Apple #1 in Mobile Apps with 82.7% of Revenue

| News

Apple maintained its dominance of the global mobile app market in 2010, according to research firm iSuppli, raking 82.7% of all revenues. While one could be excused for assuming that Google’s Android Market was the #2 market for mobile app sales, iSuppli ranked it as #4 (4.7% of revenues), behind BlackBerry App World (7.7%) and the now superfluous Nokia Ovi Store (4.9%).

While Apple’s market share is crushingly dominant, the company did lose share in 2010. In 2009, Apple had 92.8% of a much smaller market. The App Store grew 131.9% during 2010, according to iSuppli, but the market as a whole grew 160.2%, which means that Apple’s competitors made tiny inroads into that dominance.

BlackBerry App World, for instance, grew 360.3%, Nokia’s Ovi Store grew 719.4%, and Android Market grew by 861.5%. Of course, in the immortal words of Gandalf, twice nothing is still nothing, as demonstrated in the table below.

iSuppli Chart

Source: IHS Screen Digest February 2011

“In 2010, competitors managed to close the gap with Apple’s iPhone in terms of providing smart phone products with compelling user interfaces,” Jack Kent, analyst, mobile media, for IHS, iSuplli’s new parent company. “However, in terms of mobile application stores, Apple remains far ahead of the competition, with the other stores so far unable to replicate Apple’s success in generating revenue from users. Apple, in contrast, has been able to maintain advantage by leveraging its tightly controlled ecosystem—combining compelling hardware and content with the capability to offer consumers a trusted, integrated and simple billing service via iTunes.”

iSuppli expects mobile app revenue to increase another 81.5% in 2011 to hit US$3.9 billion. The company also expects the “freemium” pricing model to gain in popularity where developers release free apps and then charge for some premium features.

“As application stores become more and more crowded, with hundreds of thousands of apps available on the leading stores, developers increasingly are opting to release their content for free. They do this in the hope that they can monetize their apps by offering additional content or functionality via in-app purchases and advertising,” Mr. Kent said.

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63 Comments Leave Your Own

Bosco (Brad Hutchings)

Bryan, on the long tail of free app downloads, in-app purchasing and ad impression displays probably trends on the fat part of the tail. There’s something else motivating the 290,000 apps that only a handful of people will ever know about. Business-wise for the app developer, it’s usually more about bringing users to a wider context (i.e. a mobile portion of a web or desktop product) or trying to hook up with bigger fish. In my career, I’ve sold a lot of units to a lot of people, but the steady money more often comes from hooking up with a big long-term customer.

It’s why the percentage of free apps on Android doesn’t concern me. Most aren’t serving ads either. They’re just doing some useful thing for free or for a buck or two. If I were bathing in money, I’d be all over the SMSReader developer. There’s some super useful stuff that doesn’t really get through all the noise by developers who are just trying to delightful things.

paikinho

Bosco, could you rephrase what you are trying to say in more laymans terms. I am having a hard time following what you are getting on about.
Thanks for some help.

Bosco (Brad Hutchings)

In layman’s terms… If Apple is maximizing revenue through app sales, good for Apple. Not everyone is playing that game.

RonMacGuy

Not everyone is playing that game.

LOL, more like, not everyone is capable of playing that game.  Because, if they could, they would, and if they can’t, they hire developers to write apps to give away for free…

Jamie

So Android is the number one smartphone platform and yet their software revenue is almost 70 times less than Apple’s? That is truly stunning to me. Suddenly some of Google’s recent moves make more sense. I still don’t think copying Apple part and parcel will help them in the long run though, and it’s difficult to run a business that doesn’t generate profits indefinitely. This will be an interesting year.

Bosco (Brad Hutchings)

Ron, what do you do for a living? Seriously. Do you have any real life insight into how to make a software development gig, career, or business work?

Wanna know something funny? Product-wise, I’ve made the most money in my career on one that I mostly gave away and happily and freely helped people who weren’t jerks. That’s the “hook a bigger fish” approach. It landed a lucrative development contract where I didn’t even have to go meet the people sending me a check for the better part of a year.

Nemo

This simply backs up what the lead developer of Angry Birds said:  That trying to sale apps on Android’s Market Place is a losing proposition.

Well, Google is not happy about losing and is most definitely in the game of maximizing revenue from its Market Place store.  I know, because it has publicly and officially said so.  Google has described its app sales in the Market Place as disappointing and vowed to do something about it, which shows, at least, that it isn’t living in some la la land of not being in it for the money.  Mr. Page has said that the company that he is about to lead, Google, is getting its ass kicked, and he doesn’t like it and won’t stand for it.  We’ll see whether under his leadership Google can do anything about its miserable revenues from sales and what must also be its meager profits from sales, though I expect that Google is making much more money and probably good money from ad revenue.

Bosco (Brad Hutchings)

Nemo, you’re a lawyer. Now hypothetically, if I were a company like Motorola or LG or HTC and I came out with an Android tablet, could I advertise that tablet or create promotional material for such a tablet that included Angry Birds icons, characters, screen shots, trade dress, etc. without the permission of Rovio, its owner? Given the cool factor of Angry Birds, do you think Rovio paid the tablet makers for the privilege of being included or the other way around?

Point is that app sales are not the only way to make money with mobile apps. The Schmidt model of 2 billion handsets and figuring out how to get $10 from each out earns the Apple model of taking 30% on anything south of $67B in app sales.

Bryan Chaffin

As Bosco alluded to, direct sales revenue is not the only story in mobile apps, not by a long shot. It is, however, a story, and I think that for now it’s the biggest story in this space.

I think that as long as Apple’s ecosystem can command this kind of overwhelmingly large portion of those revenues the iOS platform is going to have a perception edge that will be nigh impossible for its competitors to catch up to.

And it’s a virtuous circle (for Apple), too, in that it seems clear to me that iOS users use apps, and a lot of them. I think that this app-using community begets ever more app users, which adds ever more momentum to the platform.

But still, at some point Google will announce a giant leap in mobie app revenues, and it’s very possible that those mobile ad revenues could eventually surpass Apple’s direct sales revenues.

Not any time soon, I should think, but it could happen.

sflocal

And the sun COULD explode in 5 billion years.
And San Francisco COULD disappear underwater in the next earthquake.

What’s your point?  You could throw every conceivable scenario out and eventually, results will occur that goes both ways.

