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February 02, 2017

Comments

E.Casais

@Tomi

"Vivo is the big newcomer jumps in at number 5 and Oppo (part of the same family) is at number 4"

Several people (including myself) suggest aggregating the figures for those conglomerates that manufacture and sell mobile phones under different brands -- BBK, Tinno, TCL -- which would give a more realistic outlook on the importance of some players.

Is that kind of presentation available in your publications?

Wayne Brady

Thanks so much for your numbers, Tomi.

I think the Xiaomi story is more interesting than you do. A couple years ago it was being hailed as a real challenger to Apple. They topped even the Chinese market above Huawei. They hired luminary Hugo Barra away from Google. (he recently left). Something happened.

I'm very excited to see what New Coke Nokia is going to be able to do. I have my doubts, which I've already written about. But they are certainly worth watching.

I do think the install base story is very interesting if only because of it's counter point to Apple's falling marketshare. Apple had a down year, it's first in the 9 year iPhone run. And still 100M were added to Apple's install base. That's 100 million new customers...which supports Tim Cook's assertion that the iPhone is still pulling in a very healthy amount of new customers and switchers from Android. Last year's business, the upgraders were just a bit more than half of Apple's iPhone sales (according to your numbers).

Apple took away the headphone jack, reused the same external design for a third year in a row, and the US dollar made iPhone's more expensive....and the ASP went up and 100M new customers have been added to Apple's famously sticky/loyal user base. These tell a far different story than the global marketshare.

I'm also interested in the Pixel story. I think Google could at least approach the top 10 this year if not actually break into it. Just depends on their rollout outside of the US. If I were a premium android customer, I'd buy the pixel over Samsung's offerings. I want the latest OS upgrades and security patches directly from Google right away, not 7 months after the release. If not this year, than in the next year or two. But I see most all of these sales coming directly out of Samsung's piece of the pie.

If nothing else, Samsung will now have two competitors stoking it's fires. Oops...didn't mean that pun :D

Abdul Muis

@Tomi

From your site:
http://communities-dominate.blogs.com/brands/2017/01/the-median-phone-on-the-planet-for-the-first-time-is-now-a-smartphone-at-the-end-of-2016-no-longer-a.html
quote "Page 39 meanwhile tells us the phone has an average replacement cycle of 29 months"

Why do we have 3.193 M user if the replacement cycle is 29 month??
29 month = 100% 2016 + 100% 2015 + 42% 2014 = 1,480M + 1,430M + 546M = 3,456M
Shouldn't the number of user be 3,456M (3.4 billion user)

Abdul Muis

Here is an iteresting CHART from SuperData Research / Unity

http://images.response.unity3d.com/Web/Unity/%7Bbfd9d8a6-823f-4c7d-a185-b7c01a165041%7D_Unity-2016-Mobile-and-VR-games-year-in-review.pdf

Quote...."
• In the U.S., developers made 45% more on an iOS player, but in China Android players were worth eight times more.
• Revenue for mobile games increased 14% year over year, largely due to Android, which saw a 32% uptick in revenue

PAGES 7...
Games revenue in asia is 24Billion US$..... WHICH IS...... 61% of whole world total game revenue!!! And ***MOST*** smartphone in Asia is Android!!!

Tomi T Ahonen

Hi Abdul

Excellent question and great point. Yes, if all existing smartphone owners also did replace their phones at exactly 29 months, we should see the math say 3.4 Billion. While my model actually has a sliding scale (some phones live far longer than others, iPhones have the longest life) the big reason why the total sold for past 29 months is not cumulative sales, but less, is attrition. We lose and break phones ourselves and some are stolen from us. Thats the 200 million difference or about 6% accumulated attrition within the 29 month period.

Tomi Ahonen :-)

cycnus

Isn't Oppo amazing to be at 4th place considering your year 2015 forecast did not put them in Top 10 at all?

