One More Time - Lets do Nokia Q1 Smartphone Results, what can we estimate of the actual numbers from the deliberate fuzzy math

So yeah. Nokia reported today (as did LG). And Nokia gave even less data this time than three months ago in Q4 results, as it has now shifted the handset business to Microsoft last week.

We know really little 'for a fact'. We know the handset unit overall reported 30% decline in revenues vs same quarter one year ago and 27% decline in revenue vs Q4 of 2013. Nokia gave that number for us, it is 1,929 Billion Euros. 

Nokia then gave a few summary statements about how those numbers came to be. Nokia writes in the Q1 2014 results:

The year-on-year and sequential declines in discontinued operations net sales in the first quarter 2014 were primarily due to lower Mobile Phones net sales and, to a lesser extent, lower Smart Devices net sales. 

 On both a year-on-year and sequential basis, our Mobile Phones net sales were affected by competitive industry dynamics, including intense smartphone competition at increasingly lower price points and intense competition at the low end of our product portfolio. Our Smart Devices net sales were affected by competitive industry dynamics including the strong momentum of competing smartphone platforms. 

 On both a year-on-year and sequential basis, discontinued operations unit volumes declined in the first quarter 2014. The year-on-year decline in discontinued operations unit volumes was due to lower Mobile Phones unit volumes, partially offset by higher Smart Devices unit volumes. Sequentially, the decline in discontinued operations unit volumes was primarily due to lower Mobile Phones unit volumes and, to a lesser extent, lower Smart Devices unit volumes. 

 Discontinued operations Average Selling Price (ASP) declined on both a year-on-year and sequential basis in the first quarter 2014. The year-on-year and sequential declines in discontinued operations ASP were due to lower ASPs for both Smart Devices and Mobile Phones. 

Ok. We know some limits. Unit sales of smartphones were definitely more than 6.1 million and definitely less than 8.4 million. We know dumbphone sales were definitely below 55.8 million and total handset sales definitely below 75.0 million. We also know that part of the revenue decline was due to lesser unit sales but part was due to lower average sales price (ASP) across both dumbphones and smartphones.

Well, we do have the elements of a multidimensional optimization problem. And I did some modelling and came with a 'solution' that fits all the above. And it comes with very 'reasonable' assumptions too, I assigned the revenue decline evenly, half coming from ASP decline, half from unit sale decline. I made sure every statement in the above paragraphs is fulfilled. And I find these numbers for Nokia Q1 results (vs Q4 of 2013 for context)

Nokia Handset Unit Results Q1 2014 (estimate by TomiAhonen Consulting)

ITEM . . . . . . . . . . . . . . . . . . . Q1 2014 . . . . . Q4 2013 . . . . Percent decline in one Quarter

HANDSETS COMBINED
Total Handset Unit Sales . . . . . 65.2 M . . . . . . 75.0 M . . . . . 13%
ASP of all Handsets . . . . . . . . . 29.60 Eur . . . . 35.11 Eur . . . 16%
Revenues of Handset Unit . . . . . 1,929 B . . . . . 2,633 . . . . . . . 27%

SMARTPHONES ALONE
Total Smartphone Unit Sales . . . 7.1 M . . . . . . . 8.2 M . . . . . . 13%
ASP of Smartphones . . . . . . . . 117.10 Eur . . . . 141.95 Eur . . . 18%
Revenues of Smartphone Unit . . 835 M . . . . . . . 1.1 B . . . . . . 27%

DUMBPHONES ALONE 
Total Dumbphones Unit Sales . . 58.1 M . . . . . . . 67.0 M . . . . . 13%
ASP of Dumbphones . . . . . . . . .14.40 Eur . . . . . 21.99 Eur . . . 35%
Revenues of Dumbphone Unit . . 1.09 B . . . . . . . . 1.49 B . . . . . 27%

The above analysis by TomiAhonen Consulting may be freely shared
Note the exact math does not 'add up' totally as this is result of 'best fit' multidimensional optimization of the known data points. It is accurate within a few percentage points on every item.

I can not be certain this is the 'only' solution to this problem but this is very 'realistic' in that all the variables are similar in size and consistent with the above (so one is not only 3% while the other parallel data point would be for example 57%). I of course welcome anyone else who might find an alternate but still reasonable solution. I think this is maybe as good an estimate of the division-specific performance we'll ever get from Nokia in its last quarter ever as a handset maker.

