Tuesday, November 15, 2011 at 1:26 pm.
Why Apple’s iPhone market share actually matters
While Google Android’s share of the smartphone market soars, Apple’s is drooping.
- Last quarter, Android represented 53% of smartphone shipments, according to Gartner — some 60 million devices shipped worldwide.
- That represented three times more Android shipments than the year-ago period (21 million), and twice as much market share (25%).
- Meanwhile, Apple’s market share dropped to 15%, down from 17% a year ago and 18% during the prior quarter. Overall shipments grew, but not nearly at the rate as Android’s.
Now, there’s a good explanation for some of this: It was widely known that Apple would be announcing a new iPhone in October, so many people delayed their purchases. Assuming Apple can ramp up supply of the iPhone 4S during the holiday season, it stands to have a better quarter.
But even the best iPhone Christmas probably won’t even come close to Android’s quarter. And even if you broaden your scope to “years” and not “quarters”, it’s safe to say that Google is winning the market share race, and this is not good news for Apple.
(Yes, Apple is beating Google and its partners in many other important categories, such as its share of the industry’s profits, the mobile apps market, and the tablet market. If you add the iPod touch numbers to Apple’s total, iOS looks a little better. Etc. But pure smartphone market share matters, too.)
Why? Because this isn’t just about selling devices and making a few hundred bucks a pop.
It’s about building the dominant mobile platform for the next several decades.
And a big part of that is getting that platform into as many hands as possible, teaching the world how to use it, and building an addictive experience around it that people can’t easily switch away from. And it’s harder to dominate when you are being outsold 3-to-1.
The best news for Apple is that, so far, this “dominant mobile platform for the next several decades” race is nowhere close to being decided.
Google, specifically, has shown little appreciation for its growing popularity:
- That is, Android has not taken advantage of its market share to build an ecosystem that people can’t easily switch away from. There is nothing “sticky” or addictive about Android. If anything, Apple is still doing better in that regard with iMessage, Siri, iCloud, etc.
- Google has not yet made an app and media market that makes publishers more money than Apple does, or which developers would favor for other reasons. I don’t know any savvy developers who are building only for Android, or first for Android. They’re still picking iOS first, because that’s where they are getting the best results and/or making the most money.
- And even if Google did make the significant changes necessary to beat Apple in those regards, it doesn’t have the upgrade path in place to deliver them to most existing Android users. Any big, new things Google makes won’t reach most people until they buy their next phones. And that’s another opportunity for Apple (or anyone) to steal those people away from Google.
What might Apple do to improve its position?
- One important thing is to address the mid- to low-end of the market. Let’s see how the iPhone 3GS — now free at AT&T — does that. (And: Is that enough?)
- Another might be to experiment with larger screen sizes, which some people seem to prefer. If Apple can do it in a way that doesn’t screw up its app experience too much, it might be a good idea.
- Particularly in the U.S., it’s probably important for Apple to support 4G LTE networks with next year’s devices. Carriers are in a hurry to get people onto LTE, and right now, that means pushing Android. I think Apple was right to hold off this year, but it should aim to have LTE support next year.
- Keep coming up with things like iMessage, Siri, FaceTime, iCloud, iTunes Match, etc., which lock people into being long-term Apple users.
- Keep improving the iOS experience for app developers and media publishers, so they continue to prefer building for Apple instead of Google. This includes user-facing features like Newsstand, which help generate revenue for publishers, and developer-facing features like geofencing, which drive new features and apps. (Ideally, without harming the user experience, as Apple did in the Kindle app.) But addressable market size also matters, and that means maximizing device sales.
- Consider sacrificing margins a bit to drive further sales. Billions more in the bank won’t help if Google really does get its act together and pull away. Dominating the handheld computing market is a once-in-a-generation type opportunity. It would be a shame to see Apple come in second place only because it was being too financially conservative.
Now: There is also a good chance that there just won’t be a single, dominant mobile platform for the next several decades — that there will always be two or three companies vying for the position, but never a clear “Windows”-like leader.
Perhaps this market share stuff really doesn’t matter that much, and won’t.
But I can’t imagine that’s the best-case scenario that the folks at Apple or Google are aiming and building toward. Even if that’s the eventual outcome, it still makes sense to be in land-grab mode now.
Within a year, we’ll see how serious Google and Apple — and even a few others, like Microsoft, Amazon, and Facebook — are about that.