So Google COULD increase their mobile ad revenues to surpass Apple.  But still, Apple COULD do something that makes current revenue generation obsolete in a year.  Google COULD decide to shut down Android.  I could keep going on additional “it ‘could’ happen” scenarios, but they’re getting a little old.

What IS going to happen is a constant roller coaster ride, with each one outdoing the other.  Certain folks here will continue to preach that one day, some day, even if it’s 50 years from now, it COULD be that Android will dominate everything.  So it doesn’t matter if Apple is cleaning house now, or for the next 50 years.  Certain folks will show their agenda and throw theories out there in the hope if it’s discussed enough, it will somehow morph into fact - NOT.

Lee Dronick

So Google COULD increase their mobile ad revenues to surpass Apple.? But still, Apple COULD do something that makes current revenue generation obsolete in a year.

Yes, I doubt that Apple is sitting still, they always seem to be several chess moves ahead of the competition.

furbies

they always seem to be several chess moves ahead of the competition.

Apple’s already thinking about how to put the chess set away after the game. (Which it won of course)

RonMacGuy

on, what do you do for a living? Seriously. Do you have any real life insight into how to make a software development gig, career, or business work?

I’m sorry, Bosco, did you mean a S/W gig, S/W career, or S/W business work? Or did you mean a S/W gig, a career in general, or a business in general?

No, I am not in the S/W business. I have an MBA in corporate finance and manage a $65M annual engineering budget. Probably why we don’t see eye to eye on most things. But I don’t think this disqualifies me from understanding the business side of the industry.

Let’s see. How to make a software business work (Business 101). Come up with an idea, write software, release product, make money by people who want to buy your product. So, in terms of this article, people come up with an idea, write software, release product on iOS, and make money, enabling further ideas, software writing, product releasing, and making more money, enabling further ideas, software writing, product releasing, and making more money, which enables…ad nauseum.

Now, the other side of the coin. Come up with an idea, write software, release product on android, and don’t make money, try again, still don’t make money, get confused over why not making any money while somehow Google makes tons of money… Now, here is where there is a fork in the road. Option 1 - Give up, go back to school, become a lawyer or a teacher or a mechanic or (God forbid) a finance person.  Option 2 - Develop for iOS and start the path detailed above.  Option 3 - Apply at Google and make a steady paycheck developing software that doesn’t make any money.

Oh wait, I forgot to integrate android fragmentation into the other side of the coin. So, come up with an idea, write software, release product on android 1.5, modify software, release on android 1.6, modify software, release product on android 2.0, modify software, release product on 2.2, modify software, release product on 3.0 but just for Xoom, modify software… ad nauseum.

grin

Tiger

The flip has flopped. Apple, which was criticized for decades for being a niche player with small sales, but a loyal, steady user base, has now been replaced by Google which is going for that stance, while Apple is going for the high volume, high dollar method this time around.

Talk about overcompensating and ironic!

paikinho

The Schmidt model of 2 billion handsets and figuring out how to get $10 from each out earns the Apple model of taking 30% on anything south of $67B in app sales.
————
But isn’t that assuming that apples iPhone sales stay stagnant while Androids get to 1.9 billion more than they have currently sold?

If you even said that Apples iphone sales would settle to even merely 20% market share. Then apple would have 4x the number of units they have now and nearly 3 billion in sales from what I understand you are saying.

paikinho

Apple is going for the high volume, high dollar method this time around.
———-
I think Apple just following the model they have had all along. It just happens that this time they have high volume which is relatively new starting with iPods.

Most companies have tried to do the high volume, low dollar amount which is what google appears to be doing with the help of its myriad hardware makers for the Android OS. They are following more of the PC model of things which has been very successful in maintaining the numbers.

But this model is tough on hardware makers as far as them making money or staying in business generally.

Bosco (Brad Hutchings)

If you even said that Apples iphone sales would settle to even merely 20% market share. Then apple would have 4x the number of units they have now and nearly 3 billion in sales from what I understand you are saying.

While Google would have $20B in mobile revenues generated on-phone and keep far more than 30%.

@Ron, you also forgot to integrate that most of the 300,000 apps in the App Store aren’t making sales revenue that more than buys a nice steak dinner occasionally. Long tail. Google it.

paikinho

While Google would have $20B in mobile revenues generated on-phone and keep far more than 30%.

————-
And apple would still be making 90 billion on the sale of its handsets plus revenue from the apps.

Bryan Chaffin

What?s your point?? You could throw every conceivable scenario out and eventually, results will occur that goes both ways.

My point was to acknowledge that direct sales revenue aren’t the only story, a point I honestly think was both salient and elegantly argued. smile

paikinho

(all in really rough math terms)

It is interesting as BH puts it that google is hoping to generate $10 per unit. Given a projection of 2 billion Androids this would give them a projected revenue of 20 billion/yr revenue flow.

If you make the same case for Apple only maintaining 20% of the market They would have somewhere around 400 million units or about 4x what they currently have. If apple had that many units and nothing changed they could expect about 7 billion/year revenue at that level. Respectable given the assumption that there would be 4 times more Android devices.

Apple given todays profits at the app store would be making $17-18 per unit already whereas Google is currently making about $1 per unit. Apple is already more profitable than where google allegedly hopes to be just on the app side.

Then you figure in the 90 billion or so from selling 300 million more units and apple is really making money.

It seems that since direct sales only account for 10% of the $10 goal of Brads idea of what google is looking for, it would be hard to see where an additional $9/unit profit would be coming from.

But assume they can do it, if they can generate 20 billion on 80% of the market while apple generates 7 billion app revenue plus 90 billion on the units, then apple with a measly 20% of the market fares pretty well.

Total domination by Google still results in obscene profits for Apple.

jfbiii

Not everyone is playing that game.

LOL. Seriously? This from the dude that thinks market share is THE only game? WAFI.

Bosco (Brad Hutchings)

jfbiii, You are the “FI” pal. My entire quote was: If Apple is maximizing revenue through app sales, good for Apple. Not everyone is playing that game.

Google, for one, is not playing that game the way Apple is playing that game. Their “open” approach sets some important fundamental checks on what they can get away with. Since users can sideload onto most Android phones, for example, and since Google has committed to showing their partners (such as Moto) how to keep content secure without douchie lock down tricks that mostly piss off the influencers, Google can’t set store and app policies that fundamentally benefit Google at the direct obvious expense of others.