So with the above, lets assume those numbers are real. Obviously we know the losses worsened in the quarter compared to Q4 so yeah, Nokia is not a beloved handset brand currently. Unit sales are down, average prices are also down, while lossed grew. That is the unholy 'trifecta' of market failure. (it is also what Microsoft now takes over pretty much a disaster, thanks to Stephen Elop's utter demolition of the Nokia handset business over the past 3 years until Nokia removed him from the post of CEO)

What do the above numbers mean from the Smartphone Bloodbath point of view? Nokia smartphone sales are down to 7.1 million units in Q1. That is down 13% from Q4 and Nokia's prelimary market share is now 2.5%. Note that the Nokia Q1 results specifically mentioned the issue at the smartphone unit where sales were down being "affected by competitive industry dynamics including the strong momentum of competing smartphone platforms."

(BTW what bullshit is that? platformS. S!!! Not 'platform' but 'platforms' plural? Strong momentum of competing smartphone platforms? We just had Apple Q1 results and iPhone sales are DOWN 14% from Q4. So who else? Blackberry is down 21% from Q4. bada has ended production. Tizen only appeared on a pair of smart watches and nobody suggests there is any 'strong momentum' in smart watches at this point. The ONLY platform that shows strong momentum is obviously Android. I HATE it when people use such sloppy reporting)

But yes, the smartphone unit is severely struggling right now. A unit decline of 13% in smartphones when the overall handset division reported revenue decline of 27% from Q4, that is very consistent with the reported performance. Note that this is the big China sales quarter (Chinese gift-giving is not at Christmas, it is at Chinese New Year which is in the first calendar-quarter of the year). China obviously is the world's largest smartphone market by a huge margin and Nokia very recently owned 70% of that smartphone market. Now the latest Kantar data for Q1 fo 2014 finds total Windows Phone market share in China to be between 0.7% and 1% over the three months of the Quarter (OUCH !!!). Some Windows Phone 'success' in Argentina or Australia will not come close to covering the losses in China.

7.1 million smartphones leaves Nokia ranked 10th of the Top 10 largest smartphone makers in the world now that Xiaomi of China has leapfrogged Nokia too (Xiaomi sold 11.0 smartphones in Q1) but at least Nokia sold more than Blackberry or the Motorola unit of Google that Lenovo has now bought.

Oh and Nokia X running Android? We don't have any data points to even attempt to model that. We can be sure that some units of 'Nokia smartphones' were running Android but Nokia gives us no clue what that might be. I can't even speculate...

Now. What about Windows Phone? If we ignore the Android based Nokia X, and just for the sake of simplicity (And the absolute best-case scenario for Microsoft) we assume all Nokia smartphone sales were on Windows Phone, and if we also assume that the pattern holds that Nokia sells 90% of all Windows Phone smartphones (HTC and Samsung most of the rest) then Windows Phone has again also fallen in market share obviously and their total sales would be in the range of 7.9 million total smartphones and 2.8% market share now at the end of Q1. Yeah. It is technically the third 'biggest' but at 2.8% can you really call this a 'third ecosystem' or - remembering all Windows Phone smartphones are sold with huge subsidies and marketing support - and still at massive losses - isn't this a failed experiment by now?

(I did say that once Nokia is removed from the 'good cop/bad cop' routine of Microsoft and Nokia (Microsoft being the bad cop) now the sales will continue to decline... It seems I've been again right on the money...)

Ok. That is Nokia. I'll think on this a bit and write a separate blog about Microsof't's chances into the future with this Nokia asset (spoiler alert - there aren't any chances, but I'll explain why). Meanwhile, lets look quickly at LG

LG reported 12.3 million smartphones sold in Q1. That is a decline of 7% from Q4 (and well below the rumors of a hot LG quarter based on rumored strong China sales). LG's market share is now preliminarily about 4.3% and the Top 10 rank in the range of 5th to 7th for the Quarter.

Ok, thats the update for now. We'll do more as data comes in and yeah, I'll do a deep analysis of what chances Microsoft has in mobile (ie none).

Comments

[RottenApple]

@Leebase:

Well, you just disproved yourself, it seems.

