I'll be presenting these slides (or something pretty close to them) on 29 May at BEA in New York. They give a pretty good overview of where the industry sits today.
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.
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.
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.
It's hardly controversial to point out that Google Plus hasn't set the world on fire. It's interesting to see what's doing better, though. This Google Trends chart shows global search volume for 'Twitter' (blue), 'Tumblr' (red), 'Google plus' (green) and 'Google+' (yellow).
People who've actually worked out new and interesting social forms are doing rather better than a top-down attempt to 'fix' perceived gaps in Facebook.
App Annie gives another perspective on this: where does the iOS Google+ app sit in the rankings?
The only country where Google+ is top of the social networking category is Albania.
Of course, 'Google Plus' is arguably a catch-all name for a project to get all Google users to be logged into a unified system and, as importantly, to stay logged in when they leave Google: that way any page you visit with a 'share on Google Plus' button will be linked to your ID and allow Google to improve targeting. To that extent, getting people to go to the Google Plus homepage isn't the main objective.
The ultimate expression of that, of course, is Android, which, by default, tracks all sorts of things you do. Google Maps for iOS doesn't store a search history unless you log-in: a clear case of putting corporate objectives ahead of user experience. But what happens when you need to log into Google to, say, watch Youtube videos on mobile? Or to see reviews on Google Maps? There are all sorts of levers that Google can pull, with very varying results, much as Microsoft could two decades ago.
Top 20 Android phones in China, as per Baidu. Samsung at the top (with about 30% total share), but lots of domestic brands in there too.
The 'Android has problems' narrative is very clearly established (as established, of course, as the 'Android is selling in vast numbers' narrative). There's the fragmentation by OS version, the fragmentation by hardware, the consistently lower engagement and monetisation, and of course the financial weakness of all the branded OEMs except Samsung, which has an equally unhealthy (for Google) 45-50% or so of Android device sales.
However, it is far from clear to me that problems for Android developers and OEMs are the same as problems for Google.
As I see it, Google really has three strategies for Android, as it has developed over time.
First, there was the publicly stated objective; to make sure that Google was not somehow shut out from the mobile internet by a dominant OS provider that chose to exclude it. Originally (i.e. pre-iPhone) this fear was directed at Microsoft; subsequently it may also have been consciously directed at Apple.
Android has been a complete and unambiguous success on this front: it is extremely hard to see how any one company could now control the mobile OS market at all, let alone try to exclude Google. (The exception, of course, is China, which I will return to.)
Second, whether deliberate or not, Android has had the effect of hugely increasing the number of people with access to the mobile internet. Just as Wintel 25 years ago powered an army of cheap PC 'clone' makers churning out tens of millions of cheap commodity PCs, Android and a small group of mobile chip companies (mainly Qualcomm, EMP, Mediatek, Spreadtrum) have enabled a flood of cheap commodity smartphones and tablets. Do a search on Alibaba for 'Android 2.3' to see what I mean - the entry price for an Android smartphone is now $45 wholesale, with wifi tablets not much more and a vast range of other devices (ersatz netbooks, in-car PCs and DVD players, set-top-boxes and lots else besides) following on behind.
These devices in turn are percolating out to emerging markets around the world and to prepay customers everywhere, quite apart from the relatively small numbers of people in developed markets buying relatively high-end devices like Samsung's Galaxy S3 (which made up under 10% of Android device sales in 2012). All of those devices represent more people and more time online, and that means search, which means Google web search and revenue for Google.
On this front too Android has been a huge success, and many of the criticisms of Android as an ecosystem are of limited relevance to Google. A forked, fragmented, Android 2.2 phone in Jakarta with no Google services on it still accesses the web (if it has a data plan, of course) and drives search volumes, and it is still a great product for a labourer with $50 to spend. The decline of HTC matters little compared to that. Even the dominance of Android sales by Samsung, though arguably unhealthy, doesn't fundamentally threaten these strategic gains so long as the 'cheap Chinese' are providing a flood of alternatives.
Equally, iPhones, which have around 20% of the smartphone market, do almost all of their web search (outside China) on Google. Given the fact that $650 phones tend to be bought by higher-end consumers than $100 or $300 phones, it is quite possible that iPhones generate more advertising revenue for Google than all Android phones combined.
Then, however, we come to the third strategy.
An Android device, properly signed into a Google account and running all the Google Apps, generates an endless stream of little bits of 'signalling' information, way beyond what Google gets from a desktop search user even if they're using Chrome. It knows where you live and work, how you commute - and which phone numbers on web ads you dial. Unlike a web browser, you are probably always signed in to Google, so all of your interactions with Search, Maps and anything else can be linked together. (This, of course, is also the main purpose of Google Plus.)
Google Now is just one manifestation of this: doing useful things like telling you that your meeting will take 45 minutes to get to because there's heavy traffic, so you should leave now. But this value flows both ways: Google is giving you useful titbits, but it is also mining far more data than it would get from a PC user - data to improve search relevance and advertising relevance.