I have to give it to Apple for resourcefulness and creativity in sucking $1.8B in revenues out of a centralized app market. Great for Apple and great for Apple’s investors. Doesn’t mean it’s a great model or even the best model for software developers or end users. Also doesn’t mean it’s the only way to make money from handsets. To put it all in perspective (with handsets anyway), the carriers monetize them to the tune of $600+ per year in revenues just on basic voice and data. App sales and ad revenue are chump change.

Bosco (Brad Hutchings)

It seems that since direct sales only account for 10% of the $10 goal of Brads idea of what google is looking for, it would be hard to see where an additional $9/unit profit would be coming from.

Actually, it’s not my idea. It’s an off-the-cuff remark that Eric Schmidt recently made about how Google makes money from Android. The guy knows the ad monetization game, so I think his off-the-cuff remarks carry a little weight and probably offer some very honest insight (such as targets and goals).

paikinho

App sales and ad revenue are chump change.
———-
So how exactly does this help google get close to Apple in revenue since they aren’t making money on hardware?

Bosco (Brad Hutchings)

So how exactly does this help google get close to Apple in revenue since they aren?t making money on hardware?

Who says that’s Google’s goal? Apple had $15B+ last quarter total revenue, Google had $6.6B+. 30% is profit for Google, while about 22% is profit for Apple. Google doesn’t face much price/feature competition from competitors—there isn’t much room to undercut it and the “open” philosophy ensures less friction for new features. Apple, OTOH, basically lost the smartphone market in about a year precisely because of those.

The similarities to early 90s thinking abound. Apple is more profitable, so it’s OK to be in a niche. Mac users buy more software and spend more money, so it’s the best platform to be on. Mac users are nicer people with more refined tastes who like simpler, more elegant things. Been there. Shouldn’t have been there in retrospect, but been there… This time is different, though, right?

jfbiii

Blah blah blah Apple is doomed blah blah Steve Jobs is a maniacal control freak blah blah blah profits don’t matter blah blah niche losers blah blah blah.

Are you sure you’re not Rob Enderle here under a pseudonym?

RonMacGuy

Blah blah blah Apple is doomed blah blah Steve Jobs is a maniacal control freak blah blah blah profits don?t matter blah blah niche losers blah blah blah.

jfbiii, you forget that Bosco lives in the Wonderful World of android Oz. Don’t try to knock him off the yellow brick road, or he will drop a house on you like he did to Steve Jobs, the Wicked Warlock of the West. He will click his heels together and say, “There’s no place like Google. There’s no place like Google. There’s no place like Google.” Difference is, when he wakes up he realizes he still lives in the Apple dominated world, and he is the only Xoom geek making stupid looking comics for the cute Apple girl (who actually likes the Corporate Finance guy that also likes Apple)!!

LMAO. I really crack myself up sometimes!!

paikinho

Apple, OTOH, basically lost the smartphone market in about a year precisely because of those.
———
I would disagree with such a general statement. Lost it in what way?

Apple didn’t create the smart phone, they are one of many competitors. And they are basically an evolution of what a smart phone was in the market at the time they put out the first iPhone. Android OS phones are the next in the continuing evolution. But there will always be more than one flavor of smart phone. People have different needs and need different choices to fit those needs as we have previously discussed.

When you say “Apple lost the smart phone market” it connotes a couple of things.

1. The the smartphone market was Apple dominated to begin. Clearly this was not the case as there were many other smart phones long before Apple.

2. Lost also could signify that Apple is fading out of the market. Clearly they are not fading out of the market since each quarter they continue to sell more phones and the rate at which they sell phones is getting larger as well.

2-3 billion phones are yet to be sold in this emerging market. Clearly Apple will not have the market share as things emerge. But as is always the case in a Market, there will be the biggest player and an array of smaller players. I know of no market where there is one choice.

So in an emerging market Apple will sell lots of phones as will lots of other vendors. Total market share will only become apparent once saturation is achieved. I believe that Apple will be able to retain 25% of this market or perhaps more over the next 5 years. It is a bit premature to predict what will happen in a market that is just developing. There could even be a player out there somewhere working on something which will relegate both Android and iOS to the closet. Who knows?

If Apple can maintain a 25% market share after saturation, they will not be a marginal playerf. They will still be the biggest company making handsets. And as I and others have posted, they will still dominate in profitability. So as I have said, for at least the next 5-6 years I believe that Apple can run on fumes and be a factor. But the truth is that Apple hasn’t show itself to be a company which rests on its laurels. It will continue to innovate.

10 years out who knows, you could be right, but for now your dire predictions seem to fly in the face of what is happening numerically.

Bosco (Brad Hutchings)

15 months ago, we were all talking about when (not if) Apple would overtake RIM in the US, then Nokia globally in smartphone sales. 15 months later, Android leapfrogged them all to take the #1 spot in Q4 2010 and sold twice as many as Apple that quarter.

So now we talk about app sales revenue. Look, Apple’s walled garden and tight control approach to mobile is quite effective in squeezing great profits out of the here and now. But it leaves itself open to a flurry of competitors who can make things that are at least “good enough” to be perceived as incredible alien level technology by most of the buying public, are available at a lower price (including lower TCO), have fewer arbitrary restrictions on their usage, and get support from more industry players. That was the Windows formula in the early 90s and it’s the Android formula today.

After thinking about it a bit, I’m coming to the opinion that Apple’s app sales are an anomaly. A well constructed one, but an anomaly none-the-less. What if Google invents and popularizes an open “native client”, which makes all or most of the advantages of native application code available in-browser? What if they do it in a way that spawns a proliferation of browser app stores, selling apps that scale from phone to tablet to desktop and access most, if not all, platform-specific features? Where does that leave Apple’s iOS App Store, except in a position of expensive and too heavily regulated?

paikinho, Apple’s disproportionate revenues might mean a couple things (or some combination). They might mean that Apple is just very, very good at mining its garden. It also might mean that Apple is exploiting an information disparity that just won’t last. I think the latter because I think the products thrown up against iOS are pretty amazing in their own right, amazing enough for most people to enjoy the price and openness advantages over Apple kit.

paikinho

It also might mean that Apple is exploiting an information disparity that just won?t last.
———-
But users are only going to buy apps they feel they need and want. And apps are really really cheap. Many are free.

