Note on cheap iPhones

Ever since the iPhone launched, people have been pointing out that it is very expensive, relative to the rest of the market, and wondering when, and how, and if Apple might go cheaper. Much like the 'Apple television', this is a story that's so old people have got very bored with it, but that doesn't mean we should forget it. 

First, a recap.

Apple's phones start at $400 and average $550-$600 where the average for phones globally is about $180 and the average for Android is $250-300. Apple's sales are entirely high-end. This has taken it to around 10% of all the phones sold on earth each quarter - it appears to have about half to two thirds of the high-end segment, with Android (mostly Samsung) having the rest. However, the bulk of Android's sales are actually at lower prices: hence Apple has 10% of sales and Android has another 10% selling at the high end but a further 40% selling at lower prices. Windows Phone and Blackberry have 2-3% and the rest is feature phones, which are converting to smartphones at prices under $100, which means Android. 

This difference between market share and pricing is, incidentally, the reason why the iPhone has 10% of handset unit sales but a third of revenue, and why the iOS app store has two thirds of app store revenues.  

So, maybe 20% of the phone market is premium, of which Apple has half, and 40% (say) is at $100 or lower and still mostly featurephones (though within that there's a lot of people trading up from lower prices). But there is a lot of debate within the industry about how the space in between plays out. The narrative generally splits the market into four rough segments: 

  • $50-100 smartphones: currently these are dominated by companies you've never heard of using off-the-shelf chips from Mediatek, Spreadtrum and others, and though they run Android and have 3G they often have only 256 meg of RAM, which makes for a pretty poor experience. And the build quality and screens are not great. 
  • $100 to (say) $200 - this is where the branded companies start playing. At this price devices like the Lumia 520, the Xiaomi Hongmi and the Motorola X provide an experience that you would not, actually, be unhappy with. I describe these phones as like driving a Toyota or a VW: you know you're not in a BMW (or a Bentley), but there's nothing wrong with them at all and some of them are pretty cool. 
  • Then, $200-450 (or thereabouts) counts as mid-range, and 
  • $450-500 and up counts as premium. Arguably there's a super-premium segment further up. 

One can debate where I've drawn the price bands, but the point is that there are different tiers of experience. One of the big debates in the industry is how viable the third category is. Do people who bought a $400 phone two years ago decide they can get something better for $200 now? Or do they decide to upgrade to $600? Do people move up into this segment from below? Do people who bought a $500 phone two yeas ago move down into this category? (Since these people are by definition less price-sensitive this seems less likely). 

So.

When people talk about whether Apple should do a 'cheap phone', it's important to be clear about which of these segments you're really talking about. When people say 'Apple is missing out on the next x billion people' - that is, the portion of the market that's still on feature phones - they're actually talking about the first category. Even Samsung doesn't really play here, nor Xiaomi. This is is the land of the $200 PC - very low margin commodities with a poor user experience. 

However, the second and third categories are rather more interesting. Apple says, over and over, that the objective is not to sell the most phones, but to make phones that it can be proud of. In 2007 the iPhone was an MVP lacking industry standards like 3G and a decent camera, yet it still needed to be $600 or more to deliver the vision. Today Apple could perfectly well make a phone it could be proud of at $300. Indeed, there's nothing that it would be ashamed of in the Lumia or Xiaomi at $150 and below.  

Meanwhile, if you look at the history of Apple's pricing, it has always made products at the high end but also in the mid-range. It has pushed to find the 'lowest viable price' for an 'Apple-quality experience' (and then added 10% or 20%, perhaps). In 2007 that price for a smartphone was $6-700, but now it is $200 or $300. That is, there is absolutely no technical reason why Apple could not make a great iPhone and sell it for $300 or so today. It wouldn't be the same as the premium product, but then the iMac was not the PowerMac. 

