How many apps do Android and iOS users download?

Both Apple and Google give occasional numbers for cumulative downloads of apps on their respective smartphone platforms. These are generally round numbers and they're often given at scheduled events (quarterly results, developer conferences), so we don't know how precise they are (did it pass 25bn yesterday, last week or last month?), but they're still useful. I've plotted the data sets in the scatter chart below: the wobbles in the lines are probably more to do with this precision issue than actual user behaviour. 

Android started later and is catching up in cumulative terms. Both are now at or around 50bn: Apple announced 50bn on 15 May and Google announced 48bn on the same day at Google IO. 

What does this look like on a monthly basis? It's possible to build a model that interpolates the run between the data points we're given to work out what the monthly run rate would have to have been. This isn't perfect, but it's all we have. The chart below shows my model's output for Google Play laid over the data from Google itself, to illustrate the process; I've done the same for Apple. 

Working this through, we can infer:

  • Android app downloads on Google Play in Q1 2013 were about 9.75bn
  • iOS app downloads were about 5bn (conveniently, Apple stated 40bn in December and 45bn in March, which makes the maths easy even for a history graduate like me). 

How does that relate to users, though? 

If we take trailing 24m unit sales as reported by Apple, the iOS base was 400m at March 2013 and 370m in December, giving an average for the quarter of 385m. Hence there were an average of 13 app downloads per live iOS device in the March 2013 quarter. 

Android is a bit trickier, for two reasons. First, to get to an active base we again have to rely on interpolating cumulative numbers, in this case Android activations, with the same precision problem. Doing this, and taking the same trailing 24m sales, my model says there were 590m live Android devices at the end of 2012 and 680m at the end of March, an average of 635m. This implies an average of 15 downloads per live device in the quarter. Given the degree of imprecision in the model, this is probably close enough to be the same. 

Just to repeat - the data is not exact enough for these to be more than reasonable approximations. It's quite possible that Apple is at 15 and Android at 10, or the other way around. 

But then there's the second problem: Google's data, both for activations and downloads, does not actually give the fully picture for Android:

  • There are many third-party Android app stores, including Amazon's, for which we have no data, and piracy also appears to be more widespread on Android
  • Android in China is largely absent from both activations and installs, since most Android in China is sold without any Google services and so never appears in Google's statistics

Finally, of course, we have no hard data at all for Google Play revenue. Apple gives cumulative revenue on the same basis. This allows me to estimate that gross revenue on the app store (i.e. including Apple's commission) is running at about $1 a month per live device, and has been stable for at least a year. Google is not so forthcoming. 

Finally, these numbers are accelerating. Apple did 5bn downloads in the three months from December 2012 to March 2013, and then another 5bn from March to 15 May. The lack of precision means we can't say this was double the rate, but the trend is clear, and it looks the same at Android, which announced 'over 2.5bn downloads' in the last month' For all the talk of HTML5, apps are as popular as ever. 

Note: both Apple and Google derive these numbers properly. Updates, re-downloads and downloads to a second device are not included. It's one download per user account per app. Matthew Panzarino at The Next Web went and asked. 

HTC and Samsung

It should be pretty obvious that Samsung (or even just Samsung Electronics) is a much larger company than HTC, with much more financial firepower. But it's interesting to look at some of the ways that scale affects things. Marketing is a good example. 

Both companies disclose a 'sales and marketing' line. For Samsung this includes activities for the TV and domestic appliance divisions, but the way the spending has grown in recent years suggests that the great majority of the spending is for mobile - and of course the brand is the same anyway, so advertising for TVs will also bleed across to phones.

Where is this money going? Well, Samsung discloses a split in the 'sales and marketing' line - around 40% is advertising and the rest is 'sales promotion expenses' - a lot of which is sales commissions. 

