How many ecosystems?

We now have over 2bn iOS and Android devices on earth, and this will grow in the next few years to well over 3bn. This kind of scale is unprecedented in the computing industry (there are only 1.6bn PCs even now), and it tends to break prior assumptions in lots of interesting ways. One of the most interesting stress points for me is in the way that we think about ecosystems. It's not clear how 'winner-takes-all' dynamics work, and it's not clear how far ecosystems are global.

The common narrative around ecosystems, as we have seen played out in the past, is that there is a very strong winner-takes-all dynamic - the larger ecosystem draws in developer activity because it offers the single best opportunity and the presence of developers in turn draws in users in a virtuous circle, with minority ecosystems squeezed out. This is what happen to the Mac, and it's what we can see happening to Blackberry and perhaps Windows Phone, and so, perhaps, it will happen to iOS, which is now being outsold by Android 4:1 or 5:1 in unit volumes. 

This is an easy and well-understood narrative, but it seems to me to fail to account for some basic changes.

First, it is not really clear what it means for iOS to be a minority ecosystem when it has 650m active devices even today, and will probably rise to, say, 7-800m, given current dynamics. In 1995, when Windows 95 sealed Microsoft's victory over Apple, there were only 250m PCs on Earth (and Macs were in the low tens of millions). There are twice as many iOS devices now as Windows PCs then. We know that Blackberry is sub-scale in this environment, but are we sure that there is no room for a second ecosystem with over half a billion users?

Second, it's now very clear that in mobile, the scale of the developer opportunity does not map well to install base or sales volumes. We know from data given by Google and Apple at their developer conferences this summer that Apple paid out roughly $10bn to developers in the previous 12 months where Google paid out $5bn, despite having close to twice as many active devices. In other words, the average Android device generates between a quarter and a third as much spending as the average iOS device.

Of course, app store revenue is only one metric, and comes with caveats, such as that the Google number excludes China and the iOS one does not, but pretty much all of the available usage data points to a similar disparity. This chart from Akamai for mobile browser share gives another view of the same gap, and one could multiply charts like this almost indefintely. For a variety of pretty widely discussed reasons, iPhones and iPads get a disproportionately large share of value, engagement and usage. 

Meanwhile, at least in developed markets, the dynamics of early-stage startups strongly favour an 'iOS-first' approach, as Steve Cheney laid out here. Their objective is normally to achieve traction in a fairly defined period with limited resources, and iOS offers lower development costs and a higher concentration of early-adopter users with a higher propensity to spend money, making it much easier to prove that your idea works on iOS than on Android. This in turn means that the 'cool new apps' tend to come to iOS first regardless of the broader unit share picture, and this again is self-sustaining - users who value this tend to choose iOS, reinforcing the effect. 

So, what will happen when the minority ecosystem has 650m users, half or more of actual use and engagement and the majority of developer activity, and this seems to be self-sustaining? How do the winner-takes-all dynamics work here? We have no precedents. 

Third, we don't really know how far we should be thinking about a global ecosystem at all. With numbers this large, we may start to have very different ecosystem dynamics in different places. Development has become much cheaper and many countries will have tens of millions of smartphone users - there will be a range of places where the local market is large enough to sustain local apps developed in defiance of norms elsewhere. 

After all, a large proportion of the apps that matter are fundamentally local. To say that Citibank in the USA, Tesco in the UK or Carrefour in France will pull their iOS apps because it's the 'minority ecosystem' is actually to say that they'll abandon the best half or best third of their users because there are lots of Android users in Indonesia. Equally, the hot new startup in India or Indonesia may well go Android first, and not care how many iPhones there are in San Francisco. The size of the broader global ecosystem is not necessarily that relevant if the target market is local and the local market is large enough to sustain development by itself. So some of these will go global (or try to) but many may not need to.

This in turn means that the question of what platforms are sub-scale or minority is different in different places and so you will get different levels of support for these platforms in different places:

  • In very big markets such as the USA (over 200m smartphones) China (at least 400m already) and India (perhaps 100m) you can build big businesses without worrying much what's used in other places.
  • Small, low income markets may be dominated by Android but also not be able to sustain local developers, and so float on the global services alone.
  • In markets like Spain one can clearly see signs that Android has 'won' and that local brands are slow to support iOS. 
  • In some middle income markets, iOS may have a small relative share but (due to income inequality) a wildly disproportionate share of the most valuable customers. 

All of this means that it isn't so much that 'market share doesn't matter' (the mantra of Apple fans for decades) as that you need to think about what kind of market share, where, and whether that matters. Or as Groucho Marx almost said, "this is my market share and if you don't like it I've got others".

3G around the world

A fascinating set of well-informed estimates from Qualcomm for 3G device shipments by its licensees. This includes all devices (dongles, mifis, tablets etc). There is a very obvious shift in the overall mix towards emerging markets. China/India have now passed North America. 

Amongst other things, this bears on ever-growing Android activations, which are strongly weighted to emerging markets: Android has 75% global share of smartphone sales but only ~50% in the USA. A lot of that 3G growth in India/China/Other are Android devices. 

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