In other words, Android, like Plus, allows Google to tie searches and advertising to individual people and places. In the long term, the data that Google gets from Android users is probably just as important as Pagerank in understanding intent and relevance in search.
Hence, the real structural benefit to Google from Android now comes from the understanding it gives of actual users, and the threat comes from devices that do not provide this data - even if, like the iPhone, they do provide plenty of search traffic.
Obviously, Google's access to this data on non-Android platforms is pretty partial, but the problem also applies to significant parts of the Android base. In China the problem is near-absolute. Google services are mostly blocked anyway, almost all Android phones ship with few or no Google services installed (i.e. they are based on the open source AOSP version of Android) and Google Play, where it is installed, appears to have a very low share of actual app installs. Hence, Google gets close to zero practical benefit from the explosive growth of Android there. There is a similar issue in other emerging markets - a significant portion of those $45 handsets skimp on Google apps just as they skimp on IMEI numbers.
The clearest expression of this is in tablets. Google gets no data from a Kindle Fire, only web search traffic. More importantly, at scale, it gets no data from many of the generic Chinese Android tablets that are starting to well out of China at $100 or less. These devices are like dark matter: everyone suspects there are a lot of them, but no-one quite knows (publicly) just how many. I've seen credible people claim it could be well over a hundred million units in 2013. Possibly much more. How many of these devices will have Google Play? How many users will install Google Maps? How many will come with a third-party web browser (from Tencent, say), one or two of the dozens of major Android app stores operating in China, or Amazon's app store?
Someone (sadly, I forget who*) described Android to me as an unguided missile: very powerful but spiralling semi-randomly with no clarity on where it would land. There is the fragmentation issue, and the weakness of most of the OEMs. There is the threat of Amazon or Samsung forking the platform. But there is also the threat that an increasing number of Android devices might have no more connection to Google than does an iPhone.
To put that another way, Google's penetration of Android is as important as Android's penetration of the handset market.
*Update: it was originally a comment on Asymco - thanks Horace.
The smartphone market in China is exploding. Depending on who you talk to, there were anything from 40-50m smartphones sold in the last quarter, compared to around 19m in the USA. Combining Baidu and CNNIC data, it looks like there were around 180m smartphones in China in Q2, of which 65m were Nokia Series 60 (a rapidly shrinking base), 30m were iPhones and about 80m were Android. Running the growth forward, there are probably now 120-130m Android phones in China.
That means that of the 500m or so active Android phones in the world today, maybe a quarter are in China. Of run-rate sales of 125m or so, perhaps a third are in China.
Using the word 'Android' to describe these devices is somewhat problematic. The great majority of them come with no Google services: no Google Maps, no Google Play and no Gmail or Google Calendar. These cannot be installed by the user either, without a great deal of fiddling with ROMs. Google Search is of course largely blocked in China, and those devices that do have Google Play can only download free applications: purchases are not supported. Even the Samsung Galaxy S3 comes in this condition: no Google services AT ALL.
In other words, these devices are 'orphaned' from Google in an analogous way to the Kindle Fire. They provide no Adsense revenue and, equally importantly, give Google none of the signalling information about user behaviour and intention that, for example, feeds Google Now. The damage done to Google by fragmentation can be overstated - a forked messed up Android 2.2 phone in Turkey with no Google apps still drives search traffic - but these phones do not even do that.
This does not exactly mean that they do not constitute an addressable market for non-Chinese developers: they have much the same mix of Android versions and hardware specifications as devices in other parts of the world, and if you localise the app and offer it for free, or place it on one of the several dozen Chinese app stores - or just sell it from your own website as many Chinese devs do - then you can find users in China. It won't be easy, though.
Apple has its own problems in China. It has struggled to find the right payment mechanisms for the App Store, and the iPhone is not available officially on the largest operator, China Mobile, which has 700m of the 1.1bn mobile users in the country and a higher proportion of the best ones. This will probably change in the next few months, due to the iPhone 5's ability to support the China-only TD-SCDMA 3G standard that China Mobile uses. But in any case, the ~30m iPhones in China (half of them on China Mobile regardless, as it happens) all have something much closer to the same services and apps as we do in the west.
There is no one 'smartphone' market
China is the specific issue, but there is a general issue here as well. Talking about global unit sales is important in one sense, but if you want to understand the evolution of ecosystems, addressable markets for developers and indeed addressable markets for manufacturers, you need to look on a more local level. Hence, for example:
- 50% of smartphone sales in the US are iPhones
- On the other hand around half of European mobile users are on Prepay and almost certainly will not buy an iPhone (unless it is a second hand one, which is an interesting topic in its own right)
- In China, the hot smartphone price point is 'RMB1000' - which is around $160 - BEFORE SUBSIDY.