You are lumping all iPhone sales together and then compare them to what's most likely just the very latest generation of Samsung devices. (As a matter of fact, the definition of 'premium' is very subjective and I have absolutely no idea what Samsung considered 'premium' at a certain point in time, and neither do you.) But if you take three generations of iPhones you also have to take three generations of premium Android devices for comparison. Otherwise you cannot claim that all Apple sales are in the premium segment.

As for the tech press. I'm not surprised. There's so much biased reporting going on - mostly in Apple's favor that it may easily draw a false picture. I'm not surprises that you happily swallow all of it.

[RottenApple]

@Leebase:

And your point being? The four phones you listed were not even considered premium phones on release.

Although not quite at that price point as the (utterly overpriced iPhone 4s), the Samsung Galaxy S3 is still listed for $300. Oh, and cheapest unlocked iPhone 4s is $389, not $405.

And don't underestimate the appeal of subsidized plans with a premium phone from 2 years ago with a $0 price tag slapped on it, with the real costs hidden in the fine print. My guess is that a lot of these get sold to non-premium users, which of course dilute the premium-ness of Apple - and that doesn't even factor in that the iPhone 4 is also still on sale.

So, if you want to talk premium we need some better definition and not something simplistic like 'All of Apple is premium'. It's not that simple. If you take it that way, you'd have to include a lot more in Android's premium segment.

[E.Casais]

http://communities-dominate.blogs.com/brands/2014/04/one-more-time-lets-do-nokia-q1-smartphone-results-what-can-we-estimate-of-the-actual-numbers-from-th/comments/page/2/#comments

My contribution to clear up this discussion about "premium".

Premium is first and foremost about price, not about quality or features.

I looked at the largest Internet portal/price comparator in Switzerland for electronics. I consider all mobile phones, of every available vintage sold new and unsubsidized online. There are many enties (649) because the same model is priced differently depending on the case colour, storage space and dual-SIM capability. Prices are in CHF (subtract 20% for EUR, add 12% for USD), and correspond to the cheapest available offer (I omit mention of the specific case colour). Switzerland is a high-income country, 30% of mobile customers are pre-paid, the share of Apple is above 50%, there is no Swiss mobile phone manufacturer, thus no national champion to skew loyalties.

Rank Price Models

1-11 984,30 - 777,00 various iPhone 5S and 5
12 754,90 HTC One 32GB dual-SIM
13-17 748,20 - 697,65 various iPhone 5S and 5
18-20 691,20 - 690,15 various Xperia Z2
22-23 688,95 iPhone 5S and Xperia Z2
24 682,70 Galaxy S4 32GB
25 674,85 Galaxy S5 16GB
26 673,92 Xperia Z Ultra 16GB
27-28 669,00 iPhone 5S 16GB and Galaxy S5 16GB
29 668,80 iPhone 5S 16GB
30 668,00 HTC One 16GB

Most expensive

BB 649,00 Q10
WP 599,00 Lumia 930
Other 582,00 Nokia Oro

Yes, you can still get hold of old devices of all kinds.

Cheapest Apple

... 350,50 iPhone 4S 8GB
... 235,95 iPhone 3S 8GB

The iPhone 4S 8GB is more expensive than
67% of all Android devices
67% of all Windows Phone devices
37% of all Blackberry devices
95% of all "other" devices
69% of all mobile phones

The iPhone 3GS 8GB is more expensive than
43% of all Android devices
44% of all Windows Phone devices
5% of all Blackberry devices
93% of all "other" devices
49% of all mobile phones

Conclusions:

iPhones are premium devices.

All iPhone models are premium devices: if such an old and thoroughly obsolete model as the 3S is still about the price mid-point for all mobile phones, then Apple is indeed a premium brand throughout.

An argument often made is that Apple has a cheap device strategy, namely, selling the model of year n-2. The statistics above prove that this strategy does definitely not qualify as a "cheap device" one -- the iPhone 4S is still more expensive than the vast majority of other devices on the market.

Market distortions caused by device subsidies from oligopolies and regional monopolies, as in North America, would require another kind of analysis taking into account the total cost of subscription, but in the end would probably not alter these conclusions.

Case closed.

[E.Casais]

@Leebase, @RottenApple

Sorry, a typo in my last post: for iPhone 3S put iPhone 3GS (of course).

