The iPhone's Far From "Dead in the Water"

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In the face of rising Android handset sales, some commentators are suggesting Apple's iPhone is soon doomed to become a mere footnote in the development of smartphone tech. But for a number of reasons, Apple's phone is most definitely "not dead yet!"

A weekend post in Business Insider carried news of Comscore's latest sales figures for the U.S. smartphone market. Noting the soaring sales of Android handsets, the post bore the headline "Android is Destroying Everyone, Especially RIM--iPhone Dead in the Water." Comscore's statistics could easily lead one to agree with that one conclusion...except for three or four important facts.

First, the headline is statistically misleading. Back in March Steve Jobs revealed Apple had sold over 100 million iPhones worldwide. Comscore's data does actually show a small rise in U.S. market share for the iPhone between November 2010 and February 2011--from 25% to 25.2%, but since the actual U.S. smartphone market itself is growing, this means Apple actually sold more handsets in that period, not a static amount. Android is indeed on a huge charge (rising from 26% of the U.S. market to 33% over the same period), and most analysts think it will cement its position as owning the larger part of the market. But that doesn't mean the iPhone is "dead in the water," implying its days as a successful platform are numbered. 

Next, if you include all iOS devices--meaning the iPad and iPod Touch, too--then look at how their owners are using them to view the web (which is where Google makes its money, via ads), then the Android web-visit marketshare has only slightly grown over recent months, and is utterly dwarfed by the iOS web marketshare...meaning Apple's devices could even be driving more revenue to Google through ads than its own Android devices do. 

The growth in Apple's web-visit share is, of course, fueled by the iPad (a tablet, not a smartphone), so you may deem it not a significant counterargument to the BI post. But then let's talk about apps. The Business Insider post contends that developers will go for the dominant platform, and that's Google--it's not a matter of which platform is "better" BI notes, it's a "question of which platform everyone else uses."

That's only partly true, because developers just don't build apps for the fun of it (on the whole), instead they build them to make money. We've known for a long time that Apple owners spend far more money on apps than Android owners, but recent statistics describing app store revenues have driven this point home. Android revenues grew 862% between 2009 and 2010, which sounds incredible until you realize the final share of app store revenues for Google from Android at the end of 2010 was just 4.7%, at an income of $102 million. Apple's revenues then were $1.78 billion, up 132% year on year--an incredible growth rate considering Apple already owned 93% of app income in 2009. Remember that Apple makes just 30% of the price on an app's sale, and then consider where the other 70% went. Developers may go where more people go, but it's absurd to imagine they wouldn't stick with chasing dollars above all else.

RIM, Nokia, and Palm are seeing their smartphone market torn away by Apple and Google--true. Google is growing at a rate that easily outstrips Apple--true. The iPhone is still a much more successful revenue generator for Apple and its tens of thousands of developers than Google's Android store is--true. The iPhone is not "dead in the water."

With evidence that Apple and Google are both girding their loins to offer cleverer phones with better user experiences and different tricks to earn more income means that the smartphone wars are only now about to enter their most interesting phase. 

Read More: Android Wades Into Apple's Patent Minefield to Capture Wireless Credit Card Payments

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5 Comments

  • Frank Pereira

    Look at the chart above. The only hardware manufacturer to grow their sales significantly is Apple (13%). And that is before the iPhone was launched on Verizon!

    Next was Samsung with about 1% growth. Where did the 7% market share increase in Android phones come from if none of the main players grew at all? Most analysts think it's from no-name, cheap and low function Android phones, not from the mainstream players. Very little web surfing and app purchasing from this lot.

    Look at the ecosystem. If you compare Android vs. IOS, IOS has far more devices, far more web browsing, far more apps purchasing, and is a much simpler environment in which to operate. And the money that is paid out to developers dwarfs that of the Android ecosystem.

    I have owned Apple products and Microsoft products since 1984. Well, Microsoft since 1996. All you technical weenies keep pontificating about the virtues of open systems and the types of people who buy Apple products. You just don't get it. An Apple product is like a fine watch or a well made car. It's innovative, has surprising features, is well designed, is elegant, operates simply, has much less vulnerability to issues (bugs, lockups, viruses) and is a typically a pleasure to own. That's why people purchase Apple products, not because of Steve Jobs or a mysterious disease which you have managed to avoid.

    Now if you have a lot of time on your hands and like to experiment, like to fix things, and like to get free software, then you will probably prefer an Android product. But most of us just want to touch the display and get the weather, talk on the phone, get directions, and be impressed with the quality of the things we buy. That's why people buy Apple products. That's why Apple loyalty is higher than that of any competing device. Higher reliability, cooler design, less time spent fixing. That's it.

  • Donald Pierce

    I'm glad sales are so close. Healthy competition drives innovation and keeps prices in check.
    There are pros and cons to both phones.

    I've heard that fragmentation is causing compatibility and consistency problems for Android.
    Though a coworker of mine with an iPhone has been unhappy with limits put on the device regarding downloads and copying files to and from the phone using a computer. Apple devices sound like they are locked down and force you to use Apple iTunes software to migrate content.

    iPhone sounds like an easy to use phone that is thoughtfully integrated, but is highly restrictive on what it allows the users to do with the device.
    Android phones allow much more open access and functionality, but don't have as many apps... yet.

    I'm an Android user, so I'm hoping that freedom wins out over what appears to be monopolistic restrictions in place on Apple products.
    The main reason I bought an Android phone was for 4G speeds and web media streaming.

  • Andrew Krause

    Two reasons why the iPhone will thrive. First, you cannot deny that the 'look and feel' of an Apple product is first class. I still miss my iPhone 3G, though I consider my HTC Droid Incredible to be a fully competant smart phone. It's simply not as much fun to use. The second reason is that Apple continues to innovate where it matters to users, while the Android and other open source platforms tend to innovate where it matters to developers and tech types. There are very few features on Android (granted, I haven't played with Honeycomb) which enhance the user experience that aren't available on iPhone already. There are plenty of features on iPhone which aren't mirrored on any other smartphone platform.

  • Roymond

    It's just great there is competition! This is just the beginning for both these companies' phones/tablets/OSs.

  • Michael Soileau

    Anyone who would call Apple dead in the water is deluded, but Droid does have a few advantages. The biggest one this article missed over is the addition of Amazon to the line-up. Droid never had a central hub to sell apps through, but now that's done. This means we should start seeing a rise in the payments to droid developers over the coming months. Also, Google doesn't charge to make apps, Apple does. Google doesn't charge profits, Apple does.

    Predictably, Apple sued Amazon.

    Two other advantages:

    Droid uses Java, a programming language most programmers are familiar with, (actually, I don't know any programmers who don't know Java). Java development is free on either Eclipse or Netbeans.

    Apple uses "Objective-C", which means you have to learn a new language, use a new SDK, and so forth. To get around this, many Apple programmers use Unity3d instead of learning Objective-C, but being able to use a native programming language is a huge boost to productivity in putting out apps.

    Next, the use of Flash. You can embed flash in I-phones, true, but you can do it much easier on the droid, (no need to embed it, runs much faster).

    Also Apple keeps trying to employ Terms of Service against using anything non-proprietary, like Unity 3D. Apple's micro-managing of everything customers and developers do is contributing to the rise of Android. It's not going to go away, but unless you like Apple's "Do it exactly how we say, when we say, and pay us for the pleasure" attitude, Droid's star will keep rising.