There are, obviously, a bunch of execution questions around this, such as how to avoid fragmenting the platform too much and how to segment the different product lines to avoid cannibalising the high-end too. What would the product matrix look like? Would Apple stop selling older models entirely? What happens to the gross margin with a wide range of entire new phones and no older ones? What happens to the resale value of the new flagships, and how does that affect sales? But then, Apple didn't worry about cannibalising Mac sales with the iPad. This might be, in a sense, a test for Tim Cook - whether he can do the right thing (assuming that's what it is) even if it erodes other businesses or pushes the stock price down, the way Steve Jobs could (or Larry Page, or Mark Zuckerberg) - can he behave like a founder?

There are two interesting sets of consequences from any such phone: the impact on Apple and the impact on Android. 

First, Apple. I've embedded a simple spreadsheet below calculating the financial impact on the company from a blockbuster 'cheap iPhone'. One can argue about the detail, but the key point is that if you sell 40m 'iPhone Nanos' (and presume for the moment that you actually can) at $250 at a 20% gross margin, that generates $2bn a quarter in gross profit for a company that reported almost $15bn gross profit last quarter. That is, a blockbuster iPhone that doubles Apple's market share adds just 15% to gross profit, before allowing for the inevitable cannibalisation of the high-end product. Factor that in and you probably only add 5-10% So, this does not really address the 'growth question' - it doesn't double Apple's business again. 

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That does not mean it is not worth doing, of course. Even apart from the financials, the broader value is the impact on the ecosystem landscape. I am not convinced that iOS, with perhaps 500m-600m active devices already compared to Google Android's 1bn or so, can really be described as sub-scale, especially given it has two thirds of app store revenue. However, adding a 'gateway' device in the mid-range with significantly more unit sales would build a much deeper moat around that ecosystem. (Though it would also dilute that high-level customer base.)

The other side of this coin is of course the impact on Android. The two markets where iPhone sales are effectively at parity with Android are the USA and Japan, and those are also the two markets where the subsidy structure means that the iPhones is not at a big price premium to Android. This is probably not a co-incidence. Meanwhile, we also see strong indications that the second-hand market for iPhones, mostly in the $2-300 range, is also extremely strong. It doesn't seem unreasonable to suppose that a new, attractive iPhone in this segment would be highly competitive. So, such a phone would sell, and sell well, and take a big chunk of the most valuable Android customers. Not, of course, the ones who value 'open' and the Google ecosystem above everything else, but true enthusiasts are a minority on both Android and iOS. 

It is also worth noting that in the high-end, where Android is roughly equal in sales to the iPhone, two major competitive drivers for an Android purchase are a larger screen and more customization options: Apple addresses many of the second with iOS8 and is strongly rumored to be planning a large-screen phone, addressing the first.  Hence, in six months, we could see both a stronger Apple proposition at the high end and also a new and pretty compelling offer in the mid range. 

Finally, the interesting thing about all of these questions is that they are largely under Apple's control. Apple chooses not to do a large screen phone, and it chooses not to go into the mid range, and it chose not to allow, say, third-party keyboards. There were strong technical challenges for all of these, but those have probably now been removed (certainly for the third point, given the extensibility of iOS8). This means Apple has more cards to play than we've yet seen. 

App store revenue

App store revenue is not an ideal way to scope the value of an ecosystem to developers. The majority of the revenue comes from games, mostly freemium using IAP, while a large proportion of the most valuable apps are offered for free and generate revenue through other means (Facebook or Amazon, for example).

However, it does give a pretty good proxy for the broader behavior of the users, and it also of course is very relevant for developers who do want to to charge. 

For the first time, Google gave numbers for app store developer revenue at IO this year, and in the latest quarterly results Apple gave (almost) like-for-like numbers: 

  • Google said it paid out $5bn to developers from Google IO in 2013 to Google IO in 2014 (a little over 13 months)
  • Apple said it has paid out $20bn to developers in total by the end of the June 2014 quarter, and at WWDC June 2013 it gave a figure of $10bn paid to developers (at the June 2013 earnings call a month later it then said it had paid out $11bn). So in the last 12 months, it paid out roughly $10bn. 
  • Google also said at IO that it has 1bn 30-day active Android users - the degree of precision is not clear. The iOS number is fuzzier: trailing 24 months' sales would be a little under 500m, but extending that to a three year lifespan would take it to over 600m. 