I am certain when a wider array of really cool apps get into the cue at the Android Marketplace, googles revenues will rise. After all, google hasn’t had the necessary time for developers to put all of their stuff out for the Android yet. That is probably why google is trying to jump start by hiring lots of developer types for their marketplace.

I’m not sure what the information gap is that Apple is exploiting. People are pretty simple. I have a need…. whoa, here is an app that someone developed who sees my needs… and it is only 1.99. Wow! Doesn’t really matter all this high minded open-ness or non-openess standards as long as there are more apps than you could even possibly imagine a use for. Market is about getting good products for a good price. That is why apple is making so much money.

The mystery is why Android marketplace isn’t making so much on apps. Personally, I think this is a transitional state. Like you said, “It wont last” but in my use of the word it has more to do with Androids app store not making as much money.

I think the paradox is simple, Apple got to the market first and developed a model to make the most of it. Now google is doing it too, playing catchup, and their profits will rise as well over time as they do catch up.

There are some amazing apps out there for Android just as there are for the iPhone. Currently, the iPhone has more. There are apps on the iPhone which don’t exist on the Android phones and vice versa. (your SMS reader being one that iPhone doesn’t have yet)

Poking around recently I found one of my favorites on the iPhone just came to Android! whooohooo. Very cool.
b.iCycle

But as far as I know, it cost the same on Android or iPhone. The openness of the apple kit or the android kit to me as a consumer is a non-issue. That is something for developers to worry about.

Prices of apps are set to what the market will bear. Openness is no advantage for the masses. Apps for every possible interest of humanity are of interest and I see no great advantage for Androids model over Apples.

Martin Hill

I think these figures demonstrate the reality behind the popular fiction that Android is beating iOS on multiple fronts.

The fiction is that the Android Marketplace boasts 200-250,000 apps.

The reality is that half of those “apps” are ringtones, wallpapers and soundboards and 45,000 are spam apps.

The fiction is that Android has more free apps than iOS.

The reality is that 28% of iOS apps are free apps = 112,000 apps vs 57% of Android Apps = 57,000 apps.

The fiction is that Android app downloads must be surpassing iOS downloads

The reality is that 9 million Android apps are downloaded daily vs 30 million iOS apps every day.

The fiction is that the number of Android devices outnumber iOS devices.

The reality is the installed base for iOS is over 160 million with the majority sold in the last 2 years vs only around 60-70 million Android devices.

The fiction is that Android is outselling iOS in daily sales.

The reality is that iOS sales last quarter of 33 million virtually equalled Android sales.

-Mart

Martin Hill

Bosco, the App Store is far from an anomaly. 

It is purely and simply an extension of Apple’s winning verticlaly-integrated formula originally established in the iTunes Music and Media Store powered by the afterburner of the one-click purchasing power of 160 million credit card wielding iTunes account holders.  iTunes of course has maintained an overwhelming 70-80% share of the worldwide music and media markets for the last decade. 

There is no reason not to expect that the iOS App Store’s dominance won’t also continue, particularly considering the inability of Android manufacturers to be able to field price-competitive devices anywhere close to the iPod touch (10 million sales last quarter - almost a third of the entire number of Android smartphones & tablets sold) or the iPad (7 million sales last quarter and 80% marketshare in the tablet market).

-Mart

Martin Hill

Oh and Bosco, in terms of your excuse that Google and others don’t rely on app sales but rather app advertising income - Mobclix’s recent stats demonstrate that even in the Advertising game, iPhone users are far more valuable than Android users. 

In the Games category, the average iPhone user brought in more than double the advertising revenue per month compared to the average Android user, a third more income in the entertainment category and 30% more in the utilities category.

Even on Google’s home turf - advertising - iOS beats Android. 

Add in iOS’s 1,750%  paid app income disparity with Android and on the hardware side, Apple’s 51% profit share of the entire cell phone industry (despite only having 4% unit sales share) and Android is looking distinctly anaemic on all fronts. 

-Mart.

Bosco (Brad Hutchings)

Mart, I have an Android phone, a Nexus One. I’ll be using it until at least August when my AT&T contract (which I got for 2 iPhones and 3 feature phones) runs out. I switched because Apple’s walled garden approach seemed grossly unfair to me, especially once Jobs declared war on Flash. Few things ever trigger my ethical hackles, BTW. I am pro abortion up to the 39th trimester and I have a cache of illegal 100W light bulbs. I also parked my truck in the reserved hybrid spot at Fresh & Easy the one time I ventured in there.

Here’s the shocker. It even shocked me on about day 2 of my switch. It’s a better phone than the 3GS or the iPhone 4. It’s not a geek thing. It’s like having all of Southern California to run around versus just Disneyland. The iPhone is probably still a safe pick if you’re starting your vacation in smart phone land. An Android phones is what you do long term. Same thing will happen on the tablet side for the same fundamental reasons. Most of the market wants choice. Most will not want to be locked into Apple’s closed ecosystem. Most will recognize that even if Apple is princess-level magical, Android is hot-beach-girl-level magical, and not all of them look exactly like Cinderella.

It’s the 90s all over again, and I really feel for you guys because I was there and was a staunch Mac guy. You feel like your way is better while the barbarians are competing against you and the hoards and masses start splitting their way a lot more and then it just keeps getting worse. Just accept that you’re doing everything you can to help Apple achieve record revenues and profitability, but that a lot of people don’t find that as important as you do, so you’re better than them.

Martin Hill

Bosco,
Funny comment.  grin

Of course the reality is that iOS is a Disneyland that is actually bigger than Southern California and it is where all the profitable businesses are located and is actually where the hot beach babes hang out while all the awkward geeky Android guys live in the poorer suburbs of LA where anything goes and they have to buy all their stuff from a far smaller range at the local flea market (after wading through all the crap) but no-one is making any money as no-one wants to pay for anything and no matter where you go the landscape is cluttered with billboards and tacky flashing neon advertising hoardings and you’d better be careful walking down those back streets and lock your doors at night.  wink

Bosco, I am actually very happy for Google to succeed rather than Microsoft and it is great for Apple to have decent competition to keep them honest and on their toes and provide choice.  I don’t begrudge those who want to go the Android route with all its pros and cons.

However, I don’t like the amount of fact-twisting and distorted press that has been swirling around in recent times as Android-boosters attempt to artificially inflate their numbers, ignore the problems of Android and demean those who choose iOS.

