaged. However, there’s no reason to believe this will continue. ~ Jay Yarrow, Business Insider

[pullquote]People who look only at overall OS numbers without taking OS versions into account are missing the “trees” for the “forrest”[/pullquote]

Yes, there is.

Pundits, like Jay, can’t seem to understand why Android leads in market share but iOS leads in usage, engagement, developers, income and everything else that makes a platform strong. ((Why The iPhone's Usage Advantage Over Android Remains So Important. The latest evidence confirms it: iPhone users are far more engaged with their devices than are Android users.)) ((Why Google’s Android is Losing the Battle to Apple’s iOS)) ((Apple iPhone users use their devices 55% more than Android users)) (("Both in apps and overall smartphone usage, iPhone owners rank higher than owners of Android handsets. After surveying both U.S. and European smartphone owners, researchers not only found owners of the Apple device more frequently use apps, but conduct more tasks suitable to smartphones, such as browsing the Internet. This despite Android’s advantage both in number of handsets out there and in sales. The dichotomy just reinforces our Android in a Drawer theory, which says many owners of the Google-powered devices see their handsets as just a spiffier version of dumb feature phones, ignoring most of what makes smartphones smart.")) ((Apple’s iOS continues to dominate with nearly 60% Web usage share vs. Android’s 26%)) ((Apple Continues To Dominate Mobile Video Viewing, With 60% Occurring On iOS Vs. 32% On Android)) (("Sandvine says that the iPad accounts for more home traffic than any other device, at more than 10 percent; and it says that if you added up all of Apple’s devices (iPads, iPhones, Macs, etc.), the company ends up with more than 45 percent of home broadband usage.")) ((Why FRONTLINE Isn’t Doing Android — Yet)) ((BBC – we have an Android development team that is almost 3 times the size of the iOS team)) ((Why there aren’t more Android tablet apps, by the numbers)) ((Android’s consumer strength hasn’t translated to enterprise, where Apple still dominates)) ((Apple rules the skies with 84% in-flight share vs. Android’s 16%)) ((Apple’s iPhone may have kept 400K customers from leaving T-Mobile)) ((screen-shot-2013-07-23-at-10-21-49-amSource)) ((Google shares were down as much as 5% in after-hour trading following a report of second-quarter net income of $3.23 billion compared with $2.79 billion a year ago. The overall revenue figure came in at $14.1 billion. The main reason for Google’s perceived weakness: less-than-spectacular mobile ad sales.)) ((app-revenue-q12013 Source))

Let me help you out. There is no paradox. The latest version of Android does NOT lead the latest version of iOS in market share. People who look only at overall OS numbers without taking OS versions into account are reversing the traditional proverb – but still making the same proverbial mistake – by missing the “trees” for the “forrest.”

Fact #5: Android hardware and software is split into many, many pieces.

  • 11,868 Distinct Android devices seen this year
  • 3,997 Distinct Android devices seen last year 
  • 8 Android versions still in use
  • 37.9% Android users on Jelly Bean

“And by the way, this is the most ideal state of Android. It only includes a version of android which talk to the Google play store so it doesn’t include things like Kindles and Nooks.” ~ Tim Cook, WWDC (113:30)


Android, for all its popularity, remains a messy, fragmented, less-than-ideal experience for a normal consumer. ~ Jay Yarrow, Business Insider

Ah! And finally we get to the crux of the matter.

Fact #6: It is iOS 6 – not any single version of Android – that is the most dominant and monolithic mobile OS in the world.

“iOS 6 Dominance” is not an oxymoron – it’s a fact. And it is iOS 7 that promises to extend the dominance of Apple’s mobile platform into the foreseeable future.

It’s impossible to look at the landscape today and believe that developers will still be iPhone-focused in five years unless Apple does something drastic to change its competitive position. ~ Jay Yarrow, Business Insider

I sorta hafta to disagree. And reality hasta disagree too. It’s not only “possible” to believe that developers will still be iOS-focused (notice how Jay conveniently ignored iPod Touches and iPads in his OS comparison?), it’s probable too.

You don’t agree? You’re an oxymoron who says that only total OS numbers, not OS versions, really matter? Sorry, I can’t hear you. The facts are shouting you down.

Do The Math: iOS 6 Is The World’s Most Popular Mobile Operating System

In fact if you do the math, you would find that iOS 6 is the world’s most popular mobile operating system and in second place is a version of Android which was released in 2010. ~ Tim Cook, WWDC 2013 (1:13:55)

Okay, let’s do the math.

Total iOS Sales vs. Total Android Activations

We know that there are approximately 600 million iOS sales and 900 million Android activations.

Now all we need do is multiply the total sales/activations times the version percentages claimed by iOS and Android.


Source: Is iOS Fragmenting? Not Nearly as Much as Android.

“And by the way, this is the most ideal state of Android. It only includes a version of android which talk to the Google play store so it doesn’t include things like Kindles and Nooks. ((In addition to excluding Kindles and Nooks, Google’s statistics exclude the millions of Android devices in China and other regions that don’t use Google’s services. Google is inflating their total activation numbers by counting them all and inflating their Jelly Bean numbers by only counting units that contact the Google Play Store.))~ Tim Cook, WWDC (113:30)

The Math

558 Million (93.0% x 600) iOS 6 (Fall 2012)
329 Million (36.5% x 900) Android Gingerbread (Winter 2010)
297 Million (33.0% x 900) Android Jelly Bean (Summer 2012 and Winter 2012)
230 Million (25.6% x 900) Android Ice Cream Sandwich (Fall 2011)
043 Million (04.8% x 900) Android older than Gingerbread
036 Million (06.0% x 600) iOS 5 (Fall 2011)
006 Million (01.0% x 600) iOS older than iOS 5

Analysis & Commentary

[pullquote]iOS 6 is the world’s most popular mobile operating system[/pullquote]iOS 6

— Tim Cook was correct: iOS 6 is the world’s most popular mobile operating system.
— iOS 6 leads second place – Android Gingerbread – by ~229 million users.
— iOS 6 leads Android’s most recent version – Jelly Bean – by ~261 million users.

And if you look at the customer’s of each operating system that are using the latest version, it’s not even close. ~ Tim Cook, WWDC 2013 (1:13:40)

[pullquote]75% of Android users and only 7% of iOS users are on non-current versions of their respective operating systems[/pullquote]

— 75% of the Android ecosystem is on the non-current versions of the operating system.
— 7% of the iOS ecosystem is on non-current versions of the operating system.

Google reports that, as of June, the largest segment of Android devices are still running version 2.3 Gingerbread (36.5 percent), which was released in the Winter of 2010.

More than a third of android users are using an operating system that was released in 2010. ~ Tim Cook, WWDC (1:15:25)

Jelly Bean
Only 33 percent are running the latest major version, Android 4.1 Jelly Bean, which was announced last summer alongside Apple’s debut of iOS 6.

Ice Cream Sandwich
Another 25.6 percent are still on Android 4.0 Ice Cream Sandwich, which was released the same month as iOS 5.

Android older than Gingerbread
Another 4.8 percent of Android users use software older than Gingerbread.

iOS 5
Only 6 percent are still using last year’s iOS 5, the last version supported by the original 2010 iPad, 2009 iPod touch and 2008 iPhone 3G.

iOS older than iOS 5
Just 1 percent of Apple’s App Store visitors still use a version older than iOS 5, released in October 2011.

Do Versions Really Matter?

Android advocates claim that fragmentation isn’t really a problem. What nonsense. Ignoring the deleterious effects of fragmentation doesn’t even pass the smell test. ((Definition of “the smell test”: A cursory test of something’s authenticity or legitimacy ~ It stinks to high heaven, both of cognitive dissonance and hypocrisy.

— It’s terrible for users who don’t have the latest features and the latest security updates.

Now this isn’t just bad for users, but this version fragmentation is terrible for developers. ~ Tim Cook, WWDC 2013 (1:13:45)

— It’s terrible for developers who want to use the latest APIs – who want to take advantage of the newest tools, techniques and technology – but can’t because they have to support years old operating systems.

— It’s illogical. If being on the latest version of an operating system doesn’t matter, then why even do newer versions?

— It’s partisan. It violates’s Kirk’ first law of objectivity ((I feel fairly certain that this will come back to haunt me.)):

“Would you maintain the validity of your contention if the positions were reversed?”

Please. Arguing that operating system versions don’t matter is the same as arguing that reality doesn’t matter. Every piece of data available supports the hypothesis that iOS is the stronger platform, despite Android’s numerical superiority. That either means that activation numbers don’t matter as much to a platform as pundits contend they do, or that Android’s activation numbers need to be discounted.

Or both.


Definition: discounting, verb, Deduct an amount from (the usual value of something)

Even if you think that raw numbers are the essence of a strong platform – and you really shouldn’t – you have to agree that older versions of iOS and Android must be discounted ((Other discounts should be applied as well, such as engagement, usage, demographics, security, ease of access and use, etc.)) if we are to make a proper comparison of the two operating systems. The problem is that the discount rate is unknown. ((Or, at least it’s unknown to me.))

If, for example, you:
— Disregard the versions of iOS and Android that are older than 3 years; and
— Discount iOS 5 and Ice Cream Sandwich by 25%; and
— Discount Gingerbread by 50%; then

Your revised and re-calculated numbers would look like this:

558 Million (558 x 1.00) iOS 6
005 Million (006 x 0.75) iOS 5
563 Million iOS Total, After Discount

297 Million (297 x 1.00) Jelly Bean
173 Million (230 x 0.75) Ice Cream Sandwich
165 Million (329 x 0.50) Gingerbread
635 Million Android Total, After Discount

Of course, the problem is that I just made these discount numbers up out of my head. I showed my math so that you can change the discount numbers and do your own calculations. If anyone knows a way of obtaining a truer, more objective discount number, I would be grateful if they would share it with us in the comments, below.


iOS 6.1.2 is the Most Popular Version of iOS Less than One Week Following Launch

Why Android Updates Are So Slow

Google engineers: We’re trying to fix Android fragmentation

The Orphans of Android: “I believe there are a lot of Android devices from months and years gone by that are sitting in drawers at home or are being sold on eBay.”

Fragmented Android drives big dev to Apple: “(The (BBC) Trust found a series of quite logical reasons why Android lagged iOS when new features were added to iPlayer, mostly surrounding the “complexity and expense” of developing for Android.