Obviously all of these numbers are rounded and were given at scheduled events, so need to be taken as imprecise. The fact that four different growth rates are involved also makes calculating ARPUs a little tricky.

That said:

  • In the last 12 months, on public numbers, Google has paid out roughly half of Apple - $5bn versus $10bn, on roughly double the number of devices. 
  • On a run-rate basis, annual gross app store revenue across iOS and Android is now $21bn. 

The chart below shows the public data points. 

The problem with this, of course, is that with only two data points from Google, we don't know the trajectory - if this is a steep curve the recent period might be pointing more sharply upwards. 

A further observation: if the current market dynamics remain, Google Android's user base will at least double in the next few years - the iPhone base is still growing, but it will probably not double. However, those users will be gained at progressively lower (much lower) device price points, and with significantly lower spending profiles. 

For more discussion of why the two platforms look different, see this post. 

Finally, just to make life easier, Play is not the only payment system you can use on Android, even Google Android. A material number of apps, mainly games and mainly in emerging markets, use other payment methods. So that number might really be somewhat higher. 

The next phase of smartphones

It’s now 7 years since the iPhone reset the phone business, and indeed the entire computing and internet businesses. But it was pretty clear at the time that the first iPhone was an MVP, and Google’s first Android… homage, the HTC G1, was even more so. It feels rather like the last 7 years have been spent adding all the things that really needed to be there to start with, both in hardware and software. For iOS and Android these have come in different orders, since their opening assumptions were very different, but they’ve ended up at much the same place in terms of the user experience and interaction model. There are small differences in how you interact, and there are always things that are on one platform before the other, but the basic user flows are very similar, and almost all the obvious gaps have been filled. 

Along these lines, my colleague Steven Sinofsky makes the point that for any new ‘thing' in computing, at the beginning everyone is doing roughly the same stuff because the stuff you need to add is pretty obvious and undifferentiated - you might deliver different things in different orders but you’ve got basically the same wish list. It’s once you’ve finished building out that stuff that things start to diverge. 

This, I think, is what we started to see at this year’s WWDC and Google IO - the end of the first 7 years and the start of a new phase, with the fundamental characters of Apple and Google asserting themselves. As Jean-Louis Gassée put it, iOS 8 is really iOS 2.0

Hence, WWDC was all about cloud as an enabler of rich native apps, while the most interesting parts of IO were about eroding the difference between apps and websites. In future versions of Android, Chrome tabs and apps appear together in the task list, search results can link directly to content within apps and Chromebooks can run Android apps - it seems that Google is trying to make ‘app versus web’ an irrelevant discussion - all content will act like part of the web, searchable and linkable by Google. Conversely for Apple, a lot of iOS 8 is about removing reasons to use the web at all, pulling more and more of the cloud into apps, while extensions create a bigger rather than smaller gap between what ‘apps’ and ‘web sites’ are, allowing apps to talk to each other and access each others’ cloud services without ever touching the web. 

Unlike the previous differences in philosophy between the platforms, which were mostly (to generalise massively) about method rather than outcome, these, especially as they evolve further over time, point to basic differences in how you do things on the two platforms, and in what it would even mean to do specific tasks on each.The user flows become different. The interaction models become different. I’ve said before that Apple’s approach is about a dumb cloud enabling rich apps while Google’s is about devices as dumb glass that are endpoints of cloud services. That’s going to lead to rather different experiences, and to ever more complex discussions within companies as to what sort of features they create across the two platforms and where they place their priorities. It also changes somewhat the character of the narrative that the generic shift of computing from local devices to the cloud is a structural problem for Apple, since what we mean, exactly, when we say ‘cloud’ on smartphones needs to be unpicked rather more. That's a subject for my next post. 