The facts I presented in my earlier posts (which you have of course conveniently ignored as you switched to an emotive argument) demonstrate the fallacy of your market-share figures and this article shows that aiming for unit sales share supremacy is in fact a hollow victory anyway when the vast proportion of software profits and hardware profits for both Apple and 3rd party software developers and hardware peripheral manufacturers continue to be found in the iOS ecosystem, not Android. 

Apple’s vertically-integrated model is not evil, just as Google’s anything-goes advertising-based model is not evil.  They are just different and have different pros and cons for developers, manufacturers and users alike.

It’s not the 90’s any more - Apple’s iOS hardware is actually cheaper than the opposition and has the lion’s share of software and hardware peripherals and has vastly more than the old Mac OS’s 5-10% unit market share this time around. 

It is more like the last decade where the iPod and the iTunes Music store have reigned supreme.  Competitors cannot match the iPod touch and the iPad on price or ecosystem so have to come out with smaller screens, carrier subsidies and artificially bloated app numbers to try and hide this fact. 

We’re not in the 90’s anymore Bosco.  This is the new millennium and whether you like it or not, the integrated iOS approach has been rewarded by the market and put Apple, not Google or MS or HP or HTC as the second most valuable company in the world.  Don’t begrudge Apple their money - they have earned it unlike Microsoft and don’t begrudge those of us who appreciate the advantages of Apple’s ecosystem - we have made our choices for very good reasons.

ciao.

-Mart

RonMacGuy

(which you have of course conveniently ignored as you switched to an emotive argument)

Hey Mart, get used to it.  It’s the way of Bosco…

RonMacGuy

Most of the market wants choice. Most will not want to be locked into Apple?s closed ecosystem.

Bosco, here’s my simple question for you today:  What makes you think you of all people actually understands what “the market” wants?

You see, geeks and techies may not want to be locked into Apple’s closed ecosystem.  But that is not the majority of the market.  The majority of the market wants fast and simple, even if it costs them a bit more.  iPhone and iPad offer that.  You never cease talking to Apple’s closed ecosystem, yet most of the market doesn’t mind it.  This is your biggest fallacy.  This is where you are wrong.

Bosco (Brad Hutchings)

Martin,

I think we’re probably talking about two different things, because your facts do not fit the phone market in the US or globally. Android phones with Marketplace (meaning “Google’s blessing”) are outselling iPhone by about 2:1 right now. Market share, however you’d like to measure it, lags but is catching up. If you want to cherry pick any stat about phones that seems more optimistic for iPhone, I would be more than happy to bet you that it will closer reflect the 2:1 figure in 3 to 6 months.

I called this when Android was barely a blip and you can dig back through TMO to November or December of 2009 if you like, because I perceived a few general things Android does better than iPhone. If you want to dominate, open matters, variety matters, industry-wide buy-in matters, developers and content providers matter, not being a dick matters. If you prefer Disneyland in what you seem to think is a sea of decay in SoCal (and I think that elitism is the blinders you’re wearing), you’re part of a pretty small niche.

Phones are phones, and I think the flaccid Verizon Unicorn is telling us that iPhone is trending toward a customer base of people who love Apple/iPhone rather than best general tool. Same trend is occurring for BlackBerry, BTW. Apps on all three platforms are totally saturated. The exception being that there are still app concepts like background SMS readers that are friggin Matterhorn wonderful on Android, but because of Apple restrictions, are about as exciting as It’s a Small World on iPhone.

Sure, Apple dominates on tablets. If you believe the press this week, they have snatched up all the tablet screen components so that competitors will need to use tiny little elves with tinier paint brushes and pay them union wages for the foreseeable future. Yet, Sammy and B&N are both shipping large quantities of 7” Android powered tablets. The B&N Nook Color can be unlocked and given Marketplace access, which appears to account for much of its popularity. Moto is shipping the Xoom this week. Eventually though, content will be like applications for 90s PCs. Everyone that’s not Apple is trying their best to make content publishing as easy as possible to their device and platform. This not only includes a full Flash experience, but a flexible purchasing experience and when a branded purchasing experience is offered, it’s a rate closer to credit card clearing rates than getting assaulted with a flexible sigmoidoscope.

Publishers want publish once, deploy many, so they can reach their customers through a multitude of channels from PCs (Windows, Linux, Mac) to the browser (IE, Chrome, Firefox, Safari, Opera) to tablets (iPad, Android, PlayBook, TouchPad, Windows 7) to netbooks (Windows 7, Ubuntu) to smartphones (Android, iPhone, BlackBerry, webOS). Apple, OTOH, cares most about publish once, deploy Apple and aligns its tools, review policies, and payment to that end. It’s not a model that can be reconciled. Apple may continue to attract such cool, high-end people, that their paid content consumption is so much higher than the riff-raff who make up the other 80% or 90%, but eventually, the cool people sneak a Bud Light and find out it isn’t so bad after-all. The economics of network effects take over, and Apple won’t have any real life advantages. Just like phones.

Bosco (Brad Hutchings)

You see, geeks and techies may not want to be locked into Apple?s closed ecosystem.? But that is not the majority of the market.? The majority of the market wants fast and simple, even if it costs them a bit more.? iPhone and iPad offer that.? You never cease talking to Apple?s closed ecosystem, yet most of the market doesn?t mind it.? This is your biggest fallacy.? This is where you are wrong.

Who are you to define what “the market” is? You seem to think it’s only the people who purchase and use phones. And you’re absolutely wrong. “The market” also includes handset vendors, carriers, developers, content providers, retailers, and a whole host of other smaller players that would take me pages to list. Apple either does not give them a stake in the iPhone or micromanages their roles. Android gives them whatever stake they’d like to invest, and a hell of a lot more freedom to execute.

What percentage of iOS developers do you think are making $5K/month or more selling apps? It’s quite low. Yes, there are a few blockbusters, but the income distribution is again, the long tail. Past a certain point very close to left of that curve, the developers who want to make money selling apps have no motivation other than putting it in Apple’s hands, and no plan B that might rely on self-determination. Some have invested a lot to build apps and had them wholesale ripped out of the App Store because guidelines or enforcement changed.

So you know what, there might not be a lot of money spent on apps in Android land, but if you’re a developer or content provider, you’re free to experiment, both technically and with your sales approach. Just like Apple might not allow your cell network to have the iPhone. But in Android land, T-Mo and Sprint are getting some really bitchin phones.