[RottenApple]

No, Premium is not just price. Premium is a good combination of features that actually justifies the high price. The iPhone 3GS clearly is not premium anymore, price nonwithstanding, anyone buying one might be in for a nasty surprise finding out that support for it is dropping off.

And it still ignores the point I was trying to make, namely that Leebase had absolutely no reference what Samsung was including in their 100m premium devices. Without any referene it can be compared against Apple's total of 150m until the end of the earth, we simply do not know if these are matching categories.

[E.Casais]

"No, Premium is not just price."

This is exactly what I stated: Premium is first and foremost about price, no about quality or features.

Quality and features do play a role, but they are secondary (tertiary?) in defining premium. Price is paramount.

iPhones lack such useful features as USB, HDMI, dual SIM or microSD card -- which can be found in comparable premium Android. But they are premium nevertheless. iPhones have smallish displays, and their cameras lag markedly behind what Nokia, Sony and Samsung offer. But they are premium nevertheless. iPhones lack software such as Swype or built-in offline maps. But they are premium nevertheless. And they were late with 3G, late with LTE -- but premium nevertheless. And from the statistics I saw (from an insurance company) they are physically more fragile than other devices. But premium nevertheless.

Ergo: if you want to identify premium, look at price instead of delving into the inextricable morass of feature/quality comparisons. You could do it, yes, but then you are in for an arduous analysis based on such statistical tools as PCA or PAF.

"Leebase had absolutely no reference what Samsung was including in their 100m premium devices."

This is correct, but apart from operators and retailers, who has the Excel sheets tabulating models, prices and total sales? The best we non insiders can do is to tabulate the lineup of models vs their market price.

[Tomi T Ahonen]

Hi All

About that app store race. I just chaired Forum Oxford on Friday and we had Distimo give their latest numbers and they have already two markets of Industrialized World (ie 'the West') where Android app store has passed iPhone app store (obviously essentially all of the Emerging World Android is ahead already but their total revenue sizes are so slight that they don't much help in tipping the balance. The big spenders in apps are in the most affluent nations where smartphone penetraations have passed 50%...). Yeah South Korea and Spain have already higher Android app downloads than iOS. The tide is turning (this also to LeeBase... the numbers are coming in - as I predicted - this is inevitable).

I am sure we'll see the Distimo numbers in some press stories also soon. But yeah, they showed the stats at Forum Oxford now on Friday 2 May. It is only a matter of time. The only market where iOS might hold 'forever' a lead, maybe, is the US market being Apple's home market.

Tomi Ahonen :-)

[Tomi T Ahonen]

I'll do a few responses

AndThis - That is just stupid posting and you know it. We have not yet heard an official Samsung number for unit sales of smartphones. So I do AS I ALWAYS DO - for the 4 big analyst houses to report their numbers. Your baseless claim that Samsung would be down - has no basis in any reported news, but the first reported numbers both by IDC and by Strategy Analytics point to GROWING Samsung unit sales of smartphones from Q4 of 2013 to Q1 of 2014 which suggests that Samsung had a good quarter for smartphone sales and market share and was a winner in the Chinese New Year gift-giving whereas Apple iPhone even with 'record-setting' China sales saw huge DECLINE in sequential iPhone sales. But I will not do any speculative nonsense about ANY brand until we have an official number or if we don't get that, until we hear from the big analyst houses. If Samsung reports GROWING business but DECLINING profit, that is NOT OPEN FOR DISCUSSION ON THIS BLOG as you know very well, a good reason why the discussion is of such high quality on this blog is that I forbid an debate about whose share price today is good or bad... Samsung reported again the second highest profits of the handset business and are nowhere near in danger of disappearing. The level of profit is then of interest to Wall Street, not to readers of my blog. But unit sales of smartphones - that is of interest - that is market share - and that seems to be up, according to the average of numbers reported so far by both IDC and Strategy Analytics.