Meanwhile, this sort of divergence is why I’m a little skeptical about the other two big reveals in the last couple of months: the Fire Phone and Facebook’s mobile announcements at F8. Facebook is trying to build essential plumbing to connect the web and apps together, in particular with its deep linking project. But this is like building the plumbing for a building that’s still going up, and where you don’t know what it's going to look like. Making tools to connect apps and the web together when Apple and Google are shifting the definitions of those terms is going to be challenging. 

Amazon has a bigger problem. Most obviously, more and more of what it means to be ‘Android’ will come from the closed Google services that aren't part of AOSP and that it doesn’t have access to. If Amazon wants to free-ride on the Android app ecosystem, it will need to spend more and more time replicating the Google Android APIs that the apps it wants are using, or the apps just won’t work - presuming that Amazon even has the sorts of search-led assets to do that. But more fundamentally, AOSP is being pulled along by Google’s aims, and will change in radical and unexpected ways. This isn’t like building on Linux - it could be more like taking a fork of DOS just before Windows 3.1 came out. Are we quite sure (to speculate wildly for rhetorical effect) that we won’t be running Android apps in a sandbox on our ChromeOS phones in 5 years? Where would that leave Amazon’s fork? AOSP is not necessarily a neutral, transparent platform for Amazon to build on. 

Digesting WWDC: cloudy

I’ve spent the last couple of days sifting through the announcements at WWDC. Apple claims 4000 new APIs, and it certainly feels like it. Apple has been busy. But setting aside all the normal incremental improvements, there are a couple of interesting strands. 

First, Apple is continuing the steady process of removing restrictions on what developers can do - but doing so in a very specific way. Almost all of these restrictions are necessarily trade-offs - on a smartphone more flexibility is ipso facto less security and less battery life. So multi-tasking was permitted only once Apple had created a way to do it while preserving control. The same now comes with Extensions. Apple has a model to allow apps to connect to each other and add functionality to other apps - but with clearly defined attach points and a clear control model. Like multitasking, the idea is to gain most benefits of being open while preserving most benefits of being closed. Rather than giving any app system access, you open up specific use cases - a new keyboard, for example, while controlling it tightly (no network access for that keyboard without permission) and dismissing other use cases entirely (no third party SMS apps). The same applies to the fingerprint scanner - apps can now ask for authentication but don’t get the print data - they only get a ‘yes/no’ response back from the system. It’s sandboxes all the way down. In addition, Apple is backing off the ‘no documents’ rule, which seems to have been a vision of a simpler and easier to use approach that was just too forward-thinking. Hence Cloud Drive, which is amongst other things an argument that DropBox really is just a feature (and in the new MacOS there are APIs specifically for file syncing services, addressing some of the heavy lifting OS hacking that Dropbox or Box have had to build themselves). The practical effect of these moves is that a lot of the specific use cases that might draw high-end users to Android (custom keyboards, say) get sliced off. 

The second theme, and a very interesting one, is cloud, the big Apple weakness. The whole of WWDC is full of cloud. A very large proportion of the new user-facing features touch the cloud in some way, as a conduit or as storage. And the ones that don’t use what you might call the personal cloud - the Bluetooth LE/Wifi mesh around you (such as HealthKit or HomeKit). So edit a photo and the edits are on all your devices, run out of room and your photos stay on the cloud but all but the previews are cleared off your phone, tap a phone number on a web page on your Mac and your phone dials it. But none of this says ‘CLOUD™’ and none of it is done in a web browser. Web browsers are for web pages, not for apps. Hence one could suggest that Apple loves the cloud, just not the web (or, not URLs). This is obviously a contrast with Google, which has pretty much the opposite approach. For Google, devices are dumb glass and the intelligence is in the cloud, but for Apple the cloud is just dumb storage and the device is the place for intelligence. And it’s built a whole new set of APIs, CloudKit, to enable this for developers, which it is (for the first time, I believe) dogfooding, building the photos product on it. 