And Ron, that’s what qualifies me to talk about what I think the market wants more than you. I recognize that the scope of the market includes both the supply and demand sides.

RonMacGuy

Oh give me a break. You’re little rampage about Disneyland was obviously focused at the end user. But whatever, keep your misdirections going. You speak so much but you don’t really say much. Fact still remains that not a lot of money is spent on apps in android land, and that will put android at a disadvantage long-term when developers refuse to work for free. But Google can afford to hire lots of developers to keep trying to do what Apple does. They obviously have hired you!!

Lee Dronick

See some interesting iOS v Android comparisons over at Roughly Drafted

RonMacGuy

Just accept that you?re doing everything you can to help Apple achieve record revenues and profitability, but that a lot of people don?t find that as important as you do, so you?re better than them.

Funny Bosco, just change one word and your quote looks a lot like a reference to you:


Just accept that you?re doing everything you can to help Google achieve record revenues and profitability, but that a lot of people don?t find that as important as you do, so you?re better than them.

Bosco (Brad Hutchings)

RonMacGuy has to get personal with everything. You can find numerous examples in TMO comments where I have alluded to the market consisting of all these other players, because that’s how I think and that’s what my business and economics training have taught me—know the whole landscape. I’m just surprised that a guy as smart as RonMacGuy never considered that maybe other market players might coalesce around something that they could all make money with rather than sit idly by while Apple takes all the sales and profits. And that with Apple taking all these profits, that these players couldn’t coordinate their profit taking (not in a planned way, BTW) in a way that was competitive with Apple on all fronts, from price to variety to churn rate and so on.

That’s really the story here. Apple fans no longer talk about iPhone sales share or market share, even just two weeks after the flaccid Verizon Unicorn appeared! It reminds me of my favorite joke about Texas. There are three things you don’t talk about in Texas: 1. Which state is the largest, as Alaska is bigger. 2. Which state has the most people, California has 50% more. And the third thing you don’t talk about it Texas? The Civil War.

RonMacGuy

RonMacGuy has to get personal with everything.

Me?  Hello, pot?  Calling me black?

“Ron, what do you do for a living? Seriously. Do you have any real life insight into how to make a software development gig, career, or business work?”  Kind of personal, after all I said was “not everyone is capable of playing that game.”  Not a direct attack of you.

But hey, I apologize for assuming you were referring to just end cell phone users when you were talking about “the market” - the article is basically about how much end users spend on apps resulting in revenue for Apple, Blackberry, etc.  You are right, I am smarter than that.

Wait, were you being sarcastic with the “as smart as RonMacGuy” comment?  grin

Shoot, I did say last week that I was going to watch quietly while things play out this year.  Guess I lied.

paikinho

I like the way the following article starts out.

It is about how programers are so ideologically intense. (ignore the bit about the demise of flash)

Seems like these discussions about Android OS and iOS are ideologically driven by everyone including me. I’m just not sure what my ideology is yet.

I especially enjoy the tidbit about thinking and judging. People seem to like to cling to their guns and their religion.

Martin Hill

Bosco,
I’m afraid it is you who is misrepresenting the situation and the topic of this article.  It is you who is cherry-picking stats, limiting things to only phones and only in the USA at that.

The topic is Mobile Apps and these platforms are far larger than just smart phones. You see, the vast majority of those apps run on the iPod touch and the iPad as well as the iPhone.

With Android missing in action in the small tablet (iPod touch) market segment and struggling in the large tablet market (Samsung stuffed the channel with 2 million Galaxy tabs but only sold a “quite small” number on to consumers), Android is most certainly not beating iOS in the big picture.

Canalys found that adding in the Tapas and OMS forks of Android (which aren’t compatible with Android or running google apps or services) running on millions of Chinese smartphones, Android managed to sell 32.7 million smartphones and tablets (yes tablets like the Galaxy tab and Dell streak were counted in those numbers because they have cell phone hardware) last quarter.

Well guess what, Apple sold 10 million iPod touches, 7 million iPads and 16 million iPhones last quarter making 33 million iOS devices, so no, Android is not beating iOS 2-1 worldwide.

The subject of this article demonstrates this fact.  iOS App sales are absolutely slaughtering Android and even in advertising, iOS users beat Android users.

Net Applications January web browser marketshare figures show iOS still has 4 times the share of Android worldwide and in fact in Australia and the UK has actually hit 5% share of the entire web browsing market, third only to Mac OS X and Windows.

These figures all highlight the iOS installed base is far larger than Android and even if Android unit sales do manage to exceed iOS sometime in the future, it doesn’t mean much because iOS is where all the software and hardware profits are and that shows no sign of changing anytime soon.

-Mart

Martin Hill

Bosco,
I’m afraid it is you who is misrepresenting the situation and the topic of this article.  It is you who is cherry-picking stats, limiting things to only phones and only in the USA at that.

The topic is Mobile Apps and these platforms are far larger than just smart phones. You see, the vast majority of those apps run on the iPod touch and the iPad as well as the iPhone.

With Android missing in action in the small tablet (iPod touch) market segment and struggling in the large tablet market (Samsung stuffed the channel with 2 million Galaxy tabs but only sold a “quite small” number on to consumers), Android is most certainly not beating iOS in the big picture.

(cont’d)

Martin Hill

Bosco,
I’m afraid it is you who is misrepresenting the situation and the topic of this article.  It is you who is cherry-picking stats, limiting things to only phones and only in the USA at that.

The topic is Mobile Apps and these platforms are far larger than just smart phones. You see, the vast majority of those apps run on the iPod touch and the iPad as well as the iPhone.

With Android missing in action in the small tablet (iPod touch) market segment and struggling in the large tablet market (Samsung stuffed the channel with 2 million Galaxy tabs but only sold a “quite small” number on to consumers), Android is most certainly not beating iOS in the big picture.

Canalys found that adding in the Tapas and OMS forks of Android (which aren’t compatible with Android or running google apps or services) running on millions of Chinese smartphones, Android managed to sell 32.7 million smartphones and tablets (yes tablets like the Galaxy tab and Dell streak were counted in those numbers because they have cell phone hardware) last quarter.
(cont’d)

Martin Hill

Whoops, sorry for those repeats.  The MacObserver website was giving me grief there for a while.

