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« Lets dig into Apple 1B dollars paid out by iPhone App Store - how relevant is this number | Main | Full Analysis of iPhone Economics - it is bad news. And then it gets worse »

June 21, 2010



That is a quite in depth analysis Tomi. What I don't understand is why are Android phones collectively counted? I mean yes it's one platform but it's sold through different manufacturers, and last time I checked Android is a free platform so that means anyone can get on it, for free. Why is this relevant? Nokia has a free platform but it makes money off of selling its own handsets. How does Google make any money off of Android?

I think Apple is given too much credit in the media, fact is they are a very new in mobile and as far as I know they don't even have their own factories to build hardware so they rely on outsourcing to make their phones. While that may be great it also has its disadvantages, for one I think you're not as flexible in adding more phones when you want it and that's the problem with Apple while they have build a great platform they can only offer it on one phone. Also going one carrier strategy I think has hurt them big time. I think long term they will keep their 18-20% market share because they do offer a great piece of hardware and software.
If Nokia stays at 30-35% and RIM at 20% that makes a total of 75% smartphone market share between them 3, that leaves for the rest (Android, Bada, WebOS, LiMo) about 25% of the pie, am I right?

Tomi T Ahonen

Hi Dardano

Welcome back. Good question on Android. I am actually tracking the smartphone war for the full year. I did the pre-year preview, and one Quarterly 'full' report, where I cover every significant brand in smartphones, where Android is both dealt as an OS and each major Android maker, Samsung, LG, SonyEricsson, ZTE, Motorola, Huawei, HTC, Dell, Lenovo etc all individually mentioned.

This blog you stumbled upon, is a short period 'update' posting, only on those brands who were in the news in the past few weeks. I've been publishing these shorter updates every few weeks this whole Spring, as I won't be able to remember all the 'important' news once per quarter haha. So I do the short term updates, and in this period, there wasn't much from HTC as we expect their quarterly numbers, nothing from Moto or SonyEricsson, and what of Samsung was more around Bada than Android. I did mention a bit about ZTE and Huawei... But its a good point, Android is a separate story as OS and across the 21 manufacturers who support it.

As to Google making money - they will make money on the ads served on the Android platform (many bits of it, maps, Gmail etc - have ad elements, and obviously search).

Apple 'too much in media' totally agree. They are the most influential provider at the moment, and are mistakenly attributed with many innovations by the US tech press who don't know better haha, but yes, Apple gets too much love and affection simply for being Apple. Agree that the one carrier strategy hurts them, and in most (Industrialized World) markets Apple has abandoned that and offer through most if not all carriers.

The math you map out is right spot-on, and it illustrates the 'zero sum game' that is in smartphone market share. For one brand to win, another has to lose. Since Q3, Apple has lost market share, RIM and Nokia have won among the big 3. of the smaller players, Microsoft and Palm have lost market share, Android has gained. Bada is only ramping up now.. But clearly, not everybody can be winners, it will be truly a bloodbath, with 24 of Global 500 sized giant corporations slugging it out, and I believe it has never happened before, that so many of 'other industry leaders' have said something else is their future, and have said they want to win in it. Consider - world's biggest PC maker HP says future is mobile. Google world's biggest internet company - mobile first. Microsoft, world's biggest software company says future is mobile. Vodafone worlds' biggest carrier group/mobile operator group suddenly wants to become also a phone maker. These and many more joining the race where Nokia, Samsung, LG, SonyEricson etc already offer smartphones. It will be bloody..

Thanks for visiting us again, let us know more of what you think

Tomi Ahonen :-)

Pat Smellie

Informative post but I wonder if your predictions on Apple might be about as accurate as your guess last quarter which ended up being wrong. Rather then predicting Apple's demise why not wait for some real data. You obviously are unimpressed with Apple's handset but the device is well received if the lines and pre-orders are any indication, your claim of all the sales are just upgrades is another guess without any data to support. Do you have international sales figures to back your claim of Android sales for the 2nd qtr? Last I checked the qtr is still going. I hate when people make their predictions appear as facts.