The company also noted a couple of other logical reasons why developers dealing with limited time and budget would opt for Apple’s mobile OS:

— Engagement is higher on Apple devices
— Android is fragmented
— Android development is complex and expensive

Comparing The Market Share of Android Phones To The iPhone Is A D@mned Lie

Disraeli is reputed to have said that there were three kinds of lies: Lies, damned lies, and statistics.

“Lies, damned lies, and statistics” is a phrase describing the persuasive power of numbers, particularly the use of statistics to bolster weak arguments. ~ Wikipedia

Comparing the market share of Android phones to the market share of iPhones is a damned statistical lie and it should never be done. Here’s why.

Venn Diagrams

If you drew a Venn diagram of “all iPhones” and “all iPhones that ran iOS”, they would be one and the same. Here is another example of such an overlapping Venn Diagram:


Source: thehighdefinite

— If you replace “Male friends who joke about having sex with you” with the words “all iPhones”; and
— If you replace “Men who would have sex with you if you showed the slightest interest” with the words “all iPhones that ran iOS”…

…you would ruin a perfectly good joke. But you would also have a Venn diagram that accurately represented the overlap between “iPhones” and “iPhones that run on the iOS operating system.” All iPhones run on iOS. But the opposite is not true. iOS is more than just iPhones.

On the other hand, Android phones are made by many manufacturers. About 40% are made by Samsung and the other 60% are made by Motorola, Sony, HTC and a variety of different hardware manufacturers. Why then do we lump all Android phones together and count them as one?

The only legitimate reason to group all Android phones together is in order to suggest a causal relationship between the number of Android phones and the strength of the Android platform. But is there such a relationship?

[pullquote]Comparing Android’s phone activation numbers to the iPhone’s sales numbers is akin to comparing fish to whales and concluding that fish outnumber mammals.[/pullquote]

The Folly Inherent In Comparing Android Phones to iPhones Instead Of Comparing Android To iOS

Comparing Android’s phone activation numbers to the iPhone’s sales numbers – and concluding that Android outnumbers iOS – is akin to comparing fish to whales and concluding that fish outnumber mammals.

Fish MAY outnumber mammals, but not nearly by the margin that fish outnumber whales. And Android devices do outnumber iOS devices but not nearly by the margin that Android phones outnumber iPhones. When making comparisons, one needs to compare like to like, otherwise, it skews the results.

There have been over 900 million Android devices activated and over 600 million iOS devices sold. And – if Flurry’s clientele is representative – the total number of active Android devices may only exceed the total number of active iOS devices by little more than 10% (see chart, below).


Source: Flurry

Comparing an operating system to an operating system; comparing all active devices to all active devices; comparing like to like; ((And don’t even get me started on the limited VALUE that Android’s market share brings to their platform. Android’s market share is literally a joke.

And if you are going to compare Android phones to iPhones, then it would be wiser and fairer to compare premium Android phones – such as the Samsung Galaxy S4 and the HTC One, etc. – to the iPhone.

And if you REALLY want to contend that market share translates directly into platform strength, then it would be far better to compare operating system VERSIONS against competing operating system VERSIONS, rather than simply lumping all of an OS’s versions together, totaling them, and pretending that they were of equal value to the platform.)) – now THAT is the proper basis for a comparison.

You do not compare an entire class of things to a subset of another class, and you do not compare phones that run the Android operating system to a subset of devices (iPhones) that run on the iOS operating system ((By the way, the exact same logic holds for comparisons of Android tablets to the iPad. Those comparisons are just as wrong as comparisons of Android phones to iPhones and they are wrong for the exact same reason – a class should never be compared to a subset of a class if your goal is to compare the two classes. Hardware models should be compared to hardware models. Operating systems should be compared to operating systems. Hardware models should never be compared to operating systems and vice versa.)), otherwise, you are likely to get is a skewed result…

…and a damned lie…

…or (-shudder-) a “Chart Of The Day.” ((A “Chart Of The Day” pretends to be based on relevant statistical data – but it often is, basically, the same thing as a damned lie – only worse.))

Legitimate Reasons Vs. Bogus Reasoning

There are legitimate reasons to compare fish to whales and there are legitimate reasons to compare Android phones to iPhones.

images-60Mammals and Fish Venn Diagram

But if you’re actually trying to compare fish to mammals or the Android operating system to the iOS operating system, such a comparison conceals – rather than reveals – the truth. It is deceitful, dishonest, untruthful, false, duplicitous, mendacious; hypocritical, untrustworthy, unscrupulous, unprincipled, two-faced, double-dealing, underhanded, crafty, cunning, sly, scheming, calculating, treacherous, Machiavellian, sneaky, tricky, foxy, crooked, fraudulent, counterfeit, fabricated, invented, concocted, made up, trumped up, untrue, false, bogus, fake, spurious, fallacious, deceptive and misleading.

In other words, it’s a damn lie.

How the Tablet is Killing the PC

IDC recently released its forecast of PC sales for the last quarter and said PC shipments were down 13.9%. It laid much of the blame on Windows 8, but I am not sure this analysis is completely correct. While others have also mentioned Windows 8 as a key factor in PCs’ steep decline, there are other layers to this onion and Windows 8 is just one of them.
Windows 8 being a transitional OS certainly played a role, but I think factors such as refresh cycles are also culprits. Even if the tablet had not been invented the PC industry would still face these challenges; these days consumers simply hold on to their PCs as long as they possibly can. It is not just that consumers don’t feel inspired to upgrade, it’s that the notebook they have been using is good enough.

To a degree the same has been true of enterprise accounts, and if Windows 8 is to blame at all, it would be with regard to IT purchasing. Large enterprise buying often leaned toward the first half of the year. With many IT customers not being early adopters of new operating systems, we never saw large quantity buys in this period of time for traditional PC form factors.

The days where we look at the PC as a benchmark for the health of the technology industry is over. Many PC buyers simply don’t value the PC as much as they used to. Instead the value in buyers’ eyes has shifted to mobile by way of smartphones and tablets. This is true of both consumers and enterprises. PCs continue to play a role in many people’s lives, but they are not as central as they once were. Tablets and smartphones have encroached on their place.

If anything, the PC’s future is one of very low cost. We buy them because we need them, but not necessarily because they are highly valued. Of course high-end market segments will still value the traditional PC form factor, but that is a much smaller niche compared to the mass market. This does not mean consumers are ready to toss PCs out of their digital mix altogether. We just see them holding on to current models longer, or if they do need to buy a PC, it will be the cheapest they can find to meet their basic PC needs. Current lower priced PCs are “good enough” to meet any needs unmet by tablets or smart phones.

The Revenge of Steve Jobs

I’ve mentioned Steve Jobs had hoped his Apple II, and then the Mac, would be the market leader in PCs. But IBM clones and Microsoft stole Jobs’ thunder and dominated the PC space for decades.

If you peel back another layer of the onion you see another key reason for PCs’ decline in demand. In one sense, Jobs finally did deliver a PC that gave Apple a weapon against Microsoft and the dominant IBM PC clones: you could argue Jobs finally got the dominant platform of the future with the iPad. With this tablet Apple has reversed the fortunes of PC vendors. All Things D published both the IDC and Gartner numbers for Q1, 2013 and wrote about both companies’ guidance for PC sales for the rest of the year.
“At this time,” wrote Arik Hesseldahl of All Things D, “it has to be said that much of the blame for the damage being done to the PC businesses of all the companies around the world can be laid at Apple’s feet: Sales of the iPad, the world’s leading tablet brand, have a lot to do with the collapse in PC sales.”

When Jobs introduced the iPad he said this product would drive the post-PC era. I think he knew his tablet was the reinvention of the PC he had long sought to bring to market, and that it would actually cause the decline of PCs, even if it meant cannibalizing Mac market share.” and “by the time he introduced the iPad he had in place all of the hardware, software, and services needed to connect the iPad to his ecosystem. Even with a decline in Macs he was insulated from the impact of a Mac sales downturn on his business.
On the other hand, HP, Dell, Acer, and other PC OEMs who were totally PC-driven are feeling the shock of the PC decline; unlike Apple they are not insulated from the impact of these sharp declines in PC demand. Their only hope is that Microsoft can deliver key software and services they can use on tablets and convertibles of their own. It may be too late however, given Apple’s strong lead in tablets, not to mention competitors like Samsung, Amazon and others who are in many ways better insulated through their own ecosystem of products and services.

While Jobs is no longer with us, I think he knew this would happen. Perhaps his last major act was to give us the iPad; final revenge for his years of toil in the PC market where he was always #2, despite being early with many of the innovations that actually took PCs to the masses. If Jobs were with us today I suspect he would not shed a tear to see the decline of the PC market. Rather he would revel in the role the iPad has played in bringing his PC competitors to their knees.
While we could see an uptick in PC demand later this year when low cost touch-based clamshell style laptops come out during the holiday season, I fear the heyday of strong demand for PCs is over. It is about to take a back seat to the tablets and smartphones of the future.

Google’s Android Activations Are A Lot Less Cash Cow And A Lot More Bull. And That’s OK.

Author’s note: Many of the commentators aren’t even reading the article but, instead, are basing their comments on the article’s title alone. Let me throw one final analogy into the mix in the hopes of clarifying my position:

Apple is in the dairy business and Android is selling meat. Apple has the cream (pun intended) of the milk-producing cows but Android has far more cows that produce far less milk, but far more meat. Both are winning because they are selling different things, but pundits think that Android has won simply because they have more cows.

Apple has the profits. Android has the market share. And they’re both doing great.

Now back to the original article…

“My belief, though, is that what Google is winning with Android is a booby prize — overwhelming majority share of the unprofitable segment of the market.” – John Gruber

The Platform Business Model

“A computing platform includes a hardware architecture and a software framework…where the combination allows software to run. … A platform might be simply defined as a place to launch software. ~ Wikipedia

The advantage of a platform business model is that once the platform is established, others do much of the work to make the platform valuable. It’s like setting up a marketplace ((I never understood why Google changed their store’s name from Google Marketplace to Google Play. I thought that “Marketplace” was the ideal name. Oh well.)). Once it’s set up, the vendors do most of the work. The platform provider benefits either by taking rents or by taking a commission from each sale or by using their access to the customers gathered by the marketplace in order to sell some complementary product or service of their own.

The Mostly Misunderstood Network Effect

“In economics and business, a network effect…is the effect that one user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service is dependent on the number of others using it (emphasis added).

