Nielsen: Android Wining OS Battle, Apple/RIM Winning Hardware

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Who is winning the U.S. smartphone battle? That’s a rhetorical question asked by market share research firm Nielsen, and the company’s rhetorical answer was, “The answer depends on whether you’re looking at operating systems or manufacturers.” The less rhetorical version is that Google is winning the battle for operating system market share, while Apple and Research In Motion are winning the hardware battle.

From November of 2010 to January of 2011, Android devices usurped both Apple’s iPhone and RIM’s BlackBerry platform to take 29% of the smartphone market in the U.S. Apple is now tied with RIM for #2, each with 27% of the market.

In a report, Nielsen wrote, “But an analysis by manufacturer shows RIM and Apple to be the winners compared to other device makers since they are the only ones creating and selling smartphones with their respective operating systems.”

That’s laid out in the chart below, which shows Apple and BlackBerry with the lion’s share of device sales, with HTC as the #3 hardware maker with a combined total of Android and Windows Mobile and Windows Phone 7 devices accounting for 19% of the market.

We should also note that until this time frame, RIM was the market share leader in the U.S., making both Apple’s and Android’s ascendancy a notable event.

Nielsen Chart

Nielsen released another chart showing the age breakdown of users across operating systems for smartphones. Android, iPhone (iOS), and BlackBerry were all pretty close in their demographics, but we did notice that there are fewer Android users above the age of 55, while there are more Android users from 18-24.

Nielsen Chart

Covering the three months between November and January, the company’s findings predate the release of Apple’s iPhone 4 on the Verizon network, and it’s a guarantee that analysts (and pundits) will be watching for market share reports after the mid-February release of the Verizon iPhone.

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Comments

BurmaYank

“...the company?s findings predate the release of Apple?s iPhone 4 on the Verizon network, and it?s a guarantee that analysts (and pundits) will be watching for market share reports after the mid-February release of the Verizon iPhone.”

IMO, the period after the mid-February release of the Verizon iPhone is the wrong time period for pundits to be watching market share reports for, if they want to discern the relative strengths of the top 4 smartphone platforms, because almost no one will be buying Verizon iPhones until the iPhone 5 (and/or LTE) comes out this summer.  Then, will that iPhone 5 buying explosion actually power the iPhone ahead of Android again (especially if by then the multifaceted disappointments, risks and frustrations encountered with all the various Androids have become commonplace knowledge amongst the great non-Nerd majority of US smartphone coveters/users)?  That’s the question pundits should be wanting the answer to.

BurmaYank

oops -  I double-posted by mistake.  Sorry!

Bosco (Brad Hutchings)

This is a lagging trend, as installed market share is subject mostly to two-year contracts. When these numbers come out in June and show RIM dropping through the floor and Apple losing more share, with Android benefiting from those losses, will that finally convince you guys that Apple’s model is bound for its typical niche?

BurmaYank

Dream on, Bosco. 

Time will tell one of us is really out of what’s happening, but I’m not expecting you to see the error of your visions then, any more than you are able to now.

Anyway, I expect RIM’s numbers are going to be quite stable for quite a long time, regardless of the Android/iOs joustings.  Neither iOS nor Android really have anything of value in to offer a true Crackberry user (and they are legion).

paikinho

Interesting, I just met a bunch of people signing up for Blackberries. What’s up there? I thought RIM was dead.

Maybe they will just limp along fine and keep picking up customers.

paikinho

What were the market numbers in Europe we were discussing not so long ago? Seems like Apple had a bigger market presence there if I remember correctly.

paikinho

will that iPhone 5 buying explosion actually power the iPhone ahead of Android again
———————
Um… I think that while the iPhone 4 surged Apples sales. Even the month the iPhone 4 came out it lagged 1.5-2 million behind the Android at the time. Hate to burst a bubble.

sflocal

and Apple losing more share, with Android benefiting from those losses, will that finally convince you guys that Apple?s model is bound for its typical niche?

Bosco, you think market-share - spread across dozens/hundreds of handset makers is more important than one system that is earning all the revenue.