-Mart

Bosco (Brad Hutchings)

(Samsung stuffed the channel with 2 million Galaxy tabs but only sold a ?quite small? number on to consumers),

Martin, I truly feel sorry for you in that you get your information from and parrot dishonest people. The Samsung exec was mis-quoted. She said “quite smooth” and “quite OK” and is clearly a non-native English speaker. You can listen to her speak the relevant sentences here.

The people who ran with with the WSJ’s misquote and never ran a correction are nothing short of malicious a-holes, and I bet their Mom’s are damn proud of them for piling on a non-native English speaker. Such class. Be sure to listen to the clip at that link and then come tell me about “quite small”.

And here is from the original WSJ report (scroll to bottom):

Corrections & Amplifications

Samsung executive Lee Young-hee said Galaxy Tab sales were ?quite smooth,? according to a recording of the company?s conference call with analysts. This post relied on a transcript of the call, which quoted her erroneously as saying they were ?quite small.? Samsung said the transcript, done by a third party and initially cited by a company spokesman, has since been corrected.

Now, read their report again and see if they could have written any of it given what Lee Young-hee actually said.

Martin Hill

Fair enough.  However she still didn’t say exactly how many were actually sold on to customers did she?  You’re cherry-picking again.  grin

Care to address any of my other points like total unit sales, web browsing share, ad income per user, vastly larger installed base, far higher app income, gigantic total manufacturer profit share, vastly larger 3rd party hardware peripheral market share, inflated Android sales numbers due to Tapas and OMS, terribly inflated Android App numbers due to ringtones, wallpapers, themes and spamware, prevalence of malware in the Android Marketplace, lack of top tier games (20 vs 300+), the error of only counting phones and ignoring the rest of the mobile app platform etc etc.

-Mart

Bosco (Brad Hutchings)

When you parrot such obviously refuted “facts” Mart, it makes me wonder about your sources. Perhaps it should make you wonder too. Did they post a retraction after such an obvious screw-up?

So you call the Android App numbers “terribly inflated” and then fail to recognize the thousands of very interesting Flash games that play great on both Android phones and tablets. For example, there are 38,848 games on Kongregate.com as I write. On my N1, they feel just like playing an app game. They’re responsive, addictive, full screen, interactive, noisy, etc. I haven’t come across any ringtones or wallpaper in Kongregate.

The Apple App Store figures are themselves inflated just by the fact that they are the only legitimate source for software on iOS. For example, when Angry Birds first came to Android, it did not come through the Marketplace. For about a week, it was available as a download directly from Rovio, from official mirrors, and from many unofficial mirrors. Downloading and side-loading an app is pretty simple on Android. Users are presented with the same permissions the app requires as they are when they make a Marketplace purchase. Gameloft didn’t have their popular games on Marketplace until recently—users had to purchase directly from Gameloft.

The take-away from this is just because Apple’s sole source system makes it easy to count some things in iOS land, doesn’t mean that the same counting techniques apply elsewhere, especially in ecosystems that are freer and more open.

Martin Hill

I’m sorry Bosco, but most normal people would know that simple Flash games that fail to use multi-touch, the accelerometer, compass, GPS, finger touch rather than mouse and keyboard or a small screen are far from comparable to the 42,000 native games available on the App Store for iOS and of course pale into insignificance against the 300+ top tier 3D and other high quality big name games from the big studios that are missing from Android. 

Oh, and that figure was gained from counting up the games as listed on the web sites of Gameloft, EA, Popcap, ngmoco, Pangea, ID and Capcom Mobile.

I just had a look at Kongegate.com - oh dear, were you really serious comparing that web-based Flash crap against native iOS apps?  The pickings really are slim on Android to use that in your argument aren’t they? 

If you doubt my sources, well you’d better check the sources for the article on this web page first as iOS’s 83% market share of app income is one of the most damning pieces of evidence against Android.  Please feel free to fill us in on what you discover.  grin

As usual I should probably stop letting myself stop get sucked in to answer your thin arguments, but thanks it has been a fun (even if slightly frustrating) exchange.  grin

-Mart

paikinho

So just curious why flash games really matter. Can some one speak to why
flash matters?

It just seems like in the next year or so, it doesn’t really matter much and beyond that will become irrelevant.

Others could actually speak to it better than can I.

Bosco (Brad Hutchings)

I just had a look at Kongegate.com - oh dear, were you really serious comparing that web-based Flash crap against native iOS apps?? The pickings really are slim on Android to use that in your argument aren?t they??

And you accuse Android people of being geeks… Kongregate had funding of $9M before being purchased by retailer GameStop last July. As of July, Kongregate had 10 million monthly players who spent 23 million hours on site games.

Kongregate is an example of something that’s free and good enough to be entertaining to a lot of people. When I had an iPhone, I used to buy apps to help entertain a friend’s kid when we all go out to dinner. Now, I can find something funny and free on Kongregate. Sorry you’re unable to do that with your iPhone.

The underlying bias that is inherent in the pro-iOS stats like number of apps, revenues, and profits is easy for you to overlook and even deny. There’s only one source to count things in iOS land because everything goes through the Apple choke point. On Android, there is a very popular default store, but it does not demand exclusivity for the platform. There are a myriad of other interesting things to do with an Android phone or tablet besides buy apps from Google. What do you think of Jeff Bezos getting into the Android apps game? Even he has no exclusive and thinks its a lucrative enough game to sell premium apps for the platform you think is just making its success up.

Bosco (Brad Hutchings)

@paikinho: Here is your rebuttal…
* Adobe has about 2 million Flash developers.
* Numerous multi-media tools export to Flash. Not sure about the newest Keynote, but an older version I have does.
* Flash is ubiquitous in an Learning Management System (LMS) for things like classroom video, Powerpoint presos, and even interactive testing.
* Flash games in the browser are a great mobile time waster. See Kongregate, which, of course, our resident guru of good taste Martin has called crap.
* Flash is fully supported by all the major tablet platforms except iOS, and will be the quickest and least expensive platform for delivering interactive multi-media “apps” to those platforms.

In short, despite all the hemming and hawing of the Apple faithful, the Flash economy has strong supply inputs and strong demand outputs. It scales from phone to tablet to web to PC across all platforms, including a kludgey subset on iOS (a result of Apple policy, not anything you can assign to Adobe).