There’s a release cycle question in here. A phone that’s refreshed every year or replaced every two can iterate and innovate much faster than a TV, car (or fridge, or, perhaps thermostat) that may be replaced only every five or ten years. So it seems like the place for the intelligence should be in the phone rather than the TV. But the extension of this is that a cloud product can iterate every day. This is the killer advantage of enterprise SaaS over on-premises software - you can improve things all the time. And Apple updates its OS once a year and, so far, the same is true for the cloud products it builds for developers, where Google can update all of its products every week. 

You can see this dynamic clearly in smartphones: for the last couple of years, Apple has done an annual release (of both hardware and software) and taken the lead for 6-9m months, and then Android (Google and the OEMs collectively) catches up and overtakes for 3-6 months until the the next Apple release. It’s a game of leapfrog. Is this a disadvantage for Apple? Again, there’s a tradeoff, embodied in Facebook’s old internal slogan, ‘Move fast and break things”. If you’re Google and your products are mostly black boxes to the outside world then iterating fast is fine, but if you have millions of developers building on those APIs, changing things every week isn’t necessarily a great idea. That is, there’s an optimum API refresh frequency. (One could also point out that though Google refreshes Android frequently, the average Android user gets a new version of Android only every two years, when they replace their phone, where the average iOS user gets the new version once a year as it is released). 

Going back to this ‘Apple view of the cloud’, though, there’s a deeper and older dynamic starting to come into play now. Apple invented the smartphone as we know it 7 years ago and since then the concept has been built out. All the stuff that really should have been there has been added step by step by both Apple and Google, and the pace at which essential improvements are made is starting to flatten out. But as that happens, the two platforms start to converge. Copy & paste is copy & paste, but iBeacon is a very Apple sort of idea, just as Google Now is a very Google product. That is, as the core features are built out and commoditised, the changes are coming more and more in ways that reflect the very different characters of Apple and Google. I’ve described this before by saying that Apple is moving innovation down the stack into hardware/software integration, where it’s hard for Google to follow, and Google is moving innovation up the stack into cloud-based AI & machine learning services, where it's hard for Apple to follow. This isn’t a tactical ‘this’ll screw those guys’ approach - it reflects the fundamental characters of the two companies. Google thinks about improving UX by reducing page load times, Apple thinks about UX by making it easier to scroll that page. 

One effect of this is that it might get harder to make essentially the same app on both platforms. If a core, valuable thing you can do on one platform has no analogue at all on the other, what do you do? Ignore the stuff that isn’t on both, and get a lowest common denominator product? Or dive into those tools, but end up having quite different experiences on iOS and Android? Things like Metal and Swift only accelerate this issue. 

Another aspect of this issue is the stuff that Facebook announced at F8, especially deep linking. Facebook would clearly like, on some level, to put together a sort of meta-OS that sits on top of both iOS and Android, driving connections and engagement between apps and acting as a social plumbing layer. But it’s not clear that that’s its place in the stack. Apple’s Extensions offer another and very compelling way to drive people between iOS apps. And in addition, Apple has quietly announced, as part of Cloudkit, its own identity layer. You can sign a user into your app using their iCloud account, and (with permission) use iCloud to see which of their friends are using the same app. And that would use the fingerprint scanner.  Looking at the address book is a major driver of growth bethink many social apps on smartphones - Apple is trying to co-opt that, with less friction but also with total user privacy built in. And privacy was a very, very common theme throughout all the developer sessions. You could build an entire multi-player game in Cloudkit, and possibly even a social messaging app. So 'cloud' things become iOS things. But only for iOS. 

And yet, on the other hand, all of the new extensions give Google and Facebook new places to embed their services within iOS.  

