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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