The classic example is the telephone. The more people own telephones, the more valuable the telephone is to each owner. This creates a positive externality because a user may purchase a telephone without intending to create value for other users, but does so in any case.” ~ Wikipedia

This is key, so please forgive me for repeating it:

“…a user may purchase a telephone without intending to create value for other users, but does so in any case.”

In other words, every user adds to the value of a phone network – even if they have no intention of doing so – JUST BY BEING ON THE NETWORK.

It is this understanding (or misunderstanding) of the network effect that makes so many mobile computer industry observers confident that:

— Market share alone creates the network effect;
— Android has market share; therefore
— Developers, profits and all the other benefits associated with the network effect MUST necessarily follow where Android’s market share leads.

Screen Shot 2013-05-23 at 10.15.59 PM

Source: Benedict Evans, On Market Share

The high priests of market share contend that since Android HAS won the battle for market share, the network effect makes it inevitable that Android WILL win the war for mobile phones.

Derek Brown, ReadWrite:

In the world of technology platforms, ubiquity matters (a lot) when developers, manufacturers, etc., are considering future products/solutions.

Google Chairman, Eric Schmidt:

“Ultimately, application vendors are driven by volume, and volume is favored by the open approach Google is taking…. ((“(M)y prediction is that six months from now you’ll say (that Android apps are beating iOS versions to market…)” ~ December 7, 2011))

Matt Asay, ReadWrite

Over time, those developers are going to move to where the market share is. They have to.

John Gruber, The church of market share:

It’s an article of faith in the Church of Market Share that Android is nearing a tipping point where its market share lead will inevitably turn into a developer share lead, too.

So is it true? With Android holding such a commanding market share lead, do developers, and then users, and then profits, and then, ultimately, all smartphone users – including iPhone users – have to convert to Android?

No, of course not. Here’s why.

Phone Networks Are Not The Same As Computer Networks

— In a phone network, the value is in the phone owner.
— In a mobile computing network, the value is in the app, not the mobile phone owner.

— In a phone network, the more phone owners there are – the more people you could call and be called by – the more powerful the network effect and the more valuable the phone network becomes.
— In a mobile computing network, the more developers there are – the more apps available for consumption – the more powerful the network effect and the more valuable the computing network becomes.

— In a phone network, there is no difference between a phone owner and a phone user – they are one and the same.
— In a mobile computing network, there is a HUGE difference between the mobile phone owner and the mobile user.

— In a phone network, the phone owner begins contributing to the platform the moment they buy the phone.
— In a mobile computing network, the mobile phone owner doesn’t begin contributing to the platform until they voluntarily decide to participate, either by buying apps or content, consuming advertising or contributing data.

— In a phone network, the phone owner’s mere PRESENCE makes the phone network more valuable.
— In a mobile computing network, you don”t measure the value of a mobile phone owner by their mere presence, you measure their value by their PARTICIPATION.

Presence, without participation, adds no value to a mobile computing network.

It is fairly easy to simply add up all of the mobile phone sales and activations for a particular operating system. It is also fairly meaningless. The trick is to discern how much those mobile phone owners are participating and the value that their participation brings to the network.

Most mobile computing industry observers are measuring the wrong thing, the wrong way:

It’s not about counting the customers. It’s about having the customers that count.

Android can count more customers than iOS can, but they don’t count for much. The ranks of Apple’s iOS owners are filled with credit card carrying cash cows. As a result, Apple’s platform profits are udderly enormous. The ranks of Google’s Android activations are a lot less cash cow and a lot more Bull. ((Being a bad customer is not at all the same thing as being a bad person. I, myself, am a great Crispy Creme Donuts customer but a very poor customer for exercise equipment. That doesn’t make me a bad person, just a bad customer.))

It’s hard to milk a Bull. Dangerous too.

How Do You REALLY Measure The Success Of A Platform Business Model?

You measure the success of a platform in three ways:

1) The health of the platform – is it self-sustaining?
2) The wealth of a platform – the amount of net profits acquired from the platform.
3) The stealth of a platform – does it serve an ulterior purpose?

The Health Of A Platform

By any meaningful standard, Apple’s iOS platform is robust, healthy and rapidly growing.


Take a look at the two pie charts, below. From Q1:10 to Q4:12, Apple’s share of the smartphone market grew from 16% to 22%. But during the same span of time, the pie itself QUADRUPLED from 55 million units to 219 million units!


Source: KPCB, Internet Trends

Further, “smartphone share” is not even the right way to measure the market that Apple is competing in. The more relevant market is the “mobile phone market”, not the “smartphone market”.

“… there is no such thing as a ‘smartphone market’. Or rather, talking about the ‘smartphone market’ is like talking about the ‘3G’ market or the ‘colour screen phone’ market: you’re picking out a sub-segment that is going to grow to take over the whole market. And ignoring the growth.

The whole mobile phone market is converting to smart. Apple is taking the high end and Android is taking the rest. Both are growing very fast, and Android is growing faster. But what matters is phone share, not smartphone share. ~ Benedict Evans

Screen Shot 2013-05-23 at 10.42.20 PM

Source: Benedict Evans, On market share

Finally, the “mobile phone market” is still not inclusive enough. When we’re comparing operating systems, we need to compare ALL of the devices in the operating system, whether they be MP3s, phones or tablets.


Source: “Apple Q2 2013 hardware sales: By the numbers

“Cumulatively, Apple has sold almost 375 million iPods, over 356 million iPhones, and nearly 140.5 million iPads since the respective products were first released. In 23 quarters, Apple has sold almost as many iPhones as it has sold iPods over 46 quarters, and sales of the smartphone are likely to overtake the aging media player during this quarter if the respective sales trajectories hold true. Put that another way: the iPhone has sold twice as fast as the iPod did.” – Apple Q2 2013 hardware sales: By the numbers

I would only add that the iPad has been selling THREE times as fast as the iPhone did.

When one looks at the WHOLE market for iOS vs. the WHOLE market for competing operating systems, the metrics supporting the health of Apple’s iOS platform are so overwhelming and so voluminous that it was difficult for me to even find a suitable method for properly displaying them. Ultimately, I resorted to simply sorting them alphabetically, by category, in the extensive appendix, below. I dare you to read the associated links in the appendix and then tell me that the iOS platform is anything but healthy. No, wait…”I triple dog dare you.”

If the purpose of a platform is to be self-sustaining, then Apple’s iOS platform is as successful as it gets.

Open Trade-Offs

Android is no slouch ((By which I mean it is one of the greatest computer operating systems ever.)) as a platform either, but Android is based on an “open” philosophy. Open is not inherently good or bad, it is a tradeoff. It has many advantages but it has many disadvantages too. The same open policies that make it easier for Android to gain market share are also the same open policies that make it inherently harder for Android to maintain a strong platform.

— An open policy towards carriers encourages rapid dissemination of devices but it also permits the carriers to take unwanted liberties with Android’s core services and allows them to shirk their responsibilities with regard to operating system updates.
— An open policy towards manufacturers allows for rapid hardware iteration but it also creates rapid hardware fragmentation.
— An open policy towards the sales of applications leads to a wide variety of apps but it also leads to a wide variety of piracy, cloning and malware too.
— An open policy towards the operating system allows for rapid feature iteration but it also allows competitors to split off a confusing variety of competing operating systems and App Stores too.

The BBC Trust:

…a couple of … logical reasons why developers dealing with limited time and budget would opt for Apple’s mobile OS:

— Engagement is higher on Apple devices
— Android is fragmented
— Android development is complex and expensive

The Wealth Of A Platform

Google is profiting from their Android platform via advertising, app and content revenue. However, as I pointed out in “4 Mobile Business Models, 4 Ways To Keep Score“, none of these revenue streams add up to very much.

Google could also be benefitting from their Android platform via the gathering of mobile computing data. This is the big “get out of jail free card” that Android advocates play whenever it is pointed out that Google is not directly profiting from Android. “The data alone”, they protest “is invaluable.” Hmm. Unless you can draw a direct line from the data being gathered to the profits being made – and you can’t – data, in lieu of profits, seems like a very poor consolation prize, indeed.

Apple too is profiting from their iOS platform via advertising, app and content revenue. However, that revenue – a few billion dollars – barely registers on their books. The vast majority of Apple’s iOS revenue is generated from the platform’s related hardware sales. (See: “Android’s Market Share Is Literally A Joke“.)

The Stealth Of A Platform

I have stated that you measure the success of a platform by its health and its wealth. I am, however, keenly aware of a third way to measure the success of a platform – an exception to the rule that is so large that it might swallow the rule altogether.

What if Google had an ulterior motive in Android? What if Android was actually a stealth weapon designed, not as a profit making engine but, as an engine of destruction aimed at Google’s mobile phone competitors?

If the purpose of Google’s Android platform was a defensive action designed to destroy Google’s adversaries and ensure that Google’s advertising and services would run on every meaningful mobile platform, then I will grant you – based on the evisceration of Palm, webOS, Windows Mobile, Windows Phone 8, Nokia’s Symbian, MeeGo, Blackberry and Linux – that Android may well be one of the most successful computing platforms of our time or of all time. ((However, that is not the end of the story for Android but, perhaps, only the end of the beginning of the story. As Android splits into different self-serving streams – like the Amazon Fire and the various Chinese Android variants – will Google’s Android ultimately be seen as having successfully salted the lands of its enemies while simultaneously sowing the seeds of its own destruction?

“We often give our enemies the means for our own destruction.” ~ Aesop))


Source: “Apple 2.0, Which is more valuable to Apple, its market share or its brand?

Apple Is Like DisneyWorld And Android Is Like A Chain Of Amusement Parks

Apple is playing the “give away the rides for free once you’re in the park, but charge for admission to the park” game. The purchase of Apple’s hardware is the golden ticket ((A Willie Wonka reference? Really? How many metaphors can this author mix together?)) that gives one entrée to their park. Google is playing the “give away the rides for free to attract customers to the park but make it up in revenues generated from the sale of ads and concessions” game.

Apple’s platform model is stronger – for now – because they get their money up front, at the point of admission to their walled garden. ((As an aside, DisneyWorld has much lower “market share” (total people in attendance) than do the tens of thousands of existing worldwide amusement parks, but does anyone ever claim that DisneyWorld is “niche” or “vulnerable”?)) Google’s platform model is weaker – for now – because it requires people to voluntarily buy the concessions and consume the advertising, and – for now – a lot of Android patrons are choosing not to buy and to just go along for the free ride.

