Android revenue: less than you might think…

Android and Apple

Recent statistics show that even though Android has a majority share of the global smartphone market, in terms of revenue it’s not quite as successful as you may think.

IDC recently published some statistics (below) that show Android is clearly “winning” in terms of the volume of smartphones shipped in 2014 with 82.3% of all handsets, and that it’s revenue share stands at an impressive 66.6%.

However, despite a rather smaller share of devices shipped, iOS (13.8%) is still managing to rake in 30.4% of the profits. One could argue that Android is clearly in the lead and in some respects it is – but it’s a very revealing statistic that despite having almost six times the volume share, the revenue generated by Android is only twice that of iOS.

Android Marketshare

Does the market share “war” even matter?

Admittedly as a whole Android accounts for higher revenue, but as far as individual companies goes, Apple makes the lion’s share of the profits and is able to plough that money back into research and development of new products – such as entering the wearables market with the forthcoming Apple Watch. In a sense, Apple can ignore the market share statistics all the way to the bank.

While Android and iOS are especially strong as the first and second place runners, unfortunately for every other platform including Windows Phone, it seems almost futile even trying to compete. Windows Phone claims just 2.7% volume share and 2% of the revenue, while every other smartphone ecosystem combined (BlackBerry and Samsung’s Tizen included) manages a paltry 1.1% and 0.9% for shipments and revenue respectively.

Mobile OS Market Share USA

In the US, the market share of each mobile platform is very different to the global picture.

 

In reality Apple doesn’t actually compete with Android – they both cater to different markets and needs. There are of course a few Android-based manufacturers who strive to compete with Apple (e.g. Samsung), but Apple isn’t even really trying to win over Android users. People that buy cheap Android phones have never been Apple’s market anyway, so it wouldn’t matter if Android didn’t even exist – those customers still wouldn’t buy an Apple device.

It’s similar to the historical arguments made by the Recording Industry Association of America (RIAA) back in the 90’s, who claimed all those people downloading illegal music were losing the record industry billions of dollars in revenue. The truth is, that if those people couldn’t download music for free, most of them wouldn’t have gone out and bought the CDs either.

If further evidence were needed that the numbers don’t necessarily mean all that much, last year IBM put out e-commerce numbers observed during Christmas.

“As a percentage of total online sales, iOS was more than five times higher than Android, driving 23 percent vs. 4.6 percent for Android. On average, iOS users spent $93.94 per order, nearly twice that of Android users, who spent $48.10 per order.”

It will be very interesting to see how the numbers stack up after the Christmas break this year…

Dominance is no guarantee of success

As far as Android and iOS are concerned, they don’t appear to be in danger of slipping into obsolescence any time soon with the might of Google and Apple behind them, but there are of course dangers faced by both companies, and real hurdles that must be overcome to remain on top.

The situation harks back to the desktop OS dominance of Microsoft in the 80’s and 90’s (and even to this day), where nothing could depose the king of its crown. Microsoft held the enviable position of controlling both the personal and the corporate OS markets in what could only be described as a monopoly. Even the availability of alternatives such as Linux and Apple’s OS X didn’t really make any dent in their market share, or profits.

Windows Phone Launch

Microsoft’s desktop monopoly didn’t exactly translate well to the mobile industry.

 

In the mobile space, Google and Apple now find themselves in a similarly dominant position in terms of smartphone operating systems, and it seems unlikely that anyone could challenge that in the immediate future. But as Microsoft knows only too well, dominance in one area doesn’t necessarily guarantee success in another. Likewise as far as entering new product categories is concerned, if you’re too slow to innovative and disrupt the market you can easily put a foot wrong (witness the uphill struggle faced by Microsoft with Windows Phone).

It’s not likely to happen any time soon, but Google and Apple still have a lot of work to do in order to remain in pole position for many years to come – after all, it’s easy for consumer mindsets to suddenly change overnight. The iPhone was released in 2007 and became a huge hit almost immediately (though it took a while for sales to really take off), upending the status quote in just a few years. Nokia too knows all too well that current success doesn’t guarantee it won’t all fall apart after a paradigm shift occurs. Rest on your laurels too long, and somebody else will come along and eat your lunch.