Wayne Brady

@Abdul - it's a bit hard to unpack what this company is saying about China

"iOS players spent on average roughly 25% more than Android gamers did worldwide. And the percentage of iOS players who purchased content in many key markets was between 5% and 20% more. However, a few outliers exist — mainly China. Not only are there almost 40% more paying users on Android, CPI on iOS is 80% higher but spending per user is only greater by 20%."

The 80% more players on Android makes sense, finally, as that's the same as the marketshare advantage.

Tomi T Ahonen

Hi Wayne and Abdul

About the eternal iOS vs Android apps revenue argument (argh... again?). The trend is .. as I said it would be .. inevitable. Because Apple only has a niche, even if its a huge global niche of rich people - it will lose the money race in the services that the iPhone supports. This is INEVITABLE. It is ONLY a matter of time. Android WON THE WAR back in, when did I post that blog? I think I called it in 2014 maybe? Since then the OS wars were won by Android and Windows (on legacy PC side) and iOS (on smartphone side) were only marking time. Now we see the tilting of the picture.

So first onto what you quoted Wayne. So iOS spending per user is 20% more. But Android has 40% more paying users. Duh. Even as Android sells far cheaper smartphones and many users cannot afford to become paying app gaming users (while anyone who can afford to buy a new iPhone can easily afford to spend a dollar or two per month for gaming) there is now a SIGNIFICANTLY larger number of paying gaming (ie app) users on Android than iOS. While iOS users spend more, that no longer 'evens the field'. So just by the math you posted Wayne, if there are 40% more users on Android but iOS generates 20% more revenue per user, then Android is ahead in revenues generated by 20%. This was inevitable.

Why is this concept so incredibly unbelievably hard for some analysts and experts to grasp? Its the USA vs rest-of-world myopic view. The iPhone best market, nearly half of all iPhones sold - are in the USA. It means iPhone is far over-visible in the US domestic market for most tech writers (in the English language) and near the tech world's 'meccha' ie Silicon Valley, than Android is. For Americans it seems like iPhone and Android are almost even - in devices they see daily when they go out shopping, to have a coffee at Starbucks etc. And in MEDIA the obsession is Apple so along their PEERS the writers tend to see nearly exclusively iPhones, plus the media support industry around them, like advertising is an in-house iHype Factory for Apple. No advertising professional would dare show up with any tech gear that doesn't proudly display its Apple logo.

But when the US domestic market is removed from the picture, in the 'non-USA world' where 92% of us live - in that world, on average, iPhone ONLY HAS 10% share of installed base of smartphones!!!!!

Yes. Do the math. Outside of the USA, in the rest of the world the numbers are BRUTAL against the iPhone, 9 to 1 against. And that includes many friendly countries like Japan, Australia, UK etc that help the Apple picture. In countries like India, Nigeria, Indonesia, gosh, iPhones are outnumbered by 20 to 1 or more, can be as bad as 50 to 1.

Now, the Apple buyer is ALWAYS affluent. They will not hesitate to buy stuff onto their new iToy. They will go to the App Store to buy apps and download them and generate money, and they will not be as sensitive about a given app's price. Even so, even today, in the USA, 49% of all smartphone owners never download a single app. I am sure that skews also in Apple's favor so it may be that only 40% of iPhone owners but over 70% of Android owners don't download any apps in the USA. This is the richest continent and half don't download apps. In all other continents, that are less affluent - ie spending chances on apps are less - the PROPORTION of iPhones is dismal.

The math for Apple's App Store economy is the USA and Japan and the EU5. Outside of those seven countries there is no App Economy for the iPhone. That is why the numbers we occasionally get - like what Abdul showed from China - are DISMAL for the iPhone. And we know this, the situation was inevitable and it has gone past its tipping point and keeps getting worse for Apple. But Apple cannot let this story be the story, that they are 'losing' the app race. They cannot have an erosion in apps where developers discover, no sense in wasting money doing an iPhone version, lets only do the Android version, at half the development cost you recoup 90% of the money your app might make. Only if it turns into a hit product, even BOTHER with an iOS version.