Giacomo - thank you !!! That was very well put (replying to AndThis)

Ben - haha shits and giggles. I think this won't be as much giggles as despair, but yes. When Elop joined Nokia (in summer 2010) Nokia's market share in China (using only Symbian) was 77% according to Canalys. Nokia loyalty in China was highest of all smartphone makers in 2010 according to Morgan Stanley. Since then of course China Mobile was a lead launch partner with MeeGo and insisted the N9 be sold in China even as Elop refused to let the N9 be sold in any other large markets. If Elop had not ruined Nokia's China market and held 77% of market today? IDC just reported that China now accounts for 40% of all smartphones sold as of Q1 of 2014 so based on IDC's number, 113.9 million smartphones went to China now in the latest quarter. Had Nokia not messed up its China market, and held 77% of that market, in China alone Nokia would have sold... 87.7 million smartphones (twice what iPhone did globally). And almost exactly the level of the average of the two analyst houses for Samsung global sales now.... Nokia would have 30% global market share by its China market alone... Whereas latest Canalys numbers give total Windows Phone (all manufacturers including Nokia) market share for China down, to less than 1% for the three months of January-March 2014. Yeah. 'shits and giggles' I think more like 'shits bricks...' As to market size, it has almost tripled in size from Q1 of 2011.

eduardo and GrantB - as I wrote, the Nokia stuff into the future is in the new blog. Lets bring the debate there, ok?

AndThis - Do I really not have earned the credibility that the MOMENT the numbers go against a player - ANY player - I will be on this blog to point it out? I have loved Nokia from the first day this blog went up (and decades before) but when bad numbers came from Nokia, I reported them dutifully here and analyzed the detail. When Blackberry, another of my faves started to report bad numbers I was here on the blog immediately. And IF - there ARE NO numbers yet of decline - if Samsung reports declining UNIT SALES of smartphones of course I will be here to discuss that. AndThis, are you SERIOUSLY doubting my 'honesty' and 'integrity' on this? You are CONFUSING the decline in Samsung profits to UNIT SALES and market share. There is NO NEWS about Samsung smartphone unit sales being down but if that comes, I will be here to discuss it in loud and sordid detail.

John Fisher - I will let your post stay as a ridiculous comment. See above. THERE HAS BEEN ZERO REPORTING BY ANYONE of Samsung UNIT SALES BEING DOWN in smartphones. NOBODY has said so, not Sammy and none of the big 4 analyst houses. BUT the numbers THAT HAVE BEEN REPORTED suggest a 3% INCREASE in Samsung unit sales of smartphones from Q4 to Q1. If you continue with the nonsense you comments will be deleted. I don't do the speculation here, except when speculation is called for (ie why did Elop get a given contract clause). We don't waste our readers time with speculation about Quarterly performance as the numbers are coming out.

Baron95 - thanks! (forensic analysis). As to 'all failing miserably except Samsung and Apple' - you are being too harsh. Sony is doing very well with its smartphone business now driving profits and Sony just sold its Vaio laptop business which was unprofitable. Lenovo is making a thin profit on its smartphone business but believes in the business so strongly, it already bought the Motorola business (and may buy more smartphone rivals in the future...). The second tier is a risky place and LG was doing some profits, it is now again in loss-making. Attempting to break out of the quagmire with expensive tech like the flexible flagship model is expensive and if it does not go well it eats up the profits really fast. And don't mistake size for profitability. So total profits of the handset industry are in two hands, only very slight profits left for the others but those others have far smaller volumes. When the do make profitable smartphones, those are often the most profitable products their company makes haha...

Your forecast is interesting and we'll see how it pans out. I do think Apple has left a lot of money on the table by not introducing 'ridiculously priced' uber-phones with obscene profit margins. There are enough iFanatics to sustain that now. But note what I wrote earlier about the Google app store now starting to pass iOS app store even in Western markets (Distimo this past Friday just reported the first two countries where that has already happened, South Korea and Spain. More to follow as the trend is inevitable.)

Your Microsoft Scenarios are plausible definitely. I think the latest news is even more pessimistic and more likely Microsoft-Nokia (on Windows specifically exclusing Asha and Android) is at 2% for the year and even if they were to throw Billions more at it, it won't go to 5%. But we'll see. Obviously we both agree that Microsoft's hopes of something North of 10% is utterly impossible in near to mid-term. And I think Nadella at Microsoft won't be as happy to throw umpteen Billions into an endless void of loss-making as the desperate Nokia Board was as they had to pray their only gamble might still reverse and cash out.