In Q4 2012 Samsung's budget was 13 times HTC's. Samsung hasn't disclosed the Q1 number yet, but if it dropped to, say, $2.5bn in Q1, the same proportionate shift as at the beginning of 2012, it would be about 19 times bigger. It's actually a little hard to see given the scale, but HTC's budget is down 40% year on year, to just $130m, a tiny amount. And given their operating profit was zero in Q1, they can't afford to spend much more.

In the handset market today, having a lovely product is necessary but insufficient. This chart ought to show why.

Incidentally, Apple doesn't break out a sales and marketing line (it only gives the advertising spend): in 2012 Apple spent about 25% as much as Samsung Electronics directly on advertising, some of which was obviously for iPads as well. However, it has contracts requiring mobile operators to spend money on advertising as well, so this isn't a direct comparison. 

Apple, open and learning from history

"History teaches us nothing except that something will happen' - Hugh Trevor-Roper

In the 1990s, the PC market was mostly a corporate market (roughly 75% of volume). Corporate buyers wanted a commodity. They were buying 500 or 5000 boxes, they wanted them all the same and they wanted to be able to order 500 or 5000 more roughly the same next year. They wanted to compare 4 vendors on price with the same  spec sheet. They didn't care what they looked like (and they were going under a desk anyway) and they didn't care how easy it was for non-technical people to set them up because the users would never touch the configuration. Nor did they care much about the user interface, because most of the users were only going to be running 1 or 2 apps anyway. 

Meanwhile with no internet, home buyers were mainly interested in a PC that ran the same software they used at work (and all of the games were for PC). They may have known Macs were supposed to be easier, but Apple had no shops of its own and what TV advertising it could afford didn't show off the user interface (it's hard to demo an desktop computer's user interface on TV). And, of course, Apple's computers were ultimately beige boxes and not really that much prettier than PCs anyway. And they were significantly more expensive. 

Hence, in this market all of Microsoft's advantages were in play, and none of Apple's. Apple, in Steve Blank's phrase, did not have product/market fit. The Open model deployed by Microsoft and Intel produced a generic commodity product that was exactly what the market wanted: Apple's model did not. Fundamentally, Apple's selling points were irrelevant, invisible or both. 

Today, of course, Android, combined with chip makers such as Qualcomm and MediaTek, is producing a quite similar flood of generic commodity smartphones. Hence, there's a pretty common narrative that 'we've seen this before' - that the same open approach, producing the same flood of generic commodity product, will crush Apple in the same way.

It would also, necessarily, crush anyone trying to make a living selling high-end Android phones, which are ipso facto much less differentiated from a $200 Android phone than is an iPhone. This is one reason why BIll Gurley suggested Android may be 'the greatest legal destruction of wealth in history' (link), at least for the tech industry. 

However, I'm not sure that's true. If one looks again at all of those 1990s PC market dynamics, almost none of them apply to the smartphone market. Phones are NOT generic, fungible commodities:

  • Phones are bought by individuals on design and user interface
  • Phone are also bought on price, and the iPhone is expensive, but the subsidy system weakens the effect (to a varying degree depending on the market and on the proportion of contract versus prepay). Moreover, the price gap between an iPhone and a cheap Android is much smaller in absolute terms than the gap between a Mac and the cheapest PC. 
  • Apple has a massive retail presence and has premium placement in every mobile operator shop
  • It is in the nature of a phone UI that you CAN show it off in a TV spot - which Apple can now afford (originally, thanks to the cash from the iPod)
  • Apple is stronger in apps than the competition, and that shows no signs of changing

In other words, Apple has product/market fit in the phone market in a way that it never had in the personal computer market. ALL of the key dynamics that doomed it in the computer market are fundamentally different in the phone market - this time, they all work in Apple's favour, and in favour of the high-end market in general. 

Now, it is unclear just how many more people can afford to pay the price Apple charges for the iPhone (link), and it is unclear how or whether Apple would offer a cheaper product (link). But the underlying structure of the market is vastly more favourable to Apple than the PC market ever was. Simply chanting 'open wins!', as though you suffer a form of tech Tourette's (a phrase coined by Fraser Speirs), isn't necessarily relevant.  