But outside of the English-and-Japanese speaking worlds, that is how it will play out. This is INEVITABLE. I have told you folks before, listen to Tomi when he uses that word, inevitable. I have never been wrong when I said inevitable. I said its inevitable that Apple has to release two phone models per year (to huge ridicule). I said its inevitable that Apple releases a lower-cost iPhone (to huge ridicule). But while I have desperately wished for an iPhone with a physical QWERTY keyboard or a better camera than the cheap plastic toy they use - I have NEVER said that was inevitable, that Apple 'has to do that' on the contrary, I have nearly always added - 'but I don't think Apple will do it'. Listen to Tomi when he uses the word 'inevitable'. It will happen. And this was one of those things, inevitable. Of course Android will have more users, because they sold more units. Of course they will have more apps in their app store because thats where most users are. Of course over time, even if Android users are less affluent, the numbers will force the issue and Android will make more money. Inevitable.

But American fools don't get it because they are WITNESSING the absolute opposite extreme end of the spectrum. This is EXACTLY like SMS was for Americans. I was preaching SMS in year 2000 at the first mobile internet conference of North America (I had previously chaired the world's first such event in Europe of course) and the American 'experts' all were aghast and thought I was nuts, and tried to convince me about email on mobile phones, that SMS would never catch on in America. Hahahahahahaha. This is AGAIN the same story. Americans think that how it happens in the USA, will also happen in the rest of the world - because in MANY tech industries, that did happen. In those industries the USA was the leader. In mobile, we know the leaders are in Asia (and Northern Europe, Finland, Sweden, Norway, Estonia etc) and in mobile, the US view is almost always utterly wrong - except with the original iPhone in year 2007 - as I wrote at the time, it was the only transformational phone in our industry's history, it changed the whole industry. But that was the dumbphone version of 2007 and since then, Apple has done nothing to invent anything new for us, they have just copied Japan's NTT DoCoMo on everything from the App Store to mobile wallet to Siri the digital assistant.

With that rant done, the word is 'inevitable'. It is inevitable that more sales are on Android, more users are on Android, more apps are on Android, more downloads are on Android, more money is made on Android (and more ads served on Android). Inevitable. I do not use that word lightly, I have made this point many times about Android vs iOS and I have never been wrong in my professional consulting and forecasting gig when I used the word 'inevitable'. This is inevitable. It means - I use the word inevitable - that the time will come when MANY (not all) app developers will do Android only, or Android first and only if their app is a big success to warrant the work, bother with an iOS version. That day will come (soon in some markets where iPhones are trivial in number). This is inevitable.

Tomi the Inevitable Guy :-)

Tomi T Ahonen

Hi cygnus

Yeah, pretty amazing. I did say several times during the Bloodbath years that the immediate next entrants to the Top 10 were from China, and I mentioned Oppo well before they cracked the Top 10. But around the time of the Xiaomi hype, I warned that China is an anomaly where a local provider can get into the global Top 10 by having a hit phone - but that is not sustainable and the threat is they become a one-hit-wonder, the flavor-of-the-month who then fades out. That China is large enough to put you into the Top 10 if you have a hit phone - but this industry needs distribution and growth beyond that China-domestic success cannot be replicated without years of building a distribution network and carrier relations internationally.

But yeah, good call, Oppo done quite well to get to 4th place in two years from entering the charts. That was, however the easy bit as only 20 million unit sales annually and a mere 1.5 points of market share are the difference between 9th ranking and 5th ranking. Oppo grew by a massive 41 million units of new sales in 2016. But even if they did that amazing level of further growth in 2017 (no chance of that: distribution) they would not catch up to Huawei haha... Huawei has built its handset distribution for 15 years and sells in almost every country in the world and has carrier relations with more than 3 out of every 4 carriers in the world.