This brings me to the macro point: Everything Apple does is about selling devices. Definitely iOS devices, and possibly an Apple TV or a wearable of its own. But for now, the device is the centre point. And that’s a $600 device. Apple has a lock on the majority of this super-premium segment, with Android’s attempts to break into it plateauing at about a third of the segment. This means that Apple sells about 10% of all the phones on earth and Android takes the next 50% or so, and that gives Apple perhaps a third of run-rate app downloads and the majority of the actual value. This is a now pretty stable situation, unless a premium alternative to Samsung emerges or the subsidy environment changes radically. But the only way for Apple to break out of that segment and sell 20% or 30% of the phones sold on earth is a cheaper phone.  Until then the annual leapfrogging with Android will continue. 

Beats - content is king?

Apple's Beats deal is a Rorschach Blot: people's reactions slot into their existing view of whether Apple still has 'it'. If you think Apple's lost it, the Beats deal is confirmation. If you don't, it's… perplexing. This is a very out-of character move for Apple (though having everyone puzzled is in character). I've seen plenty of suggestions, but few really convincing rationales that make this company worth $3bn to Apple.

That said, one thing that is clear is that Apple doesn't rule digital music anymore. Streaming and YouTube ended that, along with smartphones. Instead of a library of tracks you’ve bought and paid for, locked to a single platform by proprietary DRM, you can now listen to any track you want on any device you want, and can switch between different music services with little friction. And the iPhone’s multi-touch screen itself broke the iPod’s monopoly on good user experience - now anyone can make a decent music player experience on any device, in code.

Hence, the iPod was a lovely business but it's now pretty much over. Apple has sold 392m iPods since launch (including something over 100m iPod Touches, though) for around $66.6bn, (plus of course the revenue from selling music, which is a more complex issue). There's not much more to come.

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This reflects a broader change: content isn't king anymore.

Music has gone from being a key strategic lever in the tech industry to an afterthought. The same applies to movie and TV libraries - media has gone from being a choke-point to a check-box, commodity feature than every platform has to offer but where none has any particular advantage. Books have evolved slightly differently, but with Kindle on any device you might possibly want to read on, books are not a platform lock-in either (except possible for Amazon, but that remains to be seen).  So for a platform owner or device maker, the content you can offer is no longer a strategic asset. Content doesn't sell devices, because they all have the same content. 

In parallel, of course, the actual value of content - music in particular - is dwarfed by the value of the smartphone explosion. The iPhone alone generated $26bn in revenue last quarter - the entire recorded music industry brought in about $17bn in 2013, and the last three quarters of iPhone sales brought in more hardware revenue than the iPod in its entire history. And though 391m iPods have been sold since 2001, there are over 1.5bn smartphones on earth right now, and close to 300m are sold every quarter.   

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The amount of money involved, never that large in the context of the consumer technology industry, is such now a small percentage of Apple or Google's revenues that they might almost offer it at cost, just to have the feature. This was one reason why, before the iPhone even launched, Jeff Zucker, then CEO at NBCU, suggested that he should get a cut of iPod hardware revenue. He was mocked in the tech industry but was making a perfectly legitimate point: the money in digital video was in the devices, not the video. At that point the content he was putting on iTunes still gave Apple leverage - not anymore. This is what the people behind Beats Music may have caught on to - the money is in headphones, not the tracks they play. 

The one remaining place where content is king, of course, is TV, at least in the key US market. If someone tells you they’re going to disrupt mobile, ask them ‘with what spectrum?’, and if they say they’re going to disrupt TV then ask ‘with what content?’ Here, again, there's no differentiation: every device has the same music, movies and books and doesn't have the same TV. 

Hence, the one remaining place for Apple to work its magic is in the TV market. I wrote a post here talking about all the reasons why the US TV market in particular is rigid and also so brittle: there is still scope here for a technology company or other to put together a totally unique offer, with content as the key leverage point. But I'm not sure there's any such scope in music. 

Android fragmentation and the cloud

Game Oven's post on Android gyroscope support is a nice illustration of a general issue (another good illustration here): Android fragmentation is both massively overstated and massively understated, depending on what you want to do. 