I don’t think anyone really believes that Apple is going to dominate in terms of market share.  But they certainly will be the one making the most money and keeping people coming

Sally Granger

The only thing the Android platform is useful for is propagating malware and spam. If you love these and no doubt as a Windows user you do then this is your platform boys. You?ll feel right at home since everything is copied directly from Apple just like Windows and and you will own 100% of all the malware just like Windows. You also feel happy to know that Apple is malware free and offers a safe ecosystem in iOS just like OS-X. You are free to transfer all your delusional ideas and Microsoft lies over to defending Android just like you have always done so there is a home for those unwilling and unable to think for themselves.

Tiger

Bigger question, who is making the MONEY? It’s a very Jerry McGuire thing. Show me da money!!!!

Google’s market cap is stable just south of $196B

Apple’s is just north of $331B and climbing.

Bosco (Brad Hutchings)

Bosco, you think market-share - spread across dozens/hundreds of handset makers is more important than one system that is earning all the revenue.

No, that’s not what I think and it’s really not material to what I think. I think that a vertically integrated offering by one company in this space sets up incentives for that company that are not consistent with satisfying diverse user needs. I also think that the coopetition in the Android space will keep a common enough platform while bending it to meet different, often conflicting needs. And I think that model is fundamentally more efficient and will win the market share game.

Lastly, I think Sally is a plant. She’s laughing at you guys.

Hadley Boychuck

Steve Jobs: “This is worth repeating. It’s in Apple’s DNA that technology is not enough. It’s tech married with the liberal arts and the humanities. Nowhere is that more true than in the post-PC products. Our competitors are looking at this like it’s the next PC market. That is not the right approach to this. These are pos-PC devices that need to be easier to use than a PC, more intuitive.” Apple makes beautiful products that work & the world will continue to crave more. Apple is not so much competing with others as it is redefining the space with its own eco-system - including how we compute and what we consider a computer.

Lancashire-Witch

Jeez - I’m too old for all this stuff….

Bennyboy

I also think that the coopetition in the Android space will keep a common enough platform while bending it to meet different, often conflicting needs.

What about one of the biggest problems which is when all those Android manufactures promise an update and then don’t deliver?  There are many handsets that are still waiting for Froyo and were promised that they would update and have been given the run around for months. 

Sure you could argue that Apple makes their iOS products to be replaced within two cycles, but as far as I can see, most Android devices don’t even last a full generation before you need to update the hardware because it won’t take an OS update.  So ultimately how many times will the consumer pay for new hardware every year?

Bosco (Brad Hutchings)

@Bennyboy: You take it up with the phone manufacturer. Or maybe they get a rep for not upgrading things (or not keeping their promises) and suffer because of it. There’s learning that goes on in this ecosystem. AT&T learned that Android without side-loading was a giant fail. Moto seems to have learned that locking up the ROMs may be its prerogative, but doesn’t earn it positive reviews. My N1 got its update to Gingerbread this week, the second major update it’s received in the year I’ve had it.

For most popular Android phones, running a custom ROM is far easier than jailbreaking an iPhone. The phones are designed to load the ROMs. There’s a very active community making custom ROMs. You don’t need 31334 geek status to understand what they’re about, load one on your phone, or restore your phone to a stable build. Just as Ubuntu does with Linux, a company could come along and make a business out of keeping phones up to date.

Facts are: most apps in the Marketplace will run on Eclair or later. That’s 90%+ of Android phones. Developers are encouraged to use the lowest API level possible, and most apps could get by with the API corresponding to 1.6. 60% of Android phones have Froyo and can run Flash. Gingerbread is the new kid and adds NFC stuff that doesn’t have a huge raison d’etre, yet.

other side

Apple?s is just north of $331B and climbing.

Which only demonstrates how overvalued Apple is.

How much of that $331B is immune from a couple bad days in the market?

Tiger

As Apple enters the Enterprise market at long last with Joint Venture, the sky is the limit. Overvalued? Not likely. Still climbing. Some predictions is that Apple can overtake Exxon as the nations most valuable company by 1Q 2012. Wouldn’t that stick in more than a few people’s craws.

BurmaYank

“Facts are: most apps in the Marketplace will run on Eclair or later. That?s 90%+ of Android phones. Developers are encouraged to use the lowest API level possible, and most apps could get by with the API corresponding to 1.6.”