But yeah we could give a nice pat on the back to Oppo, they ARE doing well. As I wrote, of the Top 10 brands, its the only one worth watching in year 2017 haha..

Tomi Ahonen :-)

Wayne Brady

I would have agreed with you Tomi, except the inevitable should have happened a long time ago. In China is the only place that article states...that Android even has more games players, let alone revenue. And the article is only about games. With the 4x world wide install base, Android STILL doesn't generate more revenue. All the paying customers have been on board for years. Android is simply sucking the remaining poorest dumbphone users as they switch to smartphones while remaining the poorest customers.

The remaining 2B are poorer still than the last billion Android added.

Android has to reverse its fortunes in the high end. I'm not saying that can't be done. I'm saying that adding the remaining 2B poorest customers isn't going to matter AT ALL to App economics. Google's Pixel and Samsung's Galaxy and Note lines need to start taking back ground from the iPhone. Short of a exploding iPhome disaster, I just don't see it happening.

Abdul Muis

@Tomi

I was wondering do you think that SuperData research data were saying Android make more money than iOS? SuperData Research didn't say it, but the data seems to suggest that Android made more money than iOS because of the Asia (60% of total revenue) perhaps have 90%-95% android user.

Abdul Muis

XiaoMi mistake were doing an ONLINE-ONLY, and they were making OFFLINE store (brick & mortar store) this year.... lots of OFFLINE store to fight back Oppo & Vivo.

Karl Heinz

Hi Tomi,
The same question as for the Q3 - could you please give an exact number of Windows Phone/Windows 10 Mobile smartphones according installed base by OS data?

Arika Mendez

@wayne

It hepen sinse long time. Just no one say it. Only america think apple.

Now it sayed by internet. You just must chance you point of view.

Abdul Muis

Sony number
http://www.xperiablog.net/2017/02/02/sony-lowers-full-year-xperia-shipments-again-5-million-smartphones-sold-in-last-quarter/

zlutor

@Tomi: "The only Android phone model already being sold, did over a million units of sales in China in its first week" - weren't they just registered 'to be interested in' Nokia 6? Were they converted to be actual buyers?

e.g. : http://gadgets.ndtv.com/mobiles/news/nokia-6-android-phone-registrations-reach-1-4-million-ahead-of-second-flash-sale-on-thursday-1652431
"For those who are unaware, registrations are not the same as pre-orders and don't require any monetary exchange. Anybody who is interested in buying Nokia 6 can register over here on JD.com. You are required to have an account on the website to make a registration."

On the other hand there were 1.1+ million product reviews(!) here: http://item.jd.com/4297772.html#none
Either someone run bots for commenting or there were real buzz around this phone... :D

Anyway, 23 days and we will see in Barcelona what it is...

Abdul Muis

They need to put small amount of down payment to register for nokia 6. Google it.

vasra

As usual, your reading is good and analytical. Thanks.

Question: why are you not pooling BBK electronics numbers together: Oppo, OnePlus Vivo and imoo

They are together already bigger than Huawei (with all of it's sub-brands) and in China they totally destroy Apple sales (they are bigger than Apple in China).

The future is there.

Apple is pretty much saturated in OECD and 90% of China for now. People can't become middle-class and rich enough to buy iPhones or top-line Samsungs.

And even if they did, they have other things competing for their dollars (apartment, car, appliances, etc).

After iPhone 8 boost I think Apple will still continue to lose market share globally and esp. in China.

Probably the same for Samsung, unless they get their cheap-to-mid-tier portfolio in order.

chithanh

@Abdul Muis
> Why do we have 3.193 M user if the replacement cycle is 29 month??

Adding to what Tomi said, replacement cycle was shorter than 29 months in previous years, so phones got replaced slightly faster back then.

@Wayne Brady
> A couple years ago it was being hailed as a real challenger to Apple.

But not by Tomi. That is what you get for listening to second-rate analysts and journalists doing a poor job.