Neither Android nor iOS is going away. Both platforms have different inherent strengths and weaknesses and instead of fruitlessly trying to decide which operating system is going to win EVERYWHERE, we should be focusing our efforts on determining WHERE, specifically, each OS is likely to win.

— Android will take the low end of the market.
— iOS will take the high end.

— Android will continue to grow like a weed.
— iOS will continue to grow like a well tended farm.

— Android will continue selling a mind-numbing array of diverse products.
— iOS will continue selling three year old iPhones as if they were new, because iOS’ value is found primarily in the platform, not in the device itself.

— Android will continue to rapidly iterate their hardware and their operating system.
— iOS will continue to relentlessly integrate their hardware with their software and their platform ecosystem.

— Android will appeal to third-world nations, emerging markets, tech aficionados who admire the virtues of “open”, those who require more options, those who require more diversity, and the cost conscious.

— iOS will appeal to more established nations, maturing markets, non-technical users who admire the virtues of easy and intuitive, those who require more security, those who require more consistency, those who require more integration, the quality conscious, and those who fear Google’s ad-supported business model.

— iOS will appeal to Enterprise, businesses, governments, institutions, organizations, and other entities that require more structure, security and control. ((As one who lived through the Windows v. Mac wars, the irony of Apple’s iOS becoming the favored operating system of the Enterprise is not lost on me.))

Where Do We Go From Here?

Am I criticizing Google or Android? No, I am NOT. Android has some fantastic hardware, a rapidly iterating operating system and a brilliant and innovative company backing it. It’s a clear success story.

What I’m criticizing is the nature of the debate. Market share is not only not the best way to measure success, absent context, it is one of the worst. [pullquote]Just because Android has a winning platform does not mean that Apple doesn’t have a winning platform too. And vice versa.[/pullquote]

It would be a monumental mistake to underestimate the strength of the Android Platform – but it would also be a colossal mistake to underestimate the power of Apple’s iOS too. The truth is that iOS and Android are the two great operating systems of our time and it looks like they’re both going to remain great for quite some time to come. One platform rules market share and one platform rules profit share and – in a rapidly growing market (see graphic, below) – there’s plenty of room for both business models to survive and thrive.


Source: KPCB, Internet Trends

And The Gold Goes To…

3d small people - rewarding of winners— In mobile hardware manufacturing, Apple is the clear cut winner with Samsung coming in a strong second.

— In mobile advertising, Google is the big fish in a small, but growing, pond.

— In content sales, it’s difficult to judge, since the competitors are actually playing very different games. If you judge by revenue (and I don’t), the winner is Amazon. But if you judge by profit, you’ve got to give the nod to Apple…for now.

— In mobile platform? It’s much easier to say who has lost and that would be anyone not named “Apple” or “Google”. But so far as “winning” goes, Apple is already “winning” the only gold that matters to them (profit$) and Google’s Android has already “won” Google a seat at the mobile advertising table, which is the only gold that matters to them. They both sound like champions to me. But then, of course…

…the games are still far from over.

Read Part One of John’s column entitled: Android’s Market Share Is Literally A Joke

Read Part Two of John’s column entitled: 4 Mobile Business Models, 4 Ways to Keep Score.


Adoption: iOS 6.1.2 is the Most Popular Version of iOS Less than One Week Following Launch
Adoption: Apple’s iOS 6 now accounts for 83% of all iOS-based traffic in North America
Adoption: The Orphans of Android
Adoption: “An OS that is 2 years and 2 months old controls over 45 percent of the Android ecosystem. An OS that is 1 year and 4 months old controls another 30 percent. 75 percent of the entire Android ecosystem is still on the non-current versions of the OS. It’s 2013.”
Advertising: Why 75 cents of every dollar spent on mobile advertising is spent on iPhone and iPad
Advertising: Apple’s iOS Mobile Ad Metrics Dominates Android
Advertising: iOS leads Android in mobile ad revenue
Advertising: iPad Still Dominates Tablet Ads
Advertising: iPhone Still Ranks Far Above Samsung Galaxy Line In Mobile Ads, Says Velti
Apps: Where’s Twitter Music For Android? Why Today’s Tech Companies Are Still Going iOS First
Apps: Walt Mossberg: How Apple Gets All the Good Apps
Apps: The Data Doesn’t Lie: iOS Apps Are Better Than Android
Apps: Why Android Takes Forever to Get Cool Apps
Apps: Games: Why Game Creators Prefer iPhone to Android
Apps: Games: Game developers still not sold on Android
Business: “Apple’s iOS still dominated the enterprise mobile circuit with 75 percent of total device activations last quarter.”
Business: Google Android’s enterprise problem
Business: Study Says iOS Still Trumps Android at Work
Business: Fortune 500 Companies Moving to iPad Hits 94%
Business: Apple’s iOS continues to dominate the mobile enterprise
Business: Apple may have sold up to 4 million iPhones to businesses in Q4
Business: “Gartner: By 2014, Apple will be as accepted by enterprise IT as Microsoft is today”
Business: Forrester Report Says Apple Will Sell $39 Billion In Macs and iPads To Businesses Over Next 2 Years
Business: Bad news for Android: enterprise share dropped in Q4
Business: More Data Showing iOS, Especially The iPhone, Still Killing It In The Enterprise, At Android’s Expense
Business: Over 80% of organizations plan to support iPhones and iPads
Business: Apps: Why companies are still deploying iOS apps first
Source: “Who’s Winning, iOS or Android? All the Numbers, All in One Place
Commerce: FAB.COM: More Than A Third Of Our Visits Are Now Mobile–And 95% Of Those Are iPhones And iPads
Consumption: Data: Study finds iPhone owners to be more data hungry than Android users
Consumption: Video: NPD Group: iTunes owns the internet video market
Consumption: Video: Apple Continues To Dominate Mobile Video Viewing, With 60% Occurring On iOS Vs. 32% On Android
Consumption: Video: Apple users watch 2X more video than Android users
Consumption: Video: Watching a Video on Your Phone? You’re Probably Using an iPhone, Not an Android.
Demographics: Android Owners Aren’t Real Smartphone Owners
Demographics: Age: Sorry, Samsung, iPhone Is Not Your Mother’s Smartphone
Demographics: Age: 48% of U.S. teens own an iPhone. 62% plan to buy one.
Demographics: Age: Nearly Half of Surveyed U.S. Teens Using iPhones, Over One-Third Using iPads
Demographics: Age: Greater percentage of Generation Y own iPhones than any other age group
Developers: Android fragmentation predicted to squeeze out independent developers
Developers: Apple And Google’s App Stores Now Neck And Neck – Except On The Metric That Matters Most To Developers
Engagement: Why Aren’t Android Users Actually Using Their Handsets?
Engagement: Validating the Android engagement paradox
Engagement: iPhone users found to spend more time on their handsets
Forks: Google’s penetration of Android
Forks: Google Shuts Down Its Shopping Service in China
Fragmentation: Fragmented Android drives big dev to Apple
Fragmentation: Google engineers: We’re trying to fix Android fragmentation
Loyalty: Survey Suggests, Loyalty, Upgrade Frequency, Says Raymond James
Loyalty: Survey shows iPhone loyalty still beating out Android
Loyalty: Apple Has The Most Devoted And Loyal Computer Users [Report]
Loyalty: Survey: Apple to Eclipse Android by 2016
Loyalty: Android’s Leaky Bucket: Loyalty Gives Apple the Edge Over Time
Malware: Mobile malware exploding, but only for Android
Malware: Malware On Mobile Grew 163% In 2012, Infecting Around 32.8M Android Devices
Malware: 99.9% Of New Mobile Malware Targets Android Phones
Malware: Spam: Nearly 60K Low-Quality Apps Booted From Google Play Store In February, Points To Increased Spam-Fighting
Reliability: Apple’s iPhone tops smartphone reliability ratings by wide margin
Retail: Apple retail revenues per visitor reach new record
Retention: The iPhone’s Greatest Weapon: Retention
Retention: Android’s Leaky Bucket
Source: Apple’s 500M user accounts second only to Facebook, viewed as key driver of future growth
Revenue: Canalys: Apple dominates with 74% of worldwide mobile app revenue
Revenue: Apple: App Store Now Makes Over $1 Billion In Profits Per Year
Revenue: iOS App Store accounts for nearly 75% of mobile app download revenue
Satisfaction: iPhone dominates in customer satisfaction
Satisfaction: iPad tops in satisfaction among tablet owners
Satisfaction: J.D. Power: Apple iPad ranks highest in tablet customer satisfaction for second consecutive time
Satisfaction: J.D. Power: Apple ranks highest in smartphone customer satisfaction for 9th consecutive time
Security: ACLU to FTC: Mobile carriers fail to provide good Android security
Shopping: Online: Apple’s iPad dominates online shopping traffic & revenue generation
Store: iTunes: NPD: Apple’s iTunes accounts for 67% of TV downloads, 65% of movies
Support: Apple tops Consumer Reports survey on PC tech support
Trade-In: Study finds Apple’s iPhone retains more value than top Galaxy models
Trade-In: Galaxy S4 announcement spurs trade-ins of other Samsung phones, not iPhones
Updates: Why Android Updates Are So Slow
Usage: You Spend a Lot of Time With Your Mobile Device at Home — Even More if It’s an iPad
Usage: Apple’s iPad expands lead in tablet use at the expense of Amazon, Android, Microsoft Surface
Usage: Apple devices dominate in-flight Wi-Fi usage
Usage: Apple iPad continues domination with over 80% usage share in U.S. and Canada
Usage: Apple rules the skies with 84% in-flight share vs. Android’s 16%
Usage: Apple’s iOS continues to dominate with nearly 60% Web usage share vs. Android’s 26%
Usage: Apple’s iOS ups massive lead over Android in U.S. Web traffic with 69% share in April
Usage: Apple iPad dominates website traffic tablet share
Usage: Apple iPhone users use their devices 55% more than Android users
Usage: Safari jumps to 61 percent of mobile browser share
Usage: Android might own 75% of the smartphone market but all the action is still on the iPhone
Usage: Why The iPhone’s Usage Advantage Over Android Remains So Important
Usage: 5 Apples for every Android on Gogo Inflight Wi-Fi networks
Usage: Apple’s growing dominance of the mobile Web
Usage: Android’s Web share slipped in May, despite 10 million Galaxy S4s
Usage: iPhone owners are on their phones 53% more than Android users
Usage: The Android Conundrum: People Buy More Phones And Do Less With Them
Usage: Apple Is Destroying Android In Mobile Web Usage–Which Begs Key Question: Who Uses Android?
Usage: Apple Is Destroying Android In Mobile Web Usage–Which Begs Key Question: Who Uses Android?
Usage: Is It Time To Conclude That Android Gadgets Are Bought By People Who Don’t Actually Do Anything With Them?
Usage: Apple Continues Its Mobile-Browser Domination
Usage: Apple’s iPad Dominates Tablet Web Usage with 82% Share.
Usage: Android users: More of them than fanbois, but they don’t use the web
Vertical Markets: Doctors Are Choosing iPad Tablets Over Other Devices, Survey Says
Vertical Markets: Hospital Calculates The ROI Of An iPad At 9 Days
Vertical Markets: Why Android is losing in aviation
Vertical Markets: As medicine goes digital, Apple’s iPad is top choice among doctors

4 Mobile Business Models, 4 Ways To Keep Score

The hundred meter dash, archery, weightlifting and the long jump are four very different Olympic sports with four very different methods of keeping score. The hundred meter dash is scored on speed. Archery is scored on accuracy. Weightlifting is scored on strength. The long jump is scored on distance. You don’t judge the participants in the hundred yard dash by how much weight they can lift. That would be the wrong way to measure them.