Thanks guys, keep the discussion going

Tomi Ahonen :-)

[Tomi T Ahonen]

Gonzo

Those numbers you quoted are meaningless if the overall performance is down. If the numbers are good in some markets (the ones you list) but the total performance is down then it means Apple is LOSING in other - often more important - markets. So. To counter your numbers. Apple iPhone performance from Q4 of 2013 to Q1 of 2014 - current competitiveness - is down from 51.0M to 43.7M. Down 14%. Year-on-year, the numbers you quoted, are up only 17% while the industry grew 35% in the same period - meaning Apple IS LOSING MARKET SHARE. Exactly my point. The iPhone had 17.6% market share exactly one year ago, it has 15.3% now. Apple's peak iPhone market share in one quarter was 23.9% in Q1 of 2012. What part of basic math don't you understand?

RottenApple - thanks and yes, those numbers (Android) is what Distimo also reported just now on Friday at Forum Oxford.

Abdul - LOL the comment other than heavy gamers, other iPhone users are grandmoms... ok, maybe a bit of an exaggeration haha. But the marketing/advertising industry is all fully victims of Apple propaganda and if I ask any advertising/marketing audience what phones they use, maybe two or three hands go up for all other brands than iPhones. And those advertising and marketing people have a disproportionate effect on what is perception of reality. Look at a Hollywood movie for example and try to find a logo on any computer that is not an Apple logo haha...

About who is being a sheep of what astroturfer. We occasionally get totally inappropriate comments and I delete those. The discussion here is mostly very sensible. Yeah most of us have preferences and it shows. Its also passion and thats good. I don't mind a strong opinion one way or the other as long as we don't get rude and dont' abuse the rules.

Abdul - about me as premium user, haha, thanks for arguing that but note - if Apple were to provide a QWERTY variant on the iPhone - suggested by dozens of industry experts over the years not just me - that day I would stand in line overnight to have one of the first models. Just because I don't have an iPhone now, doesn't mean I wouldn't want one haha... But I only have two pockets and two hands, hence I carry two phones. My passions in phones prioritize camera first, QWERTY second (because of my addiction to SMS) and large screen third. I am quite affluent and I live in Hong Kong so I have access to the top line phones very early. I buy usually the phone with the best camera and another that has the best QWERTY. Apple will never have the best camera haha but they could do an iPhone with QWERTY slider/folder and that would be awesome iPhone. Steve Jobs clearly would never allow it but since he's gone, maybe Apple look at the market numbers and surprise us by offering one some day...

Separately I also want my next laptop to be a Mac (I am an old Mac trainer and I hate Windows) but with my global consulting work, and my clients' systems especially in Emerging World markets where much of my work now is, I still have to carry a Windows PC with me, and can't yet get by with a Mac. But I can't wait to get rid of this....

Tomi Ahonen :-)

[Abdul Muis]

@Tomi
About the heavy gamer & 'grandma'.

I'm not kidding. These might sound extreme to you, but you really need to sit down, and rethink.

Let me start with 'grandma'. Apple 'it just work' & 'easy to use' marketing engine really hit the market of OLD aged FEATUREPHONE user. I know this because LOTS of (un-informed/under-informed) 60+, 70+ user around me buy iphone just because they scared of HARD-TO-USE-SAMSUNG/ANDROID. This grandma/grandpa user that I know NOT UN-PREMIUM. most of them already owned a house or two, have a car or two, have a servant do their daily chores, and some of them even buying a house for their son/daughter, travel/vacation to other country a lot... BUT they don't spend money on apps. They apps were what's app, facetime, sudoku, facebook, and a couple of time killer. This market mostly don't generate any extra income for apple, and this market might use the phone for 3-4-5-6 years.

The other big user of iphone is the GAMER, THE CONSOLE gamer. This is a teenager that own PS,PS2,PS3,PS4,XBox,Nintendo Wii, PSP, etc. This is the money maker for apple. Google seems to ignore/miss this market at first, but Nokia/Microsoft is VERY CLEVER to understand this market by paying big-studio game maker to make game for Windows platform. This is where microsoft did right and BB did wrong. Blackberry trying to catch the small apps maker, Microsoft/Nokia know that 1 quality game is more valueable than 10 thousands crap. Anyway, back to the subject. There were lots of parents who think that it is cheaper to buy iphone for their kid rather than a phone + pocket game (such as Nintendo DS, PSP). And kids who were pro-gamer also prefer iphone compared to android because apple cleverly manage to make game maker to release iphone version before android. I'm not kidding with this one. Perhaps, you (Tomi) should do more research about this. This is the market that MAKE THE MONEY. This is the one that willing to pay $0.99/$4.99/$9.99 in-app-purchase in the game.