> I would have agreed with you Tomi, except the inevitable should have happened a long time ago.

No, why? Consider your very own words about installed base. App sales are dependent on installed base.
Any changes in marketshare will take some time to show up installed base.

> Google's Pixel and Samsung's Galaxy and Note lines need to start taking back ground from the iPhone.

You can sell an app only once even to a Galaxy owner.
In the big picture, the Galaxy and Pixel phones matter little to Android outside of being the most profitable for the manufacturers and creating halo effects.

If anything, the mid-range Android smartphones eating into high-end will increase app sales, as smartphones and apps are complements in economic terms.

Wayne Brady

@chithanh - re recurring revenue. There is far more than a first time purchase opportunity among the profitable customers. There are subscriptions, ads, accessories, related products, and mobile transactions.

Apple, as usual, is paving the way. Google/Samsung are following.

Under subscriptions there is Apple Music, iCloud and the "app store cut/tax" that Apple/Google make selling the subscriptions for Spotify and the like. Apple has added the subscription model to their apps as well. For example "1 Password" is now a subscription instead of a pay once model.

Mobile transactions: Apple Pay, iTunes (music, movies, tv shows), App store cut/tax, iBooks

Accessories: Apple Watch, cases, battery cases, chargers, dongles. For Google there is Google Home, Chromecast

Related products: Beats headphones, AirPods, iPads, iPod Touch, Apple Tv, Mac

Ads: self explanatory

This is Apple's business plan. More products and services targeted to the needs, wants and desires for the middle class and above - wherever there is a middle class.

Apple's share of the smartphone market falling is blinding folks from the story. Apple's "bad year" last year (with 3 straight quarters of YoY sales decline) - still had Apple add over 100 million NEW iPhone users bringing it's installed base over 600M.

Just services alone to those 600M (iCloud, iTunes, subscriptions, Apple Pay) is going to be a Fortune 100 sized business.

The flop that is the Apple Watch is the 2nd largest watch company in the world. Not "wearables company", but Watch company. It's just an accessory to the iPhone sold only to people that have iPhones.

AirPods launch and instantly become the best selling BT headphones, followed by Apple's Beats headphones - together taking 40% unit share.

What is Apple coming up with next? I don't know, but I can tell you it has nothing to do with figuring out how to sell $50 iPhones to the poorest people in the world. It will be hardware, software and services aimed at that same middle class market that Apple targets with all of their products.


Per "wertigon" Ekström

@Wayne:

"I'm saying that adding the remaining 2B poorest customers isn't going to matter AT ALL to App economics."

But it will.

Even if only 5% of these 2B customers decide to spend $10 in the store - be that for themselves, or as a gift for someone else - that's... Yup... 1 billion dollars of revenue. Of which Google would get 300M or so. Nothing to sneeze at.

But, as web apps truly start eroding the native apps - and this is something I really believe will happen as time wears on - revenue streams from app stores will start drying up as well. Then where will Apple go?

Apple is right now where the Roman empire were in 250 A.D. when it comes to smartphones. Of course, the roman empire existed for long after 250 A.D. and the iPhone will exist for quite some time as well. But in 250 A.D. the empire was in decline, slowly at first and faster later.

Come back in 2020 and see how Apple fares then. :)

Wayne Brady

@Per - If the 2 Billion more installed base Android ALREADY HAS, which already includes the richest markets - and the Google App Store is still bringing in only half of what the Apple app store does (and App store revenue is only one piece of the revenue pie) -- you hope in vain that adding the next 2 billion of the poorest of the poor are going to materially change things.

Meanwhile, instead of chasing those very few dollars - Apple keeps both increasing it's lead in unit share of the premium segment and developing more offshoots of the iPhone (products, services, subscriptions) to profit from them (and not just Apple but Apple's partners).

This is precisely WHY Google came out with the Pixel phone in direct competition with it's partners, particularly Samsung. Like Microsoft, Google has had to intervene to attempt to stop the complete commoditization of their product line and thus abandoning the most profitable segment to Apple.