“…looking at ‘smartphone share’ or ‘profit share’ or ‘platform share’ all tell you something about the industry, but all three metrics mislead you if you try to treat them as a way to see who’s ‘winning’, because ‘winning’ means different things for Apple, Samsung or Google. After all, Google may well still make more money from searches on iOS than it does from searches on Android.” ~ Ben Evans, On market share

Hardware manufacturing, advertising, “razors-and-blades” content sales, and platforms are four very different business models and they have four very different methods of keeping score too.

You don’t take the metrics used to measure one business model and apply them to another business model. That would be the wrong way to measure them.

Each business model demands its own specific forms of scoring. The goal should be to devise, discover, or discern a form of measurement that properly and accurately reflects how a business is performing in the business model in which it is participating.

Biathlons, Triathlons and Decathlons are all unusual Olympic events in that they group together several disparate sports and then determine an overall winner. Think of Apple, Google, Samsung, and Amazon as Olympic teams that compete with one another in the four interrelated mobile business models – hardware manufacturing, advertising, “razors-and-blades” content sales, and platforms – a sort of Quadrathlon. Each team has its strengths and its weaknesses, each team wants to win the events that they’re best at and maximize their score in the other events in order to win the overall Quadrathlon.

Let the games begin!

Hardware Manufacturing

Last week I tried to explain how using only market share to analyze mobile hardware manufacturing was not only the wrong way to keep score of that business model but that it was actually obscuring the real score.

“The truth is that focusing on market share as the primary metric is the only way to paint the iPhone as anything other than a roaring success.” ~ John Gruber

I suggested an alternative measurement known as the “Fair share profit analysis,” in order to generate some perspective but, truth be told, the only real way to accurately “score” who’s winning in hardware manufacturing is with net hardware profits. When it comes to selling mobile hardware, do Apple, Samsung, HTC, Motorola, etc. really care what their market share is? No they do not. That’s the top line, a means to an end. The only thing that matters when they are selling mobile hardware is profit. That’s the bottom line, the end for which the means were made. Market share is all well and good but only if it brings home the profits. Keep your eyes on the prize – and profits are the prize.

So who’s winning the medals in the olympic sport of mobile hardware manufacturing?
Source: “Who’s Winning, iOS or Android? All the Numbers, All in One Place

Awards Ceremony: Apple walks away with the Gold (both figuratively and almost literally), Samsung takes the Silver and no one else even medals. The Bronze podium stands empty.


The only proper way to score advertising is net advertising profits retained. Market share and platform may be used to garner advertising revenue but they are only the means and they should never be confused with profit, which is the end.

Today, there are three great truths in mobile advertising:

1) Google is killing it in mobile advertising.
2) Google is killing it in mobile advertising…but mobile advertising is still relatively small; and
3) The vast majority of Google’s mobile advertising revenue is generated on the iOS platform, not the Android platform.

1) Google is killing it in mobile advertising.

Google dominates the mobile search market with 93% of US mobile search advertising dollars, according to eMarketer. Facebook is at No. 2.

2) Mobile advertising is still relatively small.

The mobile ad market alone stood at roughly $4.1 billion at the end of last year, up from $1.5 billion at the end of 2011. Google, currently has more than half the mobile ads market with annual revenues of around $2.2 billion.

Just to keep things in perspective, mobile ad revenue only accounted for 9% of all online ad revenue last year, although the percentage of mobile ads vis-a-vis other online ads is rapidly growing. And mobile ad revenues paled in comparison with mobile hardware sales. While it took an entire year for ALL mobile ad revenue to reach $4.1 billion, Apple alone, and in 90 days, and in what many considered a down quarter, brought in revenues of approximately $31.4 billion just from iPhone and iPad sales.

3) Google is making its advertising money on iOS, not Android

“(I)t’s Android’s large market share that is the winner for Google. The more Android devices being used, the more Google services with Google ads are being used.” – Virtual Pants

Actually, not so very much. Most of Google’s advertising dollars are generated by iOS’s relatively smaller market share, not by Android’s massive market share.


Source: MoPub

Take a good hard look at the chart, above. The iPhone ad spend doubles the ad spend share of ALL of Android. The iPad almost matches ALL of Android BY ITSELF. And even the lowly iPod has one-quarter of the ad spend that ALL of Android does. Market share is all that matters? I don’t think so. That’s like arguing that acreage is all that matters in real estate. The size of the lot does matter in real estate but location, location, location matters more, more, more. And market share does matter in mobile advertising but it is the location of the market share that matters even more.

Apple’s iOS Mobile Ad Metrics Dominates Android

Why 75 cents of every dollar spent on mobile advertising is spent on iPhone and iPad

iOS leads Android in mobile ad revenue

Apple’s iPad dominates online shopping traffic & revenue generation

iOS Still Top Platform For Monetising Mobile Ads, Opera’s Q1 Study Finds, iPhone Also Beating Android For Generating Ad Traffic

iPad Still Dominates Tablet Ads With iPad Mini Gaining, Velti Finds

“My belief, though, is that what Google is winning with Android is a booby prize — overwhelming majority share of the unprofitable segment of the market.” – John Gruber

When it comes to ad revenues and profits, we shouldn’t be counting Android as a single entity anyway. Ad revenues don’t help Android, the platform. They help specific digital stores. Ads going to Amazon, Google, and the various stores in China and elsewhere need to be broken out separately, not lumped together.

Awards Ceremony: Google wins the Gold and they win it going away. But they receive their Gold medal standing on the Apple iOS platform, not the Android platform.

Silver and Bronze? I’ll let you decide if it’s Facebook, Yahoo, Microsoft’s Bing or someone else. They’re all so far back that it doesn’t much matter now anyway. That may change over time but we’ll have to wait and see how this market develops.

“Razors-And-Blades” Content Sales

“(T)he razor and blades business model, is a business model wherein one item is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as supplies…” ~ Wikipedia

The “razors-and-blades” business model is tricky to score.

— Hardware revenues and profits mean NOTHING in the “razors-and-blades” model. In fact, it’s not unusual to LOSE money from hardware (razor) sales.

— Market share means both nothing and everything in the “razors-and-blades” model. It means nothing because it doesn’t actually generate any profits but it means everything because it is a prerequisite to generating profits. In fact, the only reason you’re giving away your hardware in the first place is to acquire massive market share which, in turn, will hopefully lead to massive profits.

— Ultimately, the only way to measure the success of the “razors-and-blades” model is on the net profits generated by the sale of the complementary goods (razors). In mobile, the complementary goods are content such as music, video, books, etc. and apps. Amazon also has the added advantage of being able to sell everything from their sprawling retail catalog.

As I tried to explain in my tersely titled article: “Selling The Amazon Kindle Fire and Google Nexus 7 Is As Silly As Selling Razor Blades To Men Who Love Beards“, the “razors-and-blades” model makes no sense in this market space. At least it makes no sense to me. In the “razors-and-blades” model, the complementary sales – whether it be blades for razors, or ink for inkjet printers or games for gaming consoles – must be proprietary and must command a premium price. That’s the whole point. Give away the razor, make it back – and more – by selling the blades at a premium.

If you’re selling content, you want to be platform agnostic so that you can sell as much content as possible. This, in my opinion, should be Amazon’s strategy.

If you’re giving away hardware in order to sell content, then you want that content to be tied to your hardware product so that you can monopolize the sale of the complementary product and command a premium price.

In the mobile space, the complementary sales ARE NOT proprietary, they ARE subject to competition and they DO NOT command a premium price. Amazon and Google don’t sell content that is any different or superior to that being sold by Apple and other content providers and their content isn’t being sold at a premium. In fact, Amazon often sells their merchandise at a DISCOUNT which – in the “razors-and-blades” business model – is completely bat-manure crazy. ((Then again, we all know that Jeff Bezos is crazy like a fox.))

So who’s winning in the “razors-and-blades” business model? Why, surprisingly, it’s Apple and it’s Apple in a runaway.

Google Play now at 90% of iOS app store downloads; iOS still holds a 2.6X revenue lead

Despite growing competition from other tablets, Apple’s iPad still accounts for a whopping 89.28 percent of e-commerce website traffic, and also rakes in more money on a per-user basis than any other platform. ~ Monetate

Distimo reports that iOS App Store revenues were 430% larger than Android during 2012. ~ Apple F2Q13 Earnings Call

“…iTunes inclusive of Apple’s own Software generates as much as 15% operating margin on gross revenues. That’s over $2 billion a year.” ~ Asymco, So long, break-even


Source: Canalys

Apple sells their content, not in order to make money but, in order to make their hardware more attractive so that they can sell ever more hardware and make ever more profits. With regard to tablets, Apple is playing the OPPOSITE game that the Amazon Fire and the Google Nexus are playing. While Amazon and Google subsidize their tablets (razors) in order to make money on the sale of their content (blades), Apple should be subsidizing the sale of their content (blades) in order to make money on the sale of their hardware (razors). But that’s not how Apple rolls. Instead, Apple sells their hardware at a premium AND they sell their content at a premium. That’s not supposed to happen but that’s just how good the Apple ecosystem is.