It seems to me that your statement, “Developers are encouraged to use the lowest API level possible…” should actually read, “Developers are forced by platform fragmentation to use the lowest API level possible…”, and so the platform’s software as group must therefore be mostly hobbled to the most primitive & lowest-common-denominator platform capabilities. That’s not a viable strategy for longterm successful competition against iOS, Blackberry, WebOS, or even Windows 7 Mobile, IMO.

And again, when you said “Facts are: most apps in the Marketplace will run on Eclair or later. That?s 90%+ of Android phones….and most apps could get by with the API corresponding to 1.6.”, how can you think that that’s anything other than an alarming shortcoming for the Android platform?  (What goes around comes around, eventually.)

Bosco (Brad Hutchings)

@BurmaYank: If you were a competent developer and you downloaded the Android SDK and read the introductory docs, you’d see a polite admonishment to link against the SDK level that you need. Kinda like at an all you can eat buffet, it’s OK to get a heaping plateful of prime rib if you’re going to eat it. It’s not OK to take the whole serving plate for yourself. Use what you need. A common (and easily rectified) newbie mistake among Android developers is to link against the 2.2 (or 2.3) SDK when their apps only use the 1.6 level.

Again, most run of the mill apps can link against 1.6. How do I know this? Because up until last summer when 1.6 handsets were quite common, people would ask the developers via comments in Marketplace if they could support 1.6 and a few days later, the app would be updated after a recompile and users would be happy.

Fragmentation has been touted as the Achilles heal of Android for about a year now. In that year, Android phones caught up to and passed iPhone shipments, then caught up to actual installed market share. If fragmentation is so problematic, I would hate to discover what ails the iPhone.

jfbiii

Market share is the muscle car of the under-developed business plan.

paikinho

Which only demonstrates how overvalued Apple is.
—————————————
No company is immune from a calamity, however, that being said, Apple is not currently one of the weaker companies. Or even slightly overvalued. With 50 billion in cash reserves I believe their position is quite strong.

By what metric do you find Apple to be overvalued exactly?
Do you think they are going to miss some bottom line numbers?
Does apple have poor monthly sales?
Does apple have poor management? Are apples prospects poor?

From Last Quarter:
“Following earnings growth of 68%, after hours trading of AAPL at $300/share shows a P/E of 19.8. The company added over $5 billion in cash for a total of $51 billion or $52.9/share.
Excluding cash from the price of $300 leads to an enterprise value of $249 and a trailing twelve months earnings of $15.15. The ex-cash P/E is therefore 16.44.
P/E/trailing Growth is 0.29.
My guess is that this is keeping AAPL cheaper than the S&P 500 on both P/E and P/E/G.”

There is a reason Apple is going gang busters, not from over value, but because it is beating Wall Streets own predictions in sales:

Below: Our analysts’ spreadsheet. We’ll update it as more estimates come in.

Unit sales 2010 (millions)  Unit sales 2011 (millions)  Year (C or F)
Brian Marshall, Broadpoint AmTech   7.0   13.0  Calendar
David Bailey, Goldman Sachs   6.2   10.1   Calendar
Kathryn Huberty, Morgan Stanley   6.0   9.0   Calendar
Shaw Wu, Kauffman Bros.  5.0   10.0   12 mos.
Gene Munster, Piper Jaffray   3.5   8.0   Calendar
Ben Reitzes, Barclay’s Capital   2.9   7.3   Fiscal
Keith Bachman, BMO Capital   2.5   5.5   Fiscal
Jeff Fidacaro, Susquehanna   2.1   3.8   Calendar
Chris Whitmore, Deutsche Bank   2.0   4.0   Calendar
Bill Shope, Credit Suisse   1.8   7.4   Fiscal
Scott Craig, Merrill Lynch   1.2   3.7   Fiscal
Peter Misek, Canaccord Adams   1.2   3.5   Fiscal
Doug Reid, Thomas Weisel   1.1   6.8   Fiscal
Yair Reiner, Oppenheimer   1.1   4.0   Fiscal

As one can see, iPad sales in 2010 beat the highest estimate for sales in 2011!!!!
Why is Wall Street geeked? Because Apple is making a lot of money and seems to lower expectations far enough to exceed them at about every turn. Even the revised estimates 6 month on were beaten

The only possible calamity coming could be the health of the CEO.
So if Steve Jobs died, I suppose there could be considerable upheaval , but I don’t think that Apple would sink much or at all if apple were to continue to release the innovative products currently in the queue over the year following such an event.