R. Beattie

Informative post (as your other commenters note). Your discussion of the App Store was not very clear, however. I'm not sure why you are including the "free" apps when you are trying to calculate "average" revenue/app. The only legitimate way to discuss App Store income is to average the revenue over the paid apps (according to you, about 15% of applications). Calculated this way, the revenue seems reasonable (the figures you give allow me to calculate an average revenue of $1.33 per paid download [5 billion (app downloads) *.15 (% paid apps) /$1.43 billion (net app store revenue) *.7 (developer's share)=$1.33/app download] - not spectacular, not horrible, but your post doesn't really give enough data to tell). The free app developers _can't_ make money from App Store revenue (although they may be using other means like in-app ads, upgrades to paid apps, etc.).

To get a fuller picture of App Store revenues per developer, you should include some other data, such as an estimate of the total number of paid apps, and the average price of paid apps. If you do this, I think you'll find a more balanced picture than the one you paint, although I doubt that you'll see anyone raking in the big bucks on average.

R. Beattie

By the way, I KNOW that my method of calculating revenue/download is not accurate - it's just the best estimate I could make given the info in your post. In fact, the percentage of downloads that are of paid apps (as opposed to the number you quote - the percentage of apps that are paid apps) is probably MUCH lower than 15% (if we assume that the vast majority of downloads are of free apps). This would actually make the revenue/download of a paid app even higher than what was estimated in my comment.

This does raise an interesting question (for the Apple App Store as well as the Android Marketplace); Why are so many developers willing to put time and effort into developing apps that are given away for free? Is it practice? A hope of a different (i.e. - non-sale) revenue stream? Interesting questions.

Tomi T Ahonen

Hi Pat

Fair points. On 'my' forecast of Q1 - you know fully well there were two dozen published forecasts for iPhone sales decline - not one predicted sales increase - and that of all those forecasts, mine was among the smallest error. We all got it wrong, I got it significantly LESS wrong than most. And that actual sales surprise (China) was not projected by anyone in the industry prior to Q1 of 2010, there was literally no precedent to assume it. If we remove China, Apple in all other markets did decline and its USA market declined almost exactly to the level I had predicted (AT&T sales for Q1).

I feel its my duty to give facts when I find it, and my analysis including my forecasts the moment I feel confident to make those. Like any forecaster, I cannot be 100% accurate, but there are over 100 of my forecasts out in the wild, in the public domain, and I keep reporting on both where I get it right, and where I get it wrong. I don't see most of my peers bothering to inform their readers when they were wrong. As you know I am out immediately with the facts if my forecast turns out to be faulty.

Remember this is not an Apple blog nor iPhone blog. My readers find great value in my regular - and usually uncannily accurate - forecasts - like right now, I did say it would be in June that Apple reports 100 million cumulative iDevice sales, and I said last year that this year we'll pass the 1B dollar iPhone App Store annual revenue level. For the one forecast I had wrong in Q1 (that everbody got wrong) there are dozens of forecasts here on this blog that are very relevant, and are proving very accurate. Don't you agree? Who said first that SMS will pass 100 Billion dollars in revenues, or 3 Billion active users, or MMS will pass 30 Billion dollars in revenues or the majority of Americans will use SMS, etc etc etc. I would think that for an industry that is rapidly evolving, such forecasts help add some clarity. But I am the first to remind that not every forecast turns out correct, as I way back in 2001 had to eat my early forecast for video calling haha...

Now on Apple's demise. It is a fact that the iPhone market share in Q3 was 17%, its global peak. Since then the iPhone market share has shrunk to 16% (while each of its 3 nearest rivals, Nokia, RIM and HTC have grown market share). This has been before Android phones have fully ramped up. Apple's own statements during Q2 - to court documents - have stated their Q2 sales of iPhones are severely hurt because of that stolen iPhone prototype. Apple itself is reporting in the public domain that iPhone sales are down. This before the new sales hassles with iPhone 4. I do not see 'facts' that iPhone is even keeping up with the Q2 growth in the smartphone market, far less recovering its market share losses from last year.