It’s like a walk-on winning the Olympic marathon while everyone else is stuck in the starting blocks.

You can say that it’s elitist or arrogant to argue that iOS users are better customers than Android users. But you can also say that it’s the truth. ~ John Gruber, Church of market share

One last thing. If Amazon and Google have an incentive to sell discounted hardware and premium content and Apple has an incentive to sell premium hardware and discounted content, one of those business models is going to fail and it’s going to fail hard. Since Apple is, so far, successfully selling premium hardware AND premium content, I’ll let you be the judge of how this is going to play out.

Awards Ceremony: I’m tempted to award all three medals to Apple just for having the sheer audacity to win a game that they didn’t even enter. But I guess Apple will have to console themselves with just winning the Gold.

And the Amazon Fire and the Google Nexus tablets? Disqualified for not understanding the rules of the game that they were playing.

Remember, Amazon and Google sell their hardware at cost. They don’t make a penny off those sales and they might even be taking a loss.

Market share? Yes, they have taken some minor market share…in a market where they are GIVING AWAY THEIR MERCHANDISE. And market share is not how you score in the “razors-and-blades” game. While the press and the pundits fawn over the market share of the Amazon Fire and the Google Nexus, what they’re entirely missing is that in the “razors-and-blades” business model, market share should be a GIVEN. I mean, honestly, if you can’t obtain overwhelming market share when you’re giving away your product at cost, then you should be ashamed, embarrassed, abashed, chagrined, humiliated and mortified ’cause you’re doing something terribly, terribly wrong.

You win the “razors-and-blades” game by scoring the most content profits. All those Amazon Fire and Google Nexus market share numbers that the analysts are always going gaga over? Meaningless. They should be removed from the count. They’re probably not hurting the sales of the other available tablets and they’re not helping the bottom lines of their makers either. There is zero proof that Amazon and Google’s hardware giveaways have led to increased retail sales which, after all, in the “razors-and-blades” model, IS the point.

And if you’re going to prophesy that market share alone gives Google data that will someday, somehow, be worth something to someone, then you need to go back and re-read how the “razor-and-blades” business model is scored.

What we desperately need in analyzing mobile computing is far more attention paid to profits and far less attention paid to prophets.

Next Time

Next time I will finish with the “mother” of all business models – platforms – and do the medal count.

Google’s Android Activations Are A Lot Less Cash Cow And A Lot More Bull. And That’s OK.

Read Part One of John’s column entitled: Android’s Market Share Is Literally A Joke

Read Part Three of John’s column entitled: Google’s Android Activations Are A Lot Less Cash Cow And A Lot More Bull. And That’s OK.

The author would like to gratefully acknowledge the contributions of Ben Bajarin and Steve Wildstrom. All the great ideas, that you agree with, were theirs. All the bad ideas, that you disagree with, were mine.

Android’s Market Share Is Literally A Joke

This is the first of three articles looking at how we measure – and mis-measure – who is “winning” in the mobile sector. Article one focuses on market share and was inspired by an article written by Bill Shamblin, entitled: “Chasing Smartphone Market Share Is A Chump’s Game.” Article two will focus on the proper way to measure or “score” mobile hardware manufacturing, mobile advertising and the “razors-and-blades” content models. Article three will focus on the role that market share plays in the network effect and will examine the proper way to measure or “score” how well a platform is doing.

The Joke

Have you heard this one?

Two farmers bought a truckload of watermelons, paying five dollars apiece for them. Then they drove to the market and sold all their watermelons for four dollars each. After counting their money at the end of the day, they realized that they’d ended up with less money than they’d started with.

“See!” said the one farmer to the other. “I told you we shoulda got a bigger truck.”

Or how about this one?

Android is winning because they got a bigger truck.

The Joke Is On Us

Both “jokes” are based upon the old saw that one can lose money on every sale but make it up in volume. Unfortunately, the joke is on us because this is exactly the kind of nonsensical analysis that is being doled out by tech pundits and lapped up by the press and investors. You think I’m exaggerating? Take a gander at some of these recent tech headlines:

Android is crushing Apple and Microsoft in the mobile device market
Android looks like it’s winning
CHART OF THE DAY: The iPhone’s Market Share Is Dead In The Water
Despite its upmarket history, Apple needs to compete on price
Gartner: Apple falls below 20% in smartphone market share
Harvard Liquidates Apple Stake After IPhone Sales Lose Steam
How Apple Is Losing Mobile
IDC: Apple’s share of worldwide tablet market drops under 40%
iPhone growth stalls as Android continues to nip away at Apple’s market share
iPhone Market Share Stuck At 18%
Nearly 75% Of All Smartphones Sold In Q1 Were Android
Sharp to seek Samsung edge for survival as Apple sales lose steam
Why Android Is Winning The Tablet Wars

I could link to a dozen more headlines just like them. These headlines – or their underlying articles – all have two things in common:

1) They contend that Android is winning and Apple’s iPhone is in deep, deep trouble; and
2) They point to market share as the sole or primary basis for their conclusion.

TechCrunch sums up the thoughts of many this way:

“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.”

ReadWrite takes it one, final step further, stating:

“The Mobile Battle Is Over – And Google Won.”

In other words, pundits think that Android has won because they “have a bigger truck” (i.e. more market share) – regardless of how much – or how little – profit Android manufacturers make. Android, the pundits opine without a hint of irony, is not making much, if any, money but that’s okay because they’re making it up in volume.

But is that really how market share works? Can you tell how well a company or an operating system is doing solely by measuring its market share?

No, of course not.

Quiz #1: Market Share Alone

Question: Company A has 25% market share. Company Z has 75% market share. Which company is doing better?

Answer: With market share alone, there’s simply no way to know or tell. Company A might be bringing in all the profits and company Z might be going bankrupt.

The Wrong Way To Calculate Who’s Winning

(T)he primary problem with using market share as a measure of business health is it provides no insight into the profitability of the product being sold. ~ Bill Shamblin

Scoring by market share alone and ignoring profit is like saying that a baseball team won because it had more hits when the other team scored more runs. Scoring by market share alone and ignoring profit is like saying that a football team won because it gained more yards when the other team scored more points. Scoring by market share alone and ignoring profit is like saying that a hockey team won because it had more shots on goal when the other team had more goals.

Market share without context is not only useless, it is worse than useless because it is likely to be misinterpreted.

First, market share without context assumes that each percentage of market share is equal to another – that every Android activation is equal to an iOS sale. Nothing could be further from the truth. You can’t simply total up market share and determine a winner any more than you could count up coins or poker chips without knowing the underlying value of those coins or chips. A penny does not have the same value as a quarter and only a small child would rather have more coins than fewer coins but more money.

Second, market share without context implies that market share is a zero sum game – that market share gains for one always result in a loss to another. But in a rapidly growing market, a company can actually LOSE market share yet have both positive unit sales and profit growth. Not growing as fast as another company is not nearly the same as “losing”, especially if the growth is coming in a more desirable portion of the market.

For example, despite a decline in Q1 market share, iPhone sales actually increased based on year over year comparisons. (iPhone sales were not declining,they were growing slower than the overall market.)

The same was true of tablet sales. Last quarter, Apple LOST tablet market share, but because the entire market was rapidly growing, they GREW unit sales by 65%.


Source: Apple 2.0, “Pie charts of the day: Tablet sales grew 140% year over year”

The “Fair-Share” Way To Calculate Who’s “Winning”

What matters is not only market share and not only profit share but the ratio between them. This is called Fair share profit analysis. Fair Share Profit Analysis contends that 1 point of market share should deliver 1 or more points of profit share.

Less than a 1-to-1 ratio of profit share to market share demonstrates that a company is buying market share; that the company has not been able to differentiate its product in the market and is likely competing primarily on price.

More than a 1-to-1 ratio of profit share to market share demonstrates a company’s ability to differentiate its products, provide more value than its competitors, command higher prices, charge a premium and enjoy pricing power.

Quiz #2: Market Share or Profit Share

Question: Company A has 25% market share and 75% profit share. Company Z has 75% market share and 25% profit share. Which company is doing better?

Answer: If you said anything other than company A, then you are dumber than a doorknob. Any intelligent person would take company A’s profit share over that of company Z’s market share.

No one would be confused if Apple had 50 percent market share and 50 percent of the profits. But apparently it’s very confusing to some that Apple has only 5 percent of the market share and well over 50 percent of the profits. ~ John Gruber, The church of market share

Imagine, for example, that Apple were a hamburger chain who made more money than McDonalds, Burger King, and Wendys combined, but only sold 5% of the total hamburgers. Would anyone seriously contend that Apple was “losing” the hamburger wars?

Apparently so. For example, take this analysis from Matt Asay of ReadWrite (please!):

For those who say market share doesn’t matter, that Apple still commands most of the industry’s tablet profits, they clearly haven’t been paying attention to the smartphone market.

It turns out it’s a really big deal to maintain market share, and not simply profits. Profit share follows market share.

Profit share follows market share? Are you kidding me? Show me a business sector where profits have a 1-to-1 correlation with market share and I’ll show you the exception that proves the rule. The reason market share doesn’t necessarily correlate to profit share is because profits are made up of both market share and margins. And market share alone tells us nothing about margins, therefore market share and profit share are almost always going to be unbalanced.


Source: Asymco, Escaping PCs

Take, for example, the Apple Mac. As the pie chart above demonstrates, the Mac has 45% profit share with only 8% of the market share. That means that Apple pulls in an awesome 5.63% of the sector’s profits for each and every 1% of its market share.

Profit share always follows market share? Not hardly.

The truth is, anyone can get market share if they want it badly enough. All they need to do is sell their product at cost, give it away for free or, better yet, subsidize (pay their customers) to take the product off their hands. This is called “buying” market share, but it always comes at the cost of profits.

Pricing to gain market share simply for the sake of market share is a chump’s game. ~ Bill Shamblin

The problem is, you can “cheat” and buy market share, but you can’t do the reverse and “cheat” to buy profits. You have to EARN profits. Buying market share is a downhill race to the bottom but gaining profits is an tortuous uphill climb and it can only be made if the manufacturer is able to produce highly valued and differentiated products. The company that buys market share must inevitably go out of business or reverse its course and fight its way back up to profitability. The company with the value and the profits, on the other hand, has the advantage of holding the high ground and can choose to take market share at will.

