There was a time when it was really, really important for Apple to both promote app development on the iPhone and to tout the number in comparison to the competition. Thats’s no longer true.
How many apps do you have on your iPhone? How many could you load? (The answer is 180 for iPhone OS 3.x) So is it realistic to care whether there are 200,000 iPhone apps or, say, a billion? Both numbers are so far out of reasonable range, the difference, numerically, ceases to become a differentiator.
Also, as my distinguished colleague Bryan Chaffin pointed out last week, Android could very well become the Windows of the mobile community, surpassing the iPhone in every metric, even app count.
So even though Steve Jobs has pointed out that Apple must be doing something right if it has 200,000 apps available, I don’t think that’s a metric Apple can use anymore to gauge success.
The competition from Android is indeed intense. According to Google, back in March, there were 30,000+ apps available for Android. Is this a race Apple is sure to win? Does it need to?
The New Success Metrics
Apple right now is at a crossroads. It has surpassed Windows Mobile in market share and has been nipping at the heels of RIM. All of a sudden, Android comes along with exploding market share, and Apple’s dreams of easy dominance have evaporated. Apple’s goal now must be to expand worldwide sales, and that implies adding carriers in the U.S. as well.
Mr. Chaffin argues that Apple doesn’t have to be the market share leader, merely the most profitable. With low margins on Android phones and the commoditization of that market, I can foresee a future headline: “Apple with 20% market share grabs 80% of the profits.” However, I don’t think Apple’s willing to settle for that in the near term. The friction with Google has Apple thinking that there’s going to be a long, pitched battle for market share before the company settles for a small but profitable bite of the market — like the Mac.
One of the ways to fight that battle is to use Apple’s head start in foreign markets like China, Japan and Europe. Today, Morgan Stanley analyst Katy Huberty predicted that Apple will sell over 60 million iPhones in 2011 thanks to increasing demand in China and by corporations.
At the last earnings report, Tim Cook mentioned that whenever Apple added wireless carriers overseas, iPhone demand (and sales) went up. Recent surveys suggest that 17% of Verizon customers would upgrade to an iPhone if offered. It stands to reason that, eventually, Verizon and Apple will strike a deal because each company has huge gains to be made by such a deal. Money talks.
Inevitable: More Wireless Carriers in the U.S.
On the way to obtaining a deal with Verizon, however, Apple may need crank up the pressure on Verizon, say, by partnering first with Sprint. There are rumors to that effect floating around today.
The iPhone is a mature product that includes minor tweaks each year. Apple is probably thinking that it won’t be able to extract large carrier payments, even on subsidized phones, much longer in light of the Android competition. Plus, costs are coming down thanks to the high volume. It’s a race to balance market share, gross margins, and profitability right now, and it’s not clear that relinquishing market share, let alone touting the number of apps available is the right way to go.
That’s why I expect Apple to add wireless carriers in the U.S. and overseas in 2010/11 and cash in on the tremendous popularity of the iPhone before Android can gain further traction. If Apple eventually settles for being the niche market smartphone seller that makes a healthy profit, it’ll be only after a long, hard fought battle with Nokia, RIM and Android for the next two years. That’ll allow Apple to buy time for the next generation products that, again, change the game in Apple’s favor. The iPad is just one of those products.