But I have also clearly stated, time and again, that my forecast made in March of 2010 was bold and not certain by any means, and the facts will not be known until January 2011. I am fully committed - as you know - to determine at that point if my forecast was accurate or not. No data before January 2011 can conclusively prove it either way, because the Christmas quarter tends to be the year's best quarter in sales, so its influence to the annual market share is bigger than any other quarter's.

On Android, we have official Google statement on the sales level from May - when they were selling at the rate of 36 million total Android devices on an annual level (I recall that was 100,000 sold per day, which was a global number yes). But yes, the final count is likely to be bigger than this number. I can only report the latest facts that are released into the public domain, when we get the final numbers, you can be sure I will report those too.

Thank you for visiting us.

Tomi Ahonen :-)


Good reality-check Tomi, thanks! Was also disappointed to see Apple still going on their one-phone approach. Can't wait the end of the year to see how the super-smartphone landscape evolves (N8, Iphone 4, Android and the 1st Meego).

You should check the US centric view about Nokia:

Terv. - Cooli/Olivier.

Pat Smellie

@ Tomi
We all carry our bias into our view of the world, but I have trouble reconciling Apples actual YOY performance with how it is presented. If we compare Apple iPhone sales quarterly and every qtr they improve at a rate greater then the overall growth of the smartphone market how will their share not grow? For an example Apple grew iPhone sales for the last for qtrs 626%, 7%, 100% ,131% YOY, These numbers have a bit of noise due to Apple having a single big launch event verse multiple releases across the calender, but I think we can all agree with current economic conditions this is fantastic performance for any company. If we look at iPhone across model years we have sales of 6.124M, 20.328M and (e) 33.856M or YOY growth 231%, 66% which will the rate of growth is slowing it is still above average for smart-phone category. Apple is doing extremely well in the high end of the smart-phone market and before we decide that they can't grow we must make an assumption that they won't make a lower price device to compete for the next tier of the market. With the new iPhone 4 offering we now have two devices the iPhone 3GS at $500 and the iPhone 4 at $600. Will they add a third, the iPhone Nano at the $400 price point in 2011? Your assuming Android will be offered on lower cost handsets and Apple or for that matter RIM et al. will not react in any meaningful way to the competition. What happens if Samsung switches their offering to their own OS or HTC switches back to Microsoft. I think 2010 will be a great year for Android, but 2011 maybe a different story.

Romain Criton

Outsourcing manufacturing is very common in consumer electronics in general, and mobile phone in particular, so I don't think it really gives Apple a competitive disadvantage. I guess it's probably more cost-effective to own the factories, but that's not relevant for Apple who is positioned on the less price-sensitive high end segment.
Regarding the link between outsourcing and their ability to expand their phone portfolio, I don't see why outsourcing would cost them the flexibility to introduce new models.
Actually I think it is a strategic decision of Apple, like everything else they do: Quality rather than Quantity. Look at their computer line-up: they don't have that many different models when compared to other PC manufacturers.

Romain Criton

Why is that such a big problem to you that many iPhone 4 will be sold to owners of older iPhone models ?
You're making a distinction between new sales and (supposedly inferior) replacement sales, but from a pure financial perspective both are almost equivalent to Apple: it's the same hardware sales revenue they're getting in both cases. Sure in the case of replacement sales they're not expanding their installed base, but I'm sure they're not aiming for market share domination anyway (like for computers).
Actually, I see the strong replacement sales pattern as a strength for Apple: having loyal customers who purchase your products one after the other is something many companies can only dream of !


Nokia OS confusion: Nokia bails on Symbian for N-Series. N8 will be the last N-Series to run Symbian -

iOS and Android were announced way back in 2007 and Nokia has yet to sort out their superphone OS. Bloodbath indeed.


Most biased blogger.Only favors nokia's smartphone...:P


Dont predict if you prediction favor only 1 brand or give negative comments to only one brand.


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