Quiz #3: Less Market Share Can Be Better Than More

Question: Company A has 25% market share and 50% profit share. Company Z has 75% market share and 50% profit share. Which company is doing better?

Answer: Anyone with any business sense would say company A.

Company A is commanding 3 times the price of Company Z. The formula is 50% profit share divided by 25% market share (50/25 = 2). This means that for every one percent of market share, company A has two percent of the profit share. Company Z’s position is reversed. For every one percent of market share, they command only 0.5% profit share (50/75 = 0.66). Company Z would have to work three times as hard and sell 3 times as much product just to match the profits of a single sale by company A.

Grading The Contestants

Android accounts for approximately 70% of global smartphone shipments and 29% of global profits. This means that the average Android manufacturer creates just .41% of profit for each point of market share (0.29/0.70 = .414). In other words, the average Android manufacturer needs to capture 2.4 points of market share just to increase their market profit by 1%.

Such a low fair share profit index may indicate that Android manufacturers are:

— Having difficulty differentiating their product;
— Sacrificing profits in order to buy market share (the “race to the bottom”);
— Unable to reach economies of scale in the manufacturing process.

(Profit data, source: Canaccord, Market share, source: IDC)

Samsung is doing far, far better than the average Android manufacturer. Samsung’s 2013 Q1 market share was 33% and its profit share was 43%. This means that Samsung reels in 1.3% of the profits for every 1% of the market share it owns (0.43/0.33 = 1.30). Samsung, unlike all other Android manufacturers, is earning, rather than “buying”, market share.

(Profit data, source: Canaccord, Market share, source: IDC)

Apple’s iPhone 2013 Q1 market share was 18% with 57% profit share. This means that Apple’s iPhone took in a lavish 3.12% ((0.57/0.18) of all profits for each 1% percent of market share it controls.

If Android manufacturers needed to sell 2.4 phones just to gain 1% profit share, they would need to sell a staggering 7.5 units just to match the profits that Apple garnered from the sale of a single iPhone.

As Daniel Eran Dilger puts it:

“… Apple could simply have blown through much of its $13.1 billion quarterly profit to “beat” Samsung in market share, rather than allowing Samsung to do that while earning $4.8 billion less than Apple.”

Further, in 2012 Q1, Apple held 23% market share and 74% profit share. This means that each 1% of market share was equal to 3.22% (0.74/0.23) of the sector’s profit share. Apple’s market share to profit share ratio remains almost identical, which means that Apple has maintained its pricing power. Not only that, by focusing on just a few smartphone models, Apple has become the low-cost manufacturer in smartphones as well.


Source: Ben Evans, Mobile is eating the world

Take a good hard look at the chart, above, then go back and re-read the headlines I listed at the start of this article. What each and every one of those headlines is contending is that Android is winning and Apple is losing because Apple doesn’t control the green portion of the chart, above.

I mean, honest to goodness, take a look at the total units sold compared to the paltry profits obtained from those green sales. Who in their right mind would even WANT that market share?

Price Elasticity

What we’re really talking about here is the economic concept of price elasticity. “Price elasticity” seems to be way beyond the pay grade of most pundits and analysts who follow the mobile sector, but what it essentially means is that when the price of something goes down, sales almost always go up, but the rate of that sales increase depends upon the price elasticity of the product. In other words, dropping prices may increase sales but the increased sales may result in disproportionately larger or smaller profits.

Unless we truly understand the price elasticity of the iPhone, we really shouldn’t be calling for Apple to drop its iPhone prices.


It isn’t what we don’t know that gives us trouble, it’s what we know that ain’t so. – Will Rogers

Not only do the high priests of market share have it wrong, they have it exactly backwards. The company with the lower market share and the higher profits has all of the leverage. The goal is to INCREASE, not decrease, the ratio of profits to market share. Increasing market share at the cost of profits is a recipe for disaster, not a formula for success.

Apple may or may not do well in the future but right now, and contrary to popular belief, they are winning the smartphone wars and winning them handily.

3.12% Apple
1.30% Samsung
0.41% All Android

Not only is market share not the best way to evaluate the relative positions of competitors but, without context, it is one of the worst. Assuming that market share will always bring you success is like assuming that a bigger truck will always bring you bigger profits. It’s literally a joke.


Next, I’ll talk about how market share affects hardware manufacturing, advertising and the “razors-and-blades” content models. The series will conclude with a discussion of platforms and the network effect.

Read Part Two of John’s column entitled: 4 Mobile Business Models, 4 Ways to Keep Score.

Read Part Three of John’s column entitled: Google’s Android Activations Are A Lot Less Cash Cow And A Lot More Bull. And That’s OK.

Apple Is Playing Chicken With The Mobile Carriers

“The game of chicken, also known as the hawk-dove game or snow-drift game, is an influential model of conflict for two players in game theory. The principle of the game is that while each player prefers not to yield to the other, the worst possible outcome occurs when both players do not yield.” ~ Wikipedia

800 Android Carriers vs. 240 iPhone Carriers

“The narrative has been focused on the consumer demand, and the narrative needs to shift to the operator…” ~ Horace Dediu, former in-house analyst for Nokia

Android sells devices through almost all of the world’s 800 carriers while Apple sells the iPhone through only about 240. (Only about 500 of the world’s global operators have the network capabilities needed to handle the iPhone, but that number is quickly increasing.)

The reason for the discrepancy between the number of carriers supplying Android and the iPhone is that Apple prices their phones above $600 and places sales quotas and other requirements on the carriers before they are permitted to sell the iPhone. Potential partners must determine whether taking on these obligations is worth the benefit of offering the device.

Examples of holdouts are China Mobile Ltd., the world’s biggest phone company, and NTT DoCoMo Inc., Japan’s largest mobile carrier. On the other hand, other companies are succumbing to Apple’s demands. T-Mobile added the iPhone to its lineup in April and they announced that they have sold 500,000 iPhones in just under a month. And U.S. Cellular (USM), had long contended that the iPhone cost too much, yet last week they announced that they had agreed to sell $1.2 billion worth of handsets over three years, after conceding that their failure to carry the iPhone was costing them customers.

Are The Carriers In Control…

Adam Satariano of Bloomburg reviewed the current carrier impasse and concluded:

“Apple Inc. (AAPL) is missing out on a chance to court as many as 2.8 billion new smartphone customers, many of them in Asia, as wireless-service providers balk at conditions imposed by the iPhone maker and drag their heels in signing on as partners.”

“Carriers are starting to question Apple’s pricing strategy and are supporting multiple other platforms,” said Shah at Strategy Analytics. “They no longer need Apple.”

…Or Is Apple In Control?

The unasked question here is: If Apple is losing the opportunity to sell more iPhones because of their onerous conditions, then why does Apple continue to impose those conditions? The unstated answer should be – but apparently isn’t – obvious.

Clearly Apple – unlike the vast majority of tech pundits and Wall Street Analysts – does not see a pressing need to acquire additional operators at any cost. Of course Apple wants more customers, and that’s only going to happen if Apple expands its carrier base. However, unlike most of the rest of the world, Apple feels that they can patiently wait until the carriers come to them and meet their terms. Does that make Apple arrogant and out-of-touch with reality or does that make them master negotiators?

Four Realities That Favor Apple: Capacity, Real Growth, Retention and Profits

First, Apple was at their iPhone manufacturing capacity for much of the holiday quarter. It doesn’t make much sense for Apple to increase the number of addressable customers until and unless they have the capacity to provide those new customers with product.


Second, as you can see from the trajectory of the chart of the iPhone’s cumulative sales, above, Apple is still enjoying significant real growth in the sales of their phones. This truth is often obscured and overshadowed by market share numbers.

Third, as markets approach saturation in the U.S. and Europe, retention and churn become far bigger issues and when it comes to customer satisfaction and retention, Apple has it all over their competitors.

Notice how Apple started with only AT&T in the U.S., and then slowly and methodically ground down the opposition of the other carriers until Verizon, then Sprint, then T-Mobile, then U.S. Cellular and many other small carriers caved in as the churn caused by the iPhone crushed their sales and then caved in their profits.

Fourth, Apple takes in 57% of the profits in the mobile industry with only 8% of the sector’s market share. That is some serious leverage.

Apple is Enigmatic But Still Susceptible To Analysis

I contacted Apple to see what their actual negotiation strategy was but, oddly, they were not very forthcoming. Go figure. Tim Cook has failed to return my several calls (or even had the courtesy to lift the current restraining order against me) and my $605,000 attempt to have coffee with him failed when it was discovered that I had used a stolen credit card. C’est la vie.

So we’re going to have to use analysis (i.e., guesswork) instead. My best guess is that Apple’s strategy is to go after the whales and ignore the minnows. (The minnows will fall all over themselves to jump on board once the whales are lined up, anyway.) Apple only has so much capacity to manufacture phones as it is and they’d prefer to expand first in those markets that count and count the most.

Further, Apple is a damn patient negotiator. While the rest of the world is screaming at the top of their lungs that Apple has to “DO SOMETHING”, Apple is patiently waiting for the carriers to realize that they can’t compete without the iPhone in their mobile portfolio. And based upon the capitulation of Sprint, T-Mobile and U.S. Cellular, Apple may just be right.

So who will win this game of Chicken? Right now, Wall Street and a whole lot of investors are betting against Apple. But if you look at the history of Apple’s negotiations with the music labels, with AT&T and with all of Apple’s recent carrier acquisitions, you can see that Apple has played – and won – this game before.

Only time will tell us which side will blink first. But me – I’m not betting against Apple.

Android’s Penetration Vs. Apple’s Skimming Marketing Strategies

images-45Technology pundits and press, alike, seem obsessed with market share. But obtaining large market share is just one of many successful business strategies. Android follows a penetration pricing strategy. Apple uses a skimming strategy. Neither is inherently superior to the other. Like any strategy, each has advantages and disadvantages and their ultimate success often depends upon both circumstances and execution.