This point is crucial. Many Americans, accustomed as they are to a pricing structure that conceals the underlying price of the handset, make the mistake of thinking that Apple sells a 'free' phone. It does not. The iPhone 4's unsubsidised price is over $400. Conversely, you can buy any number of very basic 2G Android phones for under $50 at wholesale.
In other words, the cheapest phone that Apple makes costs around ten times the cheapest Android that a kid in Nairobi, Jakarta or Shanghai can get his hands on.
At this point, people sometimes point to the strong-selling Galaxy S3 as proof that Android sells well at high price points. The problem with this is that the S3 has (according to Samsung) sold 30m units in the last 6m or so, but Samsung sold perhaps 90m smartphones in the same period, and Android sales were close to 200m. Most of the volume is at MUCH lower prices than the iPhone.
This price difference is hugely important for market share, but it is also hugely important in understanding what it means to say that Android has '70-80-90% of the smartphone market'. It has that much of smartphone units, but it has nothing like that much of the addressable market for the typical VC-based mobile app-focused startup in London, San Francisco or Berlin. If one then considers the inarguable fact that Android users, even in the West, have a different demographic profile (which is code for 'they tend to have less money'), then that app development prioritisation looks a lot more complicated than the crude 'Android is winning' narrative might suggest.
EDIT FOR CLARITY
Obviously, devices that do not have Play or other Google services do not activate with Google and therefore do not show up in Google Activation numbers. This applies to some, but not absolutely all, of the Chinese phones. This means that the total, all-inclusive Android base is larger than Google's own figures - but not by the totality of the Chinese base.
Slides to illustrate a presentation on the mobile platform wars, given at the Frankfurt Book Fair on 8 October. Only moderately comprehensible without hearing me talk, but the charts are pretty none-the-less.
Maps are hard.
Google mounted the event below (by a strange co-incidence, a week or so before Apple went public with its own Maps project) to show just how much hard work goes into Google Maps, and followed up with an artfully placed piece in The Atlantic.
Many people seem to have forgotten now, but laughably bad results used to be a reliable part of the Google Maps experience, and still crop up from time to time. My favourite was earlier this year, when I searched for '42 Dean Street' while standing on Dean Street in London, and was given 'Deren Street', in a small town in rural Australia. Google Maps is a lot better than it used to be, but not anywhere near finished. Of course, no map can ever be finished, almost by definition.
Moreover, though Google has indeed mapped most of the world itself, from scratch, there are maps and maps. The comparison below, between 'Google Maps' for major stations in Tokyo and New York, is intriguing.
Why is the data so much richer in Tokyo? The answer, of course, is that this isn't all Google's data. Google has the roads and complete streetview photography and that's a great asset, but a meaningful part of that incredibly rich metadata is licensed from Zenrin (whose copyright appears in small text at the bottom of the browser). What exactly would Google's maps look like, without all of the third-party data that it buys in pretty much every country?
This, of course, begs the question of whether Apple can license the same: at the moment its maps for Tokyo are embarrassingly sparse. In contrast, the situation is China is... interesting. Apple is licensing data from AutoNavi for China, but this data is only available IN China. And the data it has for the rest of the world ISN'T available in China. So when you step off a plane in Beijing, suddenly your iPhone has access to fantastic maps for China and no-where else, but before you start the trip you can only see the basic data Apple has from other partners. This doesn't really matter to very many people, but it's not ideal.
On the other hand there are real practical problems with POI data even where Apple HAS done the licensing deal. Apple is taking feeds from a variety of partners with wildly varying data standards, and the integration isn't smooth yet. The most visible teething problem is with Yelp. Apple is licensing POI data from Yelp, embedding reviews and listings onto the maps. However, Yelp's data is far weaker outside the USA, and Apple isn't even taking a live feed - there are both reviews and restaurants near my house in North London that are in Yelp but not in the iOS maps results.
This is part of a broader execution problem in Apple Maps. In London, Underground stations, which are absolutely crucial, appear and disappear on a daily basis. This blog post goes into some detail as to some of the things that might be at issue (though it has perhaps excessive certainty on these). These will get fixed, of course, just as Google fixed identical issues - it's just a question of when.
Meanwhile, almost completely ignored at the moment are the 3D 'Flyover Maps' - which are sometimes quite astonishing. Personally I've found it far more useful than Google's Streetview, which after all only really shows you what your destination looks like, not how to get there.
When this fuss started to blow up, my immediate reaction was that this was another 'antennae-gate' - a major fuss that turned out to be largely artificial. Actually it's a little more serious - it's more like the fuss around the absence of Flash, which was also a real issue, until it stopped being a real issue.
One of the underlying dynamics is similar, though: Apple deciding that it needs control over a key part of the experience. In this there's a certain irony: Apple wanted to own the maps experience instead of relying on partners, but is suffering at the hands of imperfect data and imperfect integration of data from... partners.