Reasons Why iPhone v Android is not Windows v Mac redux

Not a week goes by that some tech pundit triesto make the inevitable comparisons between the iPhone and Android and Windows and the Mac.

Here are the best reasons always other than something obvious things like it’s 2010 and Steve Jobs is still running Apple that the comparison holds no weight.

1. the iPod Touch- Most overlooked element in this repeated discussion is the market power of the iPod Touch. Right now, based on data from January 2010 there were 45 million iPhones, and 30 million iPod Touches. These devices increase the available market of the device by 66% (so the market for software folks for most applications is 66% larger than most analysts projects). Expect Apple to significantly upgrade the iPod Touch this fall with new processors, more ram, and both inward/outward cameras to support HD video recording and FaceTime video conferencing. These upgrade features will help iPod Touch sales numbers despite the inevitable erosion/overlap by the iPad.

2. the iPad – this device again increases the total market/population of iOS devices. Also, software developers are finding that they can charge more for their iPad versions. If Apple sells 12 million iPads, the market for iOS software has increased again by potentially 10 to 15 percent.

3. the application store – Apple lost the battle for developers with the Mac, but for the iPhone has grabbed a huge lead in the development space. Now Android’s Marketplace is increasing their application totals, but iPhone users download nearly 2.5 times the number of paid apps as Android users. By payouts to developers, the Apple App Store leads by nearly 50 to 1 (Apple did have a huge head start here). But if their users are buying more applications and iPad users are buying more apps at higher rates, then it’s doubtful that the App Store is going to lose developers any time soon. And philsophically, does Google want an Android Marketplace of specialized applications or is Google’s real intent for a library of Web based applications that can serve as an advertising platform?

4. The iPhone is $199; The traditional way you beat Apple is by undercutting them on price and letting market forces of supply and demand force Apple into a small percentage niche market (the 3% range Apple found itself mired in from 1997 to 2006). This was possible during that timeframe due to Macs costing as much as twice to three times the amount of their Dell/HP Wintel competitors. Now this same trend was expected with the iPod, but it never happened. Apple created low end products, expanded the features/storage in middle to high end, before transitioning the high end to the touch screen iPod Touch. Apple’s iPod dominance allowed Apple to use all of the market forces which crushed their Mac business to smash the other MP3 players in the market. Apple got the best pricing on chip sets, lcd screens, and finally the all important solid state memory because they were able to make volume commitments to suppliers. Just like with the iPod, Apple is not going to get squeezed. Apple purchases as many of the key components in smartphone production as any other phone producer. Also, the cost of Apple’s products are being subsidized by the carriers, so Apple has some price protection built in from their contribution. That price contribution was never a factor in PC sales in the 90s. In addition, any premium for iPhone products is going to be substantially smaller than the PC price difference. We might see premium Android phones priced at $149 versus the $199 Apple phone. That 50 bucks does not have the same impact as the $1000 price difference between Power Book G3 in 1999 and a Dell Inspiron. The Apple brand built by their marketing and customer loyalty can handle such a price difference. Apple keeps on improving their $99 iPhone offering (next year the iPhone 4 will be a great low cost smartphone), and it wouldn’t be a surprise to see Apple move that price down to $49 or even free with activation at some point.

5. Market Share differences: at their peak,  Apple’s marketshare was only 12% in 1992 (mainly achieved by selling low margin Performas at every retail store). Instead Apple’s current US smartphone market share is around 25% (don’t forget iPod Touch/iPad sales are not counted as part of that marketshare even though they extend the market/reach of the App Store, and increase Apple’s buying power for components like chip sets and solid state memory. If you added Apple’s over 20 million iPod Touches sold in 2009 to the marketshare formula, then Apple for 2009 would have a market share closer to 33%.). And 25% of the market is not a niche, it puts Apple in 2nd place among smartphone OS share.

6. Not competing against one monolithic enemy. Android/Nokia/Windows 7/Palm Web OS are all going to be competing with Apple, and right now there are no signs of these separate forces consolidating. Android is going to be fighting RIM and Nokia for market share along with the iPhone, and in November Windows Phone 7 will finally appear. Now, the same manufacturers that produce Android phones (HTC mainly) are going to get all kinds of incentives thrown their way to build Windows 7 Phones. This is Microsoft last real shot at having a relevant mobile OS and all the cash that can be legitimately spent will be. Nokia finally might have a competitive full feature smartphone with their Maemo OS (not sure what this means for Symbian) and HP will be stupid if they don’t release at least a second generation of Palm Web OS phones before the end of the year.  Now, Nokia probably should adopt Android but there’s so much institutional investment in their OSes, Nokia is probably 2 years of declining market share and revenue away from making such a drastic decision (Nokia almost seems stuck in the same problem as Apple in the 90s with no real internal OS successor to counter Win 95). Realistically for the next couple of years, the US smartphone market will probably look like this (presuming a Verizon iPhone in early 2011. Carrier expansion is the biggest barrier to Apple increasing their marketshare, not Android or any other vendor.)

RIM – 30%

iPhone- 30%

Android – 25% (split between Samsung, HTC, LG, and Motorola)

Win7/Palm/Nokia – 15% (Win7 being split between Samsung and HTC)

Now if Nokia and/or RIM adopt Android then things change considerably but neither company looks ready to do that in the next 2 years, and MS is incredibly stubborn when it comes to admitting losing positions (Zune being all the evidence you need of that “patience”).

7. Apple Stores -While not the primary reason for the Macs collapse in the 90s, the poor retail experience when trying to purchase a Mac was certainly a contributing factor. The Apple Stores has changed that entire retail experience and is the envy of the entire tech industry. The iPhone is always going to have an elite retail experience that reinforces loyalty to the Apple brand.

8. After contract your iPhone has value as an iPod Touch – If the impact of the iPod Touch is overlooked the residual value of a 2 year old iPhone is completely ignored. At the end of most cell phone contracts when a user upgrades the phone is pretty useless. However, the iPhone without a contract becomes an iPod Touch still able to watch movies, listen to music, play games, use Wifi for apps like Skype or Pandora. There’s still almost $150 to $200 dollars of value left after two years. MoD was able to sell his iPhone 3G for $150 to a buddy who will send it to a relative overseas who will use it without a contract. If you don’t want to sell it or use it as an iPod, then you can always turn it into the coolest universal remote by purchasing an IR receiver adaptor (the adaptors come with software). You can easily spend $150 dollars on a programmable remote from Logitech.

  1. July 23rd, 2010

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