Penetration Pricing

Penetration pricing occurs when a company launches a low-priced product with the goal of securing market share. For example, a sponge manufacturer might use a penetration pricing strategy to lure customers from current competitors and to discourage new competitors from entering the industry. If the sponge’s price is low enough, consumers will flock to the new product. Competitors who can’t produce and promote sponges for such a small profit will avoid the market, freeing the sponge company to maximize brand recognition and goodwill. ~ Stan Mack, Demand Media

Price Skimming

A price skimming strategy focuses on maximizing profits by charging a high price for early adopters of a new product, then gradually lowering the price to attract thriftier consumers. For example, a cell phone company might launch a new product with an initial high price, capitalizing on some people’s willingness to pay a premium for cutting-edge technology. When sales to that group slow or competitors emerge, the company progressively lowers its price, skimming each layer of the market until the low price wins over even frugal buyers. ~ Stan Mack, Demand Media

Apple has added a twist to the skimming strategy. Rather than introducing their products at a high price and then lowering their prices later, Apple stakes out a price and then maintains and defends that price by significantly increasing the value of their products in future iterations.

For example, over the past six years, the average sales price of the iPhone has remained remarkably stable with the subsidized price remaining at ~$200 and the unsubsidized price hovering around $650.

Advantages and Disadvantages Of Price Skimming

Price skimming offers four major advantages…. It can offer insight into what consumers are willing to pay. It can create an aura of prestige around your product. If the initial price is too high, you can lower it easily. Finally, late adopters might be pleased to get your prestigious product at a bargain price, which creates goodwill for your company. A major disadvantage, however, is that large profits attract competitors, so this price strategy only works well for businesses that have a significant competitive advantage, such as proprietary technology.

The argument against Apple’s price skimming strategy is that the competition has caught up with the iPhone and Apple is no longer able to compete unless they lower their prices. But do the facts support this argument?

First, the iPhone has received 8 (EDIT: make that 9, as of March 21, 2013) straight J.D. Power and Associates awards for customer satisfaction and Apple reported that four times as many iPhone users switched from an Android phone than to an Android phone in the fourth quarter of 2012. Clearly Apple’s cachet is not on the wane, at least not in the minds of phone buying consumers.

Second, in 2012, Apple garnered 69% of all mobile phone profits. Further, they did it with only 8% of the total market share. That means that the remaining 92% of the market provided only 31% of the sector’s total profits. That’s price skimming at its finest.


The current meme is that Apple MUST abandon their skimming strategy and pursue a price penetration strategy instead. However, the facts simply do not support this contention. Apple could, of course, “buy” more market share simply by lowering their prices, but this has two major disadvantages. First, the market share that they would be buying is worth far less than the market share that they already own. Second, a lower price would lead to lower profits as well. It is obvious – or rather it SHOULD be obvious – that this could be counter-productive.

There’s nothing wrong with market share and I’m quite certain that Apple would be more than happy to expand their market share – but not at any price. For example, Apple has some 70% market share in iPods and around 50% market share in iPads. Yet they are doing this while still maintaining their price skimming strategy.

Price skimming is neither the only strategy nor is it the only superior strategy. It is just one of many marketing strategies. However, Apple is executing the strategy of price skimming brilliantly…even if Wall Street and the pundits stubbornly refuse to acknowledge it.

Does The Rise Of Android’s Market Share Mean The End of Apple’s Profits?


It’s an article of faith in the Church of Market Share that Android is nearing a tipping point where its market share lead will inevitably turn into a developer share lead, too. ~ John Gruber

Matt Asay, writing for Readwrite Mobile, puts this argument into words in his article entitled: “As iPad’s Market Share Falls, Must Profits Follow?

For those who say market share doesn’t matter, that Apple still commands most of the industry’s tablet profits, they clearly haven’t been paying attention to the smartphone market. Profit share follows market share…

Only, here’s the thing. I HAVE been paying attention to the smartphone market. Perhaps more importantly, Horace Dediu has been too. And as his chart, above, demonstrates, the facts belie the argument that profit share follows market share. Even as Android’s market share has grown by leaps and bounds, Apple’s iPhone profit share has grown too. How can this be?

What’s Really Happening

Here’s what the facts are telling us. First, Android’s growth has not hurt Apple’s profit share. Instead, Android gobbled up all of the profits from the other smart phone manufacturers. Second, Samsung subsequently gobbled up all of the profits from the other Android manufacturers. Samsung now makes as much profit share as the entire mobile industry did five years ago. Third, the iPhone has not only survived the growth of Android’s market share, it has thrived, growing its profit share from 21% in 2008, to 50% in 2010, to 57% at the start of 2011, 73% at the start of 2012, and 72% at the end of 2012. And since the pool of profits has grown dramatically over the past five years, Apple’s profits have too.

What will it take to get Apple’s critics to acknowledge that Apple’s iPhone strategy is actually a raging success rather than the raging failure they constantly portray it to be? Does Apple need to take in 100% of the profits in perpetuity for them to be convinced?

Faulty Analysis

The problem with our obsession with market share is that it rests on two faulty foundations. First, it assumes that every product sold within a category is always just as valuable as another. Second, it assumes that every customer who buys a product is of equal value. These two premises are laughably wrong.

It’s A Mistake To “Pool” all sales together

Are all smartphones or all tablets of equal quality or used in the same way? Hardly. No knowledgable person would argue that they were. Yet when we use market share as our metric, we assume exactly that.

Kiddie pools and above-ground pools and in-ground pools are all considered to be “pools”. But does the sale of one necessarily impact on the sale of another? Sandals and dress shoes and winter boots are all considered to be “shoes”. But does the sale of one necessarily impact the sale of another? Similarly, when we lump all types and makes of phones or tablets together, we create a false basis of comparison. Is the iPhone or the iPad really competing with the gray market phones and tablets being sold in China anymore than in-ground pools are competing with kiddie pools or dress shoes are competing with sandals? Just because two products fall within the same category, does not necessarily mean that they are in competition with one another.

Not All Customers Are Equal

“(T)he fundamental flaw in the Church of Market Share doctrine is the assumption that users are users. That one platform with, say, 40 percent market share, must be in a stronger position than another platform with, say, 20 percent market share, simply because a larger number of users is better, period. What Apple has shown with the Mac, and now with the iPhone and iPad, is that all users are not equivalent. Counting only the Mac, Apple is not the biggest PC maker by unit share. But it is by far the most profitable, quarter after quarter, year after year. What’s more important than a company’s share of the overall market is the company’s share of the profitable side of the overall market.” ~ John Gruber

The fact that customers are not of equal value is so fundamental that I shouldn’t even have to say it. There are whole industries and entire fields of learning devoted to the art of finding the right customer for the right company or product. Not only do companies target preferred customers, but they actively shun customers who are counter-productive too. Yet when we use market share as our metric, we assume that a customer is a customer is a customer. Nothing could be further from the truth.

For example, I might be an ideal customer for Krispy Kreme Donuts. But I might be a lousy customer for Victoria’s Secret. (This is because I stopped wearing frilly lady’s underwear years and years ago. You can confirm this with my parole officer who will totally back me up on this.)

Being a bad customer is not the same thing as being a bad person. Good people can be bad customers. But being a customer is not the same thing as being a good customer either.

Does Market Share Matter To Apple?

Absolutely. Take a gander at this critique of Apple from Steve Jobs:

“At the critical juncture […], when (Apple) should have gone for market share, they went for profits.” ~ Steve Jobs

Steve Jobs wanted, and Apple wants, market share. But they want the RIGHT market share. Apple wants customers who are willing to pay for their products. And Apple wants customers who are good for their platform. In other words, Apple wants market share in their target demographic. Based on the fact that Apple is taking in 72% of the mobile phone profits with only 8% or 9% of the market share, it sure sounds like they’ve aquired the right market share to me.

Does the rise of Android’s market share mean the end of Apple’s profits? Hardly. You can argue as loudly as you like that developers and profit share must necessarily follow market share. But the facts will shout you down.

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

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:

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.


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.

Upside Down Analysis

These thoughts via Business Insider:

According to estimates from Canaccord Genuity, Samsung has shot further ahead of the pack as the world’s largest smartphone manufacturer, shipping 56.3 million units in the third quarter.

Apple’s consolation is that it still takes a larger share of industry profits, despite shipping approximately half as many units as Samsung.

Today’s analysis of the mobile industry makes my head hurt because it is analysis turned on its head. In business, profits are not the consolation prize. Profits are the ONLY prize.


2012: The Year Google Fixes Android or Loses the War

The end of 2011 brought about some interesting market developments. Both Nielsen and NPD shared data that the once so dominant Android actually declined in market share over the holiday quarter of 2011. Both Nielsen and NPD also shared that during the same quarter iOS, mostly due to the iPhone, closed the gap on overall Android market share.

Now, with all of these quarterly market share reports, we have to keep in mind that this data only reflects the current quarters data and not the annual or overall installed base. Still, it is important to note that during the holiday quarter (perhaps the most important quarter) Android market share declined and iOS jumped dramatically. This reality should concern Android partners and Google.

We sensed this trend early on and shared with our clients last fall the fact that Android could be headed for a decline in market share. In my TIME column in October of last year I outlined many of the ways that Google was mis-handling Android and unfortunately further straining their already strained relationship with their partners. If Google does not get a handle on not only the fragmentation issues but also their relationship with their partners (by being more transparent and trusting with them) then I anticipate the decline in Android market share to continue. Not solely based on more consumers choosing iOS but by Android’s partners vesting more resources and upping their commitment to Windows Phone.

I don’t expect any Android vendors to completely dump Android but I could see them shipping fewer Android devices overall as a part of their product mix in favor of Windows Phone, which inevitably would lead to fewer Android devices on shelves at any given time, which would lead to even further Android market share decline. I firmly believe that Android device volume is its strongest competitive advantage. Right now Android currently has the bigger share of OEM resources and overall device mix per OEM. However, that could all change very quickly and in 2013 Microsoft will have a compelling story around Windows Phone and Windows 8 for their partners. If Google does not adjust their strategy with Android quickly they run the risk of OEMs shifting the balance of their resources more toward Windows Phone (or something else) and away from the Android platform.

If you line up all of these underlying trends it could spell real trouble for Android. My biggest concern for Android overall is that the platform itself creates no significant hardware loyalty. That is a dangerous truth for any of Google’s hardware partners. The same can be said of Windows Phone, or any other horizontal platform for that matter. If you are going to be in the hardware game you have to differentiate and more importantly create a partner ecosystem that creates customer stickiness.

Lastly, on my point that Android’s competitive advantage is volume of devices in channel at any given time. NPD shared their data on the top devices sold over the Oct/Nov time period. If you look at the chart you see that the top three are iOS devices. Note these are three different phones. If Apple does continue to diversify their products on the market and leave legacy devices in channel at lower price points, they will themselves be creating their own iPhone army of devices that could further hurt Android’s market share over the long haul.