Jobs is the chief steerer and chief at the helm of the ship, but there have been plenty of great folks around him who have an acquired sense of how to bring such great products to the market.

So I guess the question is, what exactly other than gut feeling are you basing your Apple is Overvalued statement on?

geoduck

1) It would be interesting to see the percentage of SmartPhone v Regular Phone v None use by age. I’d guess the percentage of users of SmartPhones and indeed any Cell Phones goes down with age.
2) As has been pointed out by many, Android phones seem to be taking over the bottom end. It makes sense that there is a skewing toward Android in the population with the lowest income. I’m guessing the iPhone is an aspirational item. People start out with a Kia but dream of a BMW.
3) 27%, 27% and 29%. That really isn’t that much of a difference. Suffice it to say the three have carved up the pie and left only crumbs for the rest.
4) I am surprised that RIM is still hanging in there. (disclaimer: I have a company BB that I despise so my view on the subject is likely a bit skewed.)
5) I am very happy to see MS with only 10%. I want to see that decline over time.
6) Nokia makes a SmartPhone?
7) With Apple and RIM holding 54% of the market it implies that the Walled Garden approach is a success.

Martin Hill

No, Android - the operating system - is not winning.

Android hasn’t won any of the most important metrics and if you look at the iOS platform as a whole vs the whole Android platform, the latter hasn’t necessarily even “won” the unit sales race.  This is because smartphone sales per quarter are only part of the story. The far more important numbers for developers, advertisers, investors and consumers are *total* unit sales of each platform, overall installed base, software and peripheral hardware market share, developer mindshare and developer income. 

*Unit Sales Q4 2010*  (source: Canalys)
- 32.7 million Android smartphones and tablets (tablets like the Galaxy tab and Dell streak were counted in these numbers because they all have cell phone hardware).
- 33 million iOS devices (16 million iPhones, 10 million iPod touches, 7 million iPads)
Note that Android numbers are inflated by inclusion of 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.

*Installed base*
- “There will be an installed base of 140 million Android portable devices, including smartphones and tablets, by the end of 2011” according to IMS Research.
- iOS installed base (Dec 2010) = 160 million with the vast majority of those added in the last 2 years.
With Apple shipping 33 million iOS devices in q4 2010, the projected iOS installed base will hit somewhere north of 250 million by the end of 2011 if current iOS sales rates stay the same.  However, iOS sales rates have been doubling every year so this figure is enormously conservative.

Of course unit sales and installed base are completely useless unless they flow over into other areas like software, hardware peripherals, ad income, manufacturer profit share etc.  Just look at Nokia where despite Symbian’s overwhelming dominance of unit sales and installed base, they have completely failed by all the other important metrics.

So let’s now look at these other important measures of success for a platform:

*App Store Revenue 2009 - 2010*
(source: IHS):
- iOS App Store grew from $769 million to $1.782 billion = $1.013 billion increase
- Android Marketplace grew from $11 million to $102 million = $91 million increase
So annual Android developer income is a meagre 6% of iOS with an annual rate of increase only 9% as large as iOS. The gap between the two is 1,000% and getting far larger every year.

*App numbers 2009 - 2010*
(source: Distimo)
- iOS Apps grew from 120,000 to 350,000 = 330,000 increase
- Android Apps grew from 20,000 to 130,000 = 118,000 increase (not including ringtones, wallpapers and soundscapes)
So the annual increase in app numbers was greater for iOS by 180% compared to Android.  The gap between the two is increasing each year with the iOS store growing over three times as fast as Android.  Also, approx 45% of Android apps are spamware according to Appbrain so the real Android total is far less.

*Advertising income per user*
(source: Mobclix)
Mobclix’s Jan 2011 stats demonstrate that 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. 

*Phone Manufacturer Profit Share*
(source: Asymco)
Despite only having a 4% share of the entire cell phone market, Apple captured 51% (up from 48% last year) of the profit share of the entire cell phone industry compared to Motorola on 1%, Samsung on 2%, LG on -2% and Nokia on 17%.