Q1 2013 US smartphone share

Numbers for the three big US operators that carry the iPhone (T-Mobile, which didn't in Q1, hasn't released the Q1 numbers yet). iPhone was 57% of smartphone activations and 49% of ALL contract phone sales. Smartphones are 86% of contract sales. 

To be strictly precise, these numbers are a mix of 'activations' and 'sales', which are not always consistently reported. The main delta is in second-hand sales. However, these do not (yet) appear to be big enough to change these numbers much. 

US smart sales

Lots of interesting things in this chart. 

First, Android isn't really growing at all in the USA, at least at the big two operators. ('Other smart' is almost all Android now). All the growth is coming from iPhone. 

Second, there's near-zero seasonality in Android phone sales. People decide they want a phone and go out and buy whatever's in the shop at the time that looks good. Launches of 'hero' Android phones appear to have no impact at all - they may take share from other Androids, but not from iPhone and they don't increase overall sales. 

Third, there seems to be a complete disconnect between Android and iPhone purchasing. One can understand iPhone sales per se going up in a launch quarter, but why don't Android sales go down in those quarters? It looks like a new iPhone launch doesn't tempt in Android buyers at all. 

The implication is that there is an ongoing base of sales that goes to Android, and to some extent iPhone as well, that totally ignores product launches, and just buys a phone. Then, there's a base of people who wait to buy the new iPhone (and of course come off their 24m contact in another launch quarter, eager to buy). And this latter base is getting bigger every year, and indeed driving all of the growth. 

What isn't shown in this chart, of course, is churn within the Android base: Android users moving to iPhone while new non-smart buyers shift to Android, keeping the sales steady. That's a bit more work. 

Notes:

AT&T and Verizon WIreless had about 65% of US smartphone sales in Q4 2012. They're the only operators (anywhere) that reported this data. Sprint only began reporting smartphone sales in Q4, and T-Mobile USA hadn't started selling the iPhone: it had had about 9% of smartphone sales, almost all Android and growing slowly

This particular split is very US-specific: the US market's pricing structure tends to conceal the price premium of the iPhone. A chart for China, assuming one could get the data, would show very strong Android growth (though also strong iPhone growth)

Nexus tablet sales: not many

Google doesn't say anything about Nexus sales. However, Asus, which makes the Nexus 7, has disclosed total tablet sales: 5.35m in the second half of 2012, when it sold the Nexus 7 as well as some other tablets. That gives us an upper bound for Nexus 7 sales, but what about the (Samsung-made) 10?

Well, both the 7 and 10 use relatively uncommon screen profiles, and these now show up in Google's development data for screen sizes:

  • Nexus 7 is 'large TVDPI' - at the beginning of April this was listed as 1% of devices hitting Play
  • Nexus 10 is 'xlarge XHDPI' - which was 0.1%

I've modeled active Android users (excluding China) based on interpolating between Google's announcements: my model says there were 680m Android users at the end of March. Assuming equal Play use across the base (a big assumption), that would imply:

  • 6.8m Nexus 7s in use (consistent with the Asus number)
  • 680k Nexus 10s in use

Rounding obviously applies to both of those numbers - '0.1%' could actually be '0.149%', which would be 1.01m. I don't believe there are any other devices on sale using either screen profile, but if there were that would obviously push the Nexus numbers down. 

That compares with probably 10m iPad Minis sold in the last 2 months of Q4, and 36.9m iPads sold in the second half of 2012. 

Given that both Nexi (?) are perfectly good devices on their own terms, this points to the continued importance of both distribution and ecosystem for Apple tablet sales versus the competition.

Incidentally, the rumour is that Microsoft's Surface tablets have only sold 1.5m units. On this basis, that would still be more than the Nexus 10.