It is Apple that is the most powerful force in mobile (computers and smartphones). The notion that Microsoft and now Google can just make the operating system and depend on their hardware partners to beat Apple - those days are over. Yes, commoditization is a real industry force, but it is Apple that has shown the way to provide a differentiated experience and premium product that customers are willing to pay for, and for which Apple makes enormous profits from.

Apple can be toppled - but not by cheap commoditization. The Mac is going for 30 years now. The iPod came and went, but it's demise never came from the cheap commodity players. The iPhone is 9 years and has set the bar as the most successful and profitable product in human history. And remains so even now. It is the Google with the Pixel and Samsung with it's two premium lines that can hurt Apple. Samsung has had a bad few years, not so much from Apple but from commodity Android. But Android has come back swinging last year and was poised to gain back some ground this year but the exploding Note 7's set them back.

I want to see where Google takes it's Pixel line. Google is following the Apple integrated playbook as well they should. Samsung could unleash something tremendous like truly foldable phones. We know they are working on it...maybe they'll deliver it this year or next.

You can beat Apple. Google already has with the unit market share of Android. Samsung already has by producing a complete product line at every price point. They won. Apple lost by that measure.

But that's the ONLY measure Apple has lost. If Google or Samsung don't beat Apple at APPLE's game, then only something different from a smartphone that replaces the smartphone....something none of us knows about, can do so. And when THAT happens, Google and Samsung will go down with Apple (if it's not one of these three that come up with "what's next").

Per "wertigon" Ekström

@Wayne:

You are still ignoring the network effects having 90% of the market gives you.

Apple is milking the iPhone for all it's worth - which right now is smart, but you trade current profits for future profits and sustainability.

It's like the oil market. If you can't see the reason why the oil market is headed towards a cliff, then you honestly won't see the fall of Apple coming either.

Apple - painted itself into a corner, walled that corner off, and is now milking their customer base for all they're worth and then some. A strategy like that is bound to give, sooner or later.

Wayne Brady

I've debunked your network effect theory numerous times. Percentage of market has nothing to do with network effects. Android already has 2 billion more install base than the iPhone....already has the richest customers its ever going to have, and it still doesn't have the economic power in its ecosystem that Apple does. Adding the final poorest 2 billion is not going Android is not going to affect Apple in the slightest.

If network effects were going to doom Apple, it would have happened years ago.

Not to mention that Android and Apple are part of the all the same networks. Facebook, twitter, wechat, Line, Snapchat - you name it. Any app or service that gets popular on one platform is ported to the other in quick order. Doesn't matter which platform gets it first.

Abdul Muis

http://images.response.unity3d.com/Web/Unity/%7Bbfd9d8a6-823f-4c7d-a185-b7c01a165041%7D_Unity-2016-Mobile-and-VR-games-year-in-review.pdf

Pages 7
Total World Wide Mobile Games Revenue in 2016 - US$40.6 Billion
North America - US$ 6.9 Billion
Latin America - US$ 2.4 Billion
Europe - US$ 5.7 Billion
Asia - US$ 24.8 Billion
ROW - US$ 0.8 Billion
.
.
This is a PROVE that the 'POOR ANDROID' user in Asia is matter. Asia bring total mobile revenue more than 3.5x North America!!!!!!!!!!!!!!
.
.
.
.
And BTW, still on page 7..... "Though China’s dominance is a result of the nearly 1 billion monthly active users playing on mobile, Japan and Korea solidify their places in the top five by boasMng big spenders: among players who made in-game purchases in 2016, Koreans spent almost $60 in an average month while Japanese spenders shelled out $70. The other three top markets came in well below, with spenders in the U.S. and China paying about $25 a month and Brits paying just over $30."

The Asians spend more $$$$$$/user instead of having lower income compare to Americans.

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Available for Consulting and Speakerships

  • Available for Consulting & Speaking
    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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