Why does Android have greater market share?

Back to the market share issue – there are compelling reasons why Android overtook iOS, such as the availability of super-sized phablets like the Samsung Galaxy Note. Apple was slow to adapt in the shift to large screens, sticking to its mantra that it already had the perfect-sized phone (the iPhone 5 and 5s) and one that could be used in a one-handed fashion. Apple has now made a play for those people who believe that bigger is better, with its iPhone 6 and 6 Plus. Those two devices have seen record-breaking sales, and are still in rather short supply for the larger capacity 128 GB devices.

Android Offices

We must also consider the undeniable fact that iPhones (and iPads) are expensive, and there’s a huge percentage of the world’s population who simply cannot afford to buy a new iPhone. This makes Android much more appealing in countries where price is an issue – most budget Android phones are actually good enough to do most things you’d want on a phone. If you think about a typical smartphone buyer in India, they are more likely to choose Android due to the lower cost, and once they have that device they tend not to consistently spend money on apps and content (of course, this is a rather huge generalisation).

Even in the relatively affluent UK, millions of people prefer to get everything for free – movies, music, and apps. These are the kind of people who prefer Android for that very reason, or if they do own have an iPhone they are more likely to jailbreak it and avoid paying Apple. There’s perhaps nothing implicitly bad about that, but it goes some way to explain that despite Android’s huge marketshare, the average revenue per user just isn’t that high.

The dangers for Apple and Google

Does Apple care about this? Probably not — they can continue to sell iPhones by the bucketload ad infinitum. They are also making industry-leading profit margins (which hover at around 30-40%) to sustain their investments, research and product innovation for a long time to come.

The problem might arise one day however, when developers simply find that it’s no longer profitable to create iOS apps because the numbers are so low. At the moment this isn’t an immediate threat, and iOS remains an attractive proposition for developers who find that it is worth making apps – for many it’s still more profitable than Android, but there are also developers who claim the opposite is true.

What are the dangers for Google? Android will no doubt continue to be the smartphone OS of choice for many for a long time to come, but there are the ongoing challenges of fragmentation (i.e. too many flavours of Android), which causes huge problems for developers who have to support a myriad of devices.

Furthermore, Android and iOS are now so similar that it’s increasingly difficult to differentiate solely by the OS, which makes it much more about the hardware – and that’s arguably where Apple has the upper hand as it controls every aspect of its iDevices.

Amazon Loses Money

It’s a fire sale! Even Amazon lost money on its high profile Fire Phone.

 

For the smartphone manufacturers who use Android, it’s increasingly difficult to make money selling hardware – even Samsung, the worlds’s number one manufacturer of Android devices, is finding it hard to grow profits, being squeezed by Apple at the high end and Chinese OEMs like Xiaomi at the low end. There is a real possibility that companies such as HTC and Motorola could simply exit the smartphone business in the not too distant future.

What does the future hold?

The fact that Android has a higher market share only benefits two companies – Google and Samsung. Google essentially develops and provides Android for free as it wants to gain value from the platform not hardware – unfortunately this means your personal information and online habits.

Google provides all the backend services (i.e. Google Drive, Google Play, email etc) that Android users rely on, which means they benefit from a greater pool of Android devices and users.

Android and Apple Battle

Samsung also benefits, as it has a ready-made and slick operating system that its users like. Ultimately, Google and Samsung can be congratulated for helping Android become the dominant mobile OS, but that’s a result of catering to a completely different audience to Apple and by expanding the market, not by taking a bite out of Apple’s audience.

The loyal Android users and tech press will always hype up the Android market share statistics, but ultimately Apple will just keep counting its cash, and developing great devices that people want.

Whatever the future holds, both companies will keep on pushing the envelope in terms of hardware and software innovation; there’s never been a better time to be a smartphone user…

Disclaimer: I am an Apple and Android user, and enjoy using them both!

Let us know in the comments what you think of the Android and Apple market share “war”. Does it really matter? and what’s your preferred device, and why…

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