On one hand, Google has been quite successful in reducing the impact of Android version fragmentation. Around three quarters of the Android devices that hit Google Play are running 4.X, but more importantly, Google has moved its own key services (maps, payment, notifications etc) out of the OS itself and into a software layer, 'Google Play Services'. By putting key platform APIs into a software layer that can be updated in that background over the air, Google has reduced its dependance on OEMs to produce firmware updates - it can update its own tools any time it wants, across the great majority of phones. When Google announces new APIs for Maps or notifications at this year's IO, they'll be available on devices running year-old and two-year-old versions of Android. There is no more fragmentation if you're using Google's cloud.

On the other hand, hardware fragmentation is if anything accelerating. This chart from OpenSignal, from last summer, is a nice visualization of the market dynamic. 

Android fragmentation isn't of itself a bad thing - it's inherent in the choices that Google made. This is what 'open' and 'choice' look like. And I doubt if it's possible to have an 'un-fragmented' device landscape that includes both $600 devices and $50 devices: some scattering in capability is part of the deal. If you want to have thousands (literally) of OEMs, and a huge range of choice and price points, well, you're going to have different devices with different capabilities. 

This is only interesting, then, to the degree that it has broader consequences. The consequence of Apple's approach is that pretty much everything behaves in predictable ways, but you have a very narrow range of devices at a narrow range of prices (and screen sizes), and that severely restricts the addressable market. More people can afford $50 phones than can afford $600 phones. The consequence of the Android approach is that you have a much wide range of devices and prices, and a much larger market, but anything on the bleeding edge doesn't work predictably at all. This doesn't just apply to the gyroscope - it also applies to varying degrees to almost anything trying to do clever things with the hardware. This is also true even if the API does actually work as advertised - there's not much point trying to do a mass-market Android NFC deployment when you have no idea how many of your users even have NFC Androids (and the users themselves don't know).

One result of this, as I've said before, is that Apple and Google are focusing their innovation in different areas. Apple is moving down the stack with integrated hardware/software experiences (iBeacon, fingerprints, M7 etc) that are hard for Android to match, and Google is moving Android up the stack with Google Play Services, the cloud and machine learning, which is hard for Apple to match. 

The paradox for developers, meanwhile is that the more open and extensible platform can actually be harder to hack on. When you buy two Samsung phones of the same model and brand in two different countries and find they have different camera drivers and your app will crash on one or the other (or both), where do you focus your seed funding? You have limited resources and limited time and you need to hit milestones to get your next round, after all. Plus, the users who want to install your cool new apps are still concentrated on the iPhone. Again, this is a paradox: Android is the platform best for early adopters and iOS the one best for late adopters who just want something that works, but the market adoption is the other way around. That's one of the reasons this chart is both unfair but relevant.

Which type of innovation is crucial to a platform? With the current dynamics, people like Game Oven are going to keep doing iOS first and Android second (if at all), and that keeps the majority of the best users on iOS and Apple's machine turning over - the classic ecosystem virtuous cycle. But if, as many people suggest (Fred Wilson most recently) the most interesting and important innovation will happen in the cloud, then Google's tradeoff might win over Apple's trade-off - Google's comfort zone beats Apple's.

There's another paradox here, though: if all the best stuff is happening in the cloud, then you'll buy the device based not on apps and developer support but on design, quality, fit and finish... that is, all the things Apple always leads on. The web saved Apple 20 years ago, because with the web you could choose the best hardware and UX regardless of the ecosystem - you could buy an iMac and not worry about the software. So if everything goes to the cloud again, is that really an existential problem for Apple?

(As an aside, note this post I wrote a year ago about the different issues facing iPhone and Android.)

Unfair but relevant

A while ago I wrote a post talking about how sometimes, the best and most important comparisons are those that are unfair, but relevant. 

This is a pretty good example of an unfair but relevant comparison: Facebook's active users of Android and IOS by region. 

People who buy $600 phones (Apple's ASP) and people who buy phones for $250 (Android's ASP)  or less tend to be different types of people. 

Of course, whether everyone in Greenwich who will ever get one already has an iPhone, and hence whether there's any more growth to be had, is another equally relevant question.