A note on install bases

On average, mobile phones are replaced every 24 months. So trailing 24m sales are a pretty good proxy for the install base. On that basis, at the end of 2012 the Android install base was about 675m, and the iPhone base was about 230m. (Apple discloses these numbers so you can just work them out: Google gives Android activations numbers with sufficient frequency to work out a run rate, to which you have to add an estimate of Chinese sales, since they're not included in the activation numbers.)

The interesting thing is to think abut how those bases have grown. At the end of 2010 (24 months earlier), Android had sold 55-60m units since launch about a year earlier, and the iPhone had sold 72.7m units in the previous 24 months.

Applying a little arithmetic, we see that a little over 90% of the current Android base got its first Android in the last 2 years, and 68% of the iPhone base its first iPhone.

Of course, this ignores switching between the platforms, for which there is no good data, but a lot of it will net out. It also ignores people buying a new phone every year - but also people who are still on 3 or 4 year old phones - but these are buried in the average. The number of people selling their iPhone to buy a new one every year is the big variable here. 

To put that another way, about 90% of current Android users are on their first Android, as are 70% of iPhone users. It'll be interesting to see what their second purchase is. 

Price

From 2007 to 2012 annual mobile handset sales grew from 1.1bn units to 1.7bn units. This was, obviously enough, driven by an expansion in the number of ‘human’ mobile phone users from 2.1bn to 3.2bn (the number of total connections was much higher).  

Almost all of the growth in subscribers and hence in handset volume growth came from the low end at low prices. So, one would have expected the average price of a phone to fall. It didn't. 

ASPs (average selling prices) did indeed fall for a while, bottoming out in late 2010, but since then they've almost doubled, to a little over $180 per phone at the end of 2012. 

The reason for this, of course, is the arrival of smartphones, which have persuaded people to pay more for a phone than they ever did before. The iPhone, most obviously, sells in a super-premium $600+ bracket that barely existed before, and parts of the Android market (and to some extent Nokia) have followed.  At the end of 2012, top-end smartphones amounted to about 17% of total phone volumes, and about half the revenue. Meanwhile a quarter of phones sold were still plain old basic voice phones. 

The interesting question, to me, is what the third and fourth smartphone bought by a given person will cost.  When do people decide that a $150 smartphone is good enough that it's an acceptable replacement for a two-year-old smartphone that cost $300 new? Or, do they decide to upgrade - to buy an iPhone 6 or Samsung GS5? Or do they just wait - buy a phone every three years instead of every two?

Moore's Law is working away on phones, and a $150 phone is indeed as good as a $300-$400 phone from two years ago - but the new $300 phone is also a dramatic improvement. The perceptible improvement of new product categories follows a curve over time: 20 years ago a new PC was noticeably better than a 2 year old PC, but today the gap with even a 5 year old PC can be pretty hard to spot. Hence, the PC replacement cycle has lengthened to 5 years, and average selling prices have steadily fallen.  Phones today are at the steep part of the curve: there are still compelling reasons to spend the extra money, and to upgrade relatively frequently (and of course a phone gets scuffed and scratched). 

Also skewing the purchase decision, of course, is subsidy: a $150 saving is only the price of a coffee and pastry each month over a 24m contract. This applies especially in the USA, where even a $400+ iPhone 4 costs the same to consumers as a $150 Android - both phones are 'free' and there's no difference in the contact price based on which you choose. 

My suspicion is that we'll see a polarisation in the market. There is a portion of the market that will pay a premium price for the best phone possible - and for these people $600 (however manifested) is not actually that much money every two years. But the $300 segment may well get squeezed, between people trading up, paying the price of a coffee and croissant and getting an iPhone, and people trading down to a perfectly good $150 phone. 

It is also, of course, entirely possible that the phone they trade down to is a $200 iPhone, a $150 Google 'Chrome' phone or a $100 Kindle Fire phone. At that point everything changes again.