I know there were other kind of user, the 'regular' user. or the 'me-too' user. But what many miss on why app store held a bigger value towards android play store is because apple might have MORE THAN 80% of AVID-GAMER/PRO-GAMER. This is why apple store can generate about the same amount of $$$ (as of 2014?) whereas apple only has 15% market share vs. android 60% market share. Of course, like you said, that Google slowly turn the table. Big user number (1.1 billion) can't be easily ignored. But my point here is leebase and baron argument about apple premiumness is baseless. Apple big income on iTunes is not because apps, but because of PREMIUM-GAME/POCKET-CONSOLE-QUALITY-GAME. Apple steal the pocket console user income, and manage to sugar coated it to make they seems very success in smartphone industry.

This is where samsung/google need to learn from microsoft/nokia on premium game
http://www.dailymobile.net/2012/01/11/nokia-and-ea-get-together-to-bring-27-games-for-wp7/

[RottenApple]

@Leebase:

Read my previous comment about 'being ripped off'.
For you money and profit that's directly derived from the app store seems to be the only yardstick in the game.

Of course, for 99% of all mobile users, that's mostly irrelevant! They may buy one game or two, but aside from that use their phone as a tool. They are not interested in apps, paid services and ad spam.

But with Apple they increasingly feel that they are being force fed the bad stuff. And it's precisely for the things you so praise: The entire money making machine seems to be deadlocked on squeezing the Apple users dry - just because it so happens that the few users who respond well to this stuff were the early adopters that have stuck with Apple over the years.

But it will eventually create a toxic environment for everybody else. I have seen it devolve to the point where certain free websites get blocked on iOS and the user being forced to download a paid app to have access to the same service.

[Tomi T Ahonen]

Abdul

Haha, you're preacing to the choir. I have been saying for YEARS that the only viable app industry sector that is capable of making money out of apps is gaming. I hear you. I totally AGREE with you. And I also have been arguing - from before the iPhone was launched - that it is (or would become) the easiest-to-use smartphone out there. I know about the grandmoms... BUT. Those two extremes are only 'niches' within a niche of iPhone users. Most iPhone users are mainstream consumers mostly young adults and usually in good well-paying jobs. That was what I meant.. That while it is a funny observation and there is some merit to it, the gamers and elderly are not anywhere near the majority of iPhone owners...

LeeBase - ok. But we well know (as Abdul just discussed) the VAST majority of apps that make ANY money are games. Some stat just last month that I retweeted, might have been Distimo but am not sure, listed 9 out of the top 10 apps generating revenues across all platforms being games with the tenth being a hybrid app somewhere between a social network and game. When we remove games from apps, the remaining 'industry' is tiny and wanting. On ANY platform..

Tomi Ahonen :-)

[Abdul Muis]

@Tomi

I was surprised by your data. I thought pro-gamer might account 10%-15% (30 million user) on apple platform (out of 100% apple user) based on observation in Malaysia, Singapore, Indonesia, Philippine, Thailand. And most (around 2/3) young adults who usually in good well paying jobs who used to own iphone already moved on.

BTW, thanks for the data. Although I was surprised, maybe SE-asian market that I observed doesn't reflect the whole world.

[Abdul Muis]

@Tomi

Quote: "And I also have been arguing - from before the iPhone was launched - that it is (or would become) the easiest-to-use smartphone out there."

I was wondering if you notice that iOS 'easiness' resemble the Nokia series 30 OS / Series 40 (early) OS. 1 home screen, then icon/apps list, no-messy android-like/symbian-like widget/icon-shortcut on home screen.

[RottenApple]

@Abdul Muis:

"And most (around 2/3) young adults who usually in good well paying jobs who used to own iphone already moved on."

Yeah, my impression, too.
The iPhone users I know fall into two groups:

- those who held on to their old iPhone for a bit longer, mostly iPhone 4 and 4S users. As a general rule these are already a bit older, 40 and up.
- those who have some urge to always own 'the latest and greatest' without any reflection if it's useful to them. Those are normally NOT young adults in well paying jobs.