As such, while Android is doing well, it is years away from passing the installed base of Apple’s iOS, is only neck and neck in terms of current quarterly unit sales and is failing badly in terms of app ecosystem, revenue and manufacturer profit share.

-Mart

Tiger

Recent mobile phone research (as presented at a conference last week in New Orleans) would surprise most. The highest use age bracket is actually in the 40-55 range!

Lancashire-Witch

This is the sort of story about Android issues that cause me to question why I should ever move away from Apple and go back to the sort of stuff I had before.

Here’s one sentence taken from the story in the link above. -

“He advised anyone who believed they had installed one of the malicious apps to find out whether they need to get a new handset or re-install the operating system on the one they have.”

Get a new handset!  Re-install the OS!  Forget it. I’ll stick with my iPhone 3G.  I’ve had it longer than any other mobile phone I’ve ever bought in 15 years. I hope to get a few more months out of it before I replace it with an iPhone 5.  Android-anything doesn’t even make my shortlist. It may be a more efficient model or meet diverse and conflicting needs, as Bosco describes so well. But I prefer not to risk it. Maybe it’s my age.

paikinho

Lancashire -
Couldn’t concur more about the questioning part. Still, I think the Android OS is fine for the most part. Security will only get better I believe since there is a perceived problem that will begin to erode Android sales if left unaddressed.

Google will address the issue and we may find them having to do more stringent things for apps they allow at their store so they don’t have to remove them after the fact and have a bad time with PR.

And as BH points out, this could happen with an iPhone and its apps. The only one I have heard of is where theives physically steal the iPhone and Jailbreak it to bypass the password in order to get at sensitive data and passwords.

ethan

“and so the platform?s software as group must therefore be mostly hobbled to the most primitive & lowest-common-denominator platform capabilities”

Except the beauty is that Google can roll API updates out to the older SDk versions.

http://phandroid.com/2011/03/04/fragments-api-extended-to-pre-honeycomb-platforms/

So 1.6 can continue to evolve as now a 1.6 app can support the zoom aspect ratio and resolution without switching to 2.3.  No one ever said that once an sdk version was superceeded that development on it stops. The idea is you look at what features your specific app uses and you build to the api that supports those features. It’s how a single binary can run on mac osx leopard and snow leapord or windows xp,vista and win7.

wab95

As such, while Android is doing well, it is years away from passing the installed base of Apple?s iOS

Martin:

I am only just now getting to this discussion thread (my internet access is spotty where I am, and my time short). Just wanted to say, very well-researched and argued post. Congratulations.

Martin Hill

Thanks wab95. I find myself getting sick and tired of every article taking a very limited set of numbers (smartphone quarterly sales) and foolishly declaring winners and losers and completely ignoring all the important issues. Quite depressing really.

-Mart

Bosco (Brad Hutchings)

Hey Mart!! You’ve got some splainin’ to do this morning.

Signed,

There is no money in Android apps.

Martin Hill

There will always be exceptions to the rule.  grin

Give us more than one example of an app doing well Bosco and you might have something.  In the meantime, we have the recent evidence over the whole industry from sources such as IHS and Mobclix to show us the big picture:

*App Store Revenue 2009 - 2010*
(source: IHS):
- iOS App Store grew from $769 million to $1.782 billion = $1.013 billion increase
- Android Marketplace grew from $11 million to $102 million = $91 million increase

So annual Android developer income is a meagre 6% of iOS with an annual rate of increase only 9% as large as iOS. The gap between the two is 1,000% and getting far larger every year.

*Advertising income per user*
(source: Mobclix)
Mobclix?s Jan 2011 stats demonstrate that 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.

-Mart

paikinho

Android is on a curve which lags behind iOS. The profitability will come and that is undeniable. It is useless to argue about a static place in time and claim it is representative.

Arguing about Android’s profits on apps is like arguing…. whoops… that was then.

Android will make profits and the amount of profits will be fine for some, but the long tail of apps BH always is on about will apply to. It has to.
Eventually Android and iOS will each have a million apps. A few percentage of apps will make some serious money, some developers will cover costs, some won’t. But that is why developers develop multiple apps. One or another will cover the costs of the development of the rest.

Anyhow. The world is changing and will continue to change.

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