And as to the blog posting you cite. When people start with Myers-Briggs, they need an a slap to the face. Might as well go with racial arguments, which are less opaque.

paikinho

Thanks for the numbers BH.

As to Myers-Briggs I know nothing about it, so count me among the ignorant.

Just found the perspective interesting for 2 reasons.

1. Since I hadn’t heard about either the dogmatism in programmers assertion of the blog it piqued my interest. In a general way I found that this assertion seems to concur with my andecdotal experience in odd ways.

2. Saying flash would become irrelevent seemed to be an interesting statement given Flash’s pervasiveness currently.

Martin Hill

Bosco, let’s put Kongregate’s 38,000 free Flash games and 10 million users into perspective shall we?

Just one iOS game, Cut the Rope has sold (that’s sold not viewed for free) $6 million worth of copies (not including the millions upon millions of free copies that were also downloaded in 3 months.  The developer of that one game, Chillingo was acquired for $20 million as a result.

Then there is Backflip, the makers of NinJump and Papertoss who just by themselves have 20 million monthly users.

Here’s just a few more stats which of course would be much greater by now:

Doodle Jump: 5 million sales as of June 25, 2010
Tap Tap Revenge: 20 million downloads, 5 million songs sold, as of June 4th, 2010
Pocket God: 3 million sales as of August 5, 2010
Angry Birds: 6.5 million sales as of August 13, 2010
Flight Control: 3 million sales as of Sept 9, 2010

Kongregate’s 38,000 free games are well and truly overshadowed by the actual sales (not free views) recorded by each of these *individual* games on iOS.

Perhaps the most damning comparison is of course the 42,000 games - the most popular category on the iOS App Store which as a whole gets 30 million downloads a day and make $1.7 billion per year compared to the 38,000 Flash games on Kongregate which make um….?

Oh heck, I responded again.  Drat - Bosco’s empty arguments just keep on sucking me back in. 

So is Bosco a plant of Mac Observer to get us all coming back for more page hits or something?

-Mart

Martin Hill

Oh and of course Bezos is desperate to get into the App Store game.  Apple’s overwhelming success has shocked the entire industry.  Whether they will successfully make a go of it is another matter.  Apple’s App Store is a break-even proposition to enrich their ecosystem and boost hardware sales.  Competitors like Amazon don’t have that luxury and have to try and make a profit on the the store itself.

Amazon’s other attempt at going head-to-head against Apple has certainly been an enormous disappointment.  Even with DRM-free music (a year before the Music Cartels allowed Apple to go DRM-free) at cheaper prices, Amazon’s online Music Store has still only managed a 13% share of the online music business to Apple’s 65% share.

The current proliferation of Android App Stores with of course even the carriers like Verizon jumping in to try and get their cut will only further assist in fragmenting the Android app scene and make it that much harder for developers to cover all bases and for users to find what they need.

These multiple Android App stores are more of a curse than a blessing.

The one-stop-App Store of iOS, like the iTunes Music Store before it is the only place devs have to submit their apps and the only place users have to go to get what they want (and there’s always the Cydia store to get what isn’t available from Apple for those who want to jailbreak their iOS devices).

-Mart

Bosco (Brad Hutchings)

Apple?s App Store is a break-even proposition to enrich their ecosystem and boost hardware sales.? Competitors like Amazon don?t have that luxury and have to try and make a profit on the the store itself.

I don’t get this. How is it then that the cost of a sale in the App Store is about 30%, while with fairly simple PayPal APIs, developers could sell the same digital goods from their own websites for less than 5% cost of the sale? Please consider the vast majority of apps that do not make it into staff picks or the top 100 in a category, and this get effectively zero promotion in store.

This is the crux of Sony’s disappointment with the rejection of Reader and the current outcry about Apple’s publishing model. Seriously Martin, you can’t crow about how Apple gets all the profits in the mobile industry and then claim that things are break even where their take is comparatively the highest on a transaction that has had very low, predictable costs for the better part of a decade.

Martin Hill

Bosco, Apple makes its money on hardware.  That is why they bring in 51% of the entire cell phone industry’s profits despite only having 4% marketshare of the entire cell phone market.

The software equation is completely different - stop trying to conflate completely separate issues.

Apple’s 30% take on App sales is far lower than any competitor before them.  Handango, Blackberry, Carrier stores and others all used to charge 40%, 50% or even 70% commission.  No wonder mobile software sales were so poor for decades before the App Store brought a revelation to the industry. 

Heck Amazon only dropped their take on eBooks from 70% to 30% after Apple dropped their bombshell on the industry.  And yet where was the hew and cry about them?

Apple’s app sales have to support the billions of free app downloads that Apple doesn’t charge anyone for.

There are 30 million app downloads a day from the iOS App Store with many apps such as games, GPS and media apps pushing up close to a gigabyte or more in size.  And that is just new app downloads - Apple doesn’t report the enormous additional number of app updates they also support for free forever after the initial purchase.

Do you seriously think that it doesn’t cost anything in bandwidth usage, hosting & server costs and support for such a huge volume of data and transactions, not to mention the large number of small credit card processing fees (on $1 billion worth of purchases and an additional $1 billion in in-app purchases last year alone ) etc. 

Apple is one of Akamai’s biggest clients.

With the vast majority of apps downloaded being free, we’re not talking trivial back-end costs here.

You just can’t let go can you Bosco.

-Mart

Bosco (Brad Hutchings)

Martin,

Do you seriously think that for 280,000 of the 300,000 apps on the App Store, a $15/month shared server hosting account wouldn’t provide the bandwidth needed for all conceivable downloads, and a half day spent integrating PayPal for in-app purchases and the original digital download wouldn’t be worth the sub-5% cost of payment for the developer?

Not possible with Apple because developers can’t deliver their own apps from outside of the App Store and can’t choose their own payment system. The fact of app stores in general is that most apps never get any promotion and a fact of the Apple App Store is that many developers take several months to get to the minimum payment threshold. On the Android Marketplace side, developers get paid immediately for each sale via Google Checkout. Or they can do like Gameloft did for the longest time and just sell from their own websites.

Anyay, your argument that Apple’s make-work costs it a lot is horseshit. Retail high availability bandwidth is running about $25/terrabyte right now. That’s 1 million downloads of a 1MB app, which is top .5% or less of all apps in a month. Apple only needs Akamai because they (forcefully) aggregate. Duh.

Martin Hill

*rolls eyes*

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