The smart people around here have already realized that, if you are not heavily into gaming, there's really no need to own a premium phone. The second tier models do the job just as well, but cost considerably less. And guess what: Apple doesn't serve this growing market at all!

[Abdul Muis]

@RottenApple

Exactly!!! That's what's going on with most wealthy iphone user around me. They change into android user. But the primary reason around me is because of the screen size. The observed user (by me) around here don't care about ONE-HANDED-OPERATION-CAPABLE DEVICE (3.5" or 4" iOS device). The iOS device screen is simply too small that they type too much error on such a small screen. The 4.7" is the minimum screen size to have comfortable level typing on glass screen. 5" is the preferable screen size.

@Tomi

I was wondering either your information outdated, or we live in more advance market than majority of iphone user, or we just simply in a niche market.

[Ronin8317]

" This is a teenager that own PS,PS2,PS3,PS4,XBox,Nintendo Wii, PSP, etc."

The gamer who owns a PS, PS2, PS3, PS4, Xbox, etc are not usually teenagers. They're more likely to be lifelong gamers between 25-45, and mobile phones simply don't offer the precision control needed for the game they like to play. Their number are few, however they are willing to pay serious $$$ for their passion. (like $10k to buy a virtual space ship). Games for iPhone and Android appeals to casual gamers, which is a much larger and different market.

Microsoft tried paying game developers for exclusive content on the console, and it didn't always work. Rock Star, creator of the very popular Grand Theft Auto (a game where you steal, kill, car jack, etc). Microsoft paid Rock Star millions to make a game for Kinetic when Xbox 360 first came out hoping for an exclusive 'killer game'. Rock Star took the money and made a totally non-violent table tennis game which didn't sell very well.

In regard to Google's plan for Android : the holy grail is the monopoly on mobile payment. It can make Apple's astronomical profit looks like peanuts.

[RottenApple]

@Ronin8317:

"Microsoft paid Rock Star millions to make a game for Kinetic when Xbox 360 first came out hoping for an exclusive 'killer game'. Rock Star took the money and made a totally non-violent table tennis game which didn't sell very well."

That seems to be Microsoft's curse - being ripped off by smart entrepreneurs that manage to get their money for worthless results by exploiting all the loopholes in the contracts. How could something like this even happen, didn't Microsoft put the slightest bit of requirement for the game to fulfill into the contract? Stupid.

"In regard to Google's plan for Android : the holy grail is the monopoly on mobile payment. It can make Apple's astronomical profit looks like peanuts."

That may well be. But my main concern as a consumer here is that everybody in this business seems to be too greedy. So far not one single mobile payment method is aimed at the customer, they all are concerned with skimming off as much of the money flow as possible. And as long that's the case it's all doomed to fail. Just look how aggressively the EU tries to cap the profit of payment agencies, like for credit cards.
If mobile payment is ever going to work it a) can't be a monopoly where one company dictates prices, b) needs to be cheap enough that it doesn't remain some fringe business and c) the various payment methods need to be compatible in some way.
None of the current undertakings in this business have that goal. They all a) try to be a monopoly, b) their fees are too high) and c) are mutually incompatible, i.e. it's all one big mess.

Well, anyway. I think Google already managed to achieve their main objective with Android, namely that nobody can monopolize the mobile market. Imagine what would have happened if they hadn't had Android in their pocket when Apple entered the scene. They would have run away with their iPhone, with absolutely nothing in sight that could have stopped them.

[AndThisWillBeToo]

@RottenApple
"They would have run away with their iPhone, with absolutely nothing in sight that could have stopped them."

What are you talking about? MeeGo would have stopped it outright! Tens of manufacturers lined up to use it and N9 rated as good as iPhone and often rated better! Major carriers supported it and China Mobile had selected MeeGo to be their default OS for smartphones.
Nokia had the biggest installed base available for Qt apps and the support of Series 40 phones was increasing it 4-fold.
What did I miss?
Oh, right. /s belongs here.

[RottenApple]

Even if I took your post's content seriously, MeeGo would have been too late.

Imagine a market where Apple could have operated without any real competition for more than 3 years - yes, that would have happened without Android! - and nobody would have been able to stop them. Their initial monopoly of high quality premium phones is what they still live on, as diluted as it may have been become. But what if it had taken 2 or 3 years longer for that dilution to set in...?

Any competitor entering the scene would have faced an uphill battle against a towering giant.