Reality Check: NPD’s Android vs. iPhone sales headlines
May 10th, 2010
Daniel Eran Dilger
Headlines tell such a sensationalized side of the story. Here’s the missing bits of recent tech media events that have been reported with a slant starting with:
NPD says Android has surpassed iPhone in US unit sales
The suggestion: the reign of iPhone is over because Google’s Android platform is taking over the market in terms of sales and installed base.
The reality: Android sales are certainly not eating up iPhone sales, which are higher than ever–especially in the first quarter, when Apple’s hardware sales have historically plateaued. Rather than taking on the iPhone, Android is really just replacing the plummeting sales of Windows Mobile and the old Palm OS (and even webOS) and the embedded software that formerly ran a lot of HTC and Motorola phones. Consumers are upgrading away from pseudo-smartphones from LG and Samsung, and buying more advanced smartphones, which looks good for Android.
Globally however, Android sales are still well below the iPhone. According to IDC, Apple took 16.1% share of smartphones in the quarter, while HTC and Motorola (the only Android makers, who also sell other non-Android smartphones) amassed a combined global share of 9%. Android’s total share is less than half that of second place RIM’s BlackBerry sales and less than a quarter of the smartphones sold by Nokia, but Android is getting a lot of press to suggest that it is taking over the market, at least in the US.
Why is Android doing so well in the US? It’s the same reason RIM’s BlackBerry sales have kept pace ahead of the iPhone, despite failing to best or even match Apple’s platform in terms of technology: most of those phones are being given away for free. That’s an easy way to claim market share, but not really a way to actually create sustainable growth. And if you look at RIM’s global sales in the last quarter, they’re only up 45% year over year compared to Apple’s 131% growth, despite all of RIM’s promotional free giveaways contrasted with Apple’s actual sales to customers.
NPD’s numbers aren’t a story of Android competing against iPhone as much as Verizon trying to keep up with AT&T’s iPhone trajectory by dumping a ton of free smartphones into the market, many of which happen to use some version of the Android OS. Even so, Verizon is still behind AT&T in terms of smartphone sales.
It’s also notable that only a third of the installed base of Android phones are running the modern Android 2.x. The majority are still running last year’s versions, meaning that Android as a platform is fractionalized to the point where sales (and free giveaways) are not creating a viable market for modern software.
Add in the technical issues that prevent Android apps from being sophisticated (they’re limited in size due to hardware architecture and operating system software issues that have not been resolved) and you have a platform that is smaller than it should be, and therefore less attractive to developers than it would appear it ought to be, given all those free phones that are being distributed.
On the other hand, Apple’s other iPhone OS devices, the iPod touch and iPad, are not figured into these smartphone numbers but clearly have a huge impact on the market share and installed base that is driving iPhone OS apps. Statistics have long indicated that iPod touch users are buying more apps than even iPhone users, so Apple’s parallel efforts are bolstering the iPhone App Store by a huge amount (approaching a 100% increase over iPhone sales alone) even as Android’s fractionalization problems are deeply cutting away at the critical mass of the Android Market.
Apple’s iPod touch is also driving game development to the point where Apple’s mobile platform is encroaching upon dedicated game systems. Apple now has 20% of that market, nearly double the share taken by the Sony PSP and nearly three times what the iPhone OS claimed just last year. Android isn’t even represented on that pie chart, because there is no viable gaming market on Google’s platform. If Android were really outselling the iPhone OS in some meaningful way, that shouldn’t be the case at all.
Both Google and Apple are accomplishing exactly what they’re intending to do. The purpose of Android is to broaden the base of mobiles that are tied to Google’s adware-based services, rather than Microsoft (Windows Mobile) or perhaps Symbian, which could possibly ally with Microsoft given the deal between Nokia and Microsoft to bring mobile versions of Office to Symbian at some point.
The purpose of the iPhone is to sell new hardware at a profit and dramatically expand the market for Cocoa-based software development. Google doesn’t really care about the hardware margins of its partners, and can’t seem to really sell its own Nexus One branded phone. Google doesn’t care about hardware.
It also isn’t that excited about creating a mobile software platform. It hopes the open source community will accomplish most of that work for it. Google engineers have informed me that the company’s long term plan isn’t to do anything with Android’s Java-like VM or even the new C-based native platform; Google sees the future of mobile apps developed in the same code as it sees desktop apps: the web. The company is betting everything on HTML5. Talk about Android’s current VM, NDK, and Google’s support for Flash are all just efforts at covering the bases until mobile HTML5 apps can become a reality.
Apple sees HTML5 as a useful tool for developing web apps, but unlike Google, the company isn’t sold on the idea that the desktop and native mobile platforms are going to vanish anytime soon. Apple is putting significant efforts into developing Cocoa and Cocoa Touch as viable platforms well into the future, serving needs that web apps can’t serve now and many never really excel at.
That’s why Google’s apps are nearly all web based (Maps, Docs, Gmail, etc) and Apple’s are all native (iWorks, iLife, iPhone apps, Pro Apps). It should come as no surprise that Google’s support for cheap, low quality phones that can be given away for free is an extension of that adware/web-based strategy, while Apple’s sophisticated, premium iPhone market that exacts the world’s highest ASPs while still biting off a third place share of the global market is exactly what Apple is trying to do.