As vast and sophisticated as the mobile tech industry may have become, in the end it still relies on some very basic ways for making money. You can either sell hardware, like Apple’s doing, or sell ads, which account for roughly the same proportion of Google’s regular income. Netflix and Amazon’s Kindle store have found success as cross-platform services, but spending on mobile software is unlikely to ever match that of the old days when we paid for Windows, Office, and Photoshop on the desktop. It’s easier to sell things that a person can touch and interact with physically. This is why HTC is diversifying into selling weird cameras, why LG and Samsung keep churning out new smartwatches in search of a perfect formula, and why everyone at CES earlier this month had a wearable of some kind to show off. And in spite of their lamentations about tough competition, HTC, LG, and Lenovo are all generating profits from their smartphone operations, and Samsung’s recent sales decline hasn’t been enough to put the Korean company on the wrong side of the ledger. None of these manufacturers have a profit driver of the caliber of the iPhone, but they’re running sustainable businesses even while relying almost wholly on Google’s Android software.
Just to illustrate: Apple has sold one billion iOS devices to date, and last year alone, one billion Android smartphones have been shipped (so this excludes tablets). These numbers – Apple’s profits, Android devices shipped in just a year – are insane.
I don’t find those numbers to be insane at all. Mobile communications & computing devices offer huge convenience. What I do find insane is how many people use things like Facebook and Twitter on a regular basis. It’s also insane to me that people are so addicted to social media that when driving they’re willing to take their eyes off the road to read/post updates. It’s insane that texting-while-driving now kills more people a year than drunk drivers. People have literally walked off piers and fell into the ocean because they couldn’t be bothered to pay attention to anything other than the newest picture of someones lunch.
That there’s billions of cellphones? Not amazing in the least. How idiotic people become while using them, now that’s insane.
The insane numbers of mobiles and insane users might have a causal link, just saying.
Flagship phones only sell well because they are “free” on long term contracts. Make the buyer pay up front and iPhone sales would shrink faster than an ice cube in the Sahara.
Yup, this is exactly what happened in The Netherlands. iPhones have far higher up-front costs, and Apple’s share here as dropped down to 10-15%.
Damn right it would cuz nobody in their right mind would pay $600+ for a cellphone. The way it seems these days, a lot of people don’t have $600 in their bank account, much less $600 in disposable cash to throw away on a cellphone.
Companies love keeping people on the hook with monthly payments, and people love having things they can’t really afford. It’s the perfect marriage.
There are also many ‘good enough’ phones that for the average consumer that is all they need – the iPhone has a status symbol attached to it but it will be interesting to see how long that status symbol lasts particularly with some of the up and coming brands coming out of Asia with New Zealand right on the doorstep of getting many of these.
The Coles supermarkets here in Australia are now selling very good 4″ MTK based prepaid phones (no contract) for under AUD50 (about USD40). I saw a KatKit Alacatel model for AUD39 with a AUD20 Play Store card a couple of weeks back. Boost also sells a quad core 5″ model for AUD99 (USD75).
I suspect that a huge number of people will switch to these “good enough” models (and a MVNO) when their expensive contracts run out in a year or two.
Vodafone NZ has their own range and even their $249 is pretty good but then again I have a feeling that the impact is has been more brutal on Samsung’s bottom line rather than it impacting on Apple given that Apple competes in a different strata. It appears that Apple is attacking Samsung from the top, Alcatel, ZTE and Huawei from the bottom to middle with Samsung left wondering how they’re going to compete. It is difficult to feel sorry for them after they’ve screwed their customers for so long with subpar software and even a worse level of customer service in terms of after sales support and desktop sync software.
So Samsung is about to experience the same that they exposed Nokia too some years ago…
Wouldn’t be surprised if it occurred given that for many in the Asia-Pacific region they purchase a Samsung smartphone based on the Samsung reputation of producing fairly reliable products in other areas such as televisions, washing machines, and other products. The problem is that eventually their half assed work in the smartphone market will come back to bite them in the ass – their market share in NZ is only gained through massive price cuts and bundles with other Samsung products not to mention deep discounts to carriers. I think it is a sure sign when, if you as a business, have to make massive price cuts just to get products moving out the door when Apple can keep the same price on the day of launch and 1 month before the refresh and still make great sales numbers during that time.
Samsung developed a great reputation with their feature phones like the Manhattan. They’re cheap, rock solid and have great battery life.
I don’t know about your country, but in Russia iPhone took 30% of smartphone market in 2014. And we don’t have US-style contracts.
It would be interesting to see what the sales are in terms of marketshare outside of the US where subsidies are prevalent as part of mobile phone contracts. Sure, you can get phones on contract here in New Zealand for NZ$0 down but it costs you upwards of NZ$140 per month which makes me wonder how the carriers can do what they do in the US given that the NZ$0 up front in NZ still results in a massive per month contract rate. Although I see iPhones around I would say in terms of just volume alone Android dominates the market given that there are vendors that cater for all levels of the market where as the iPhone only caters for the medium to high end (but even then their high end are more popular and visible).
I’ll have to disagree. In theory the flagship Samsungs are pretty comparable to Apple’s stuff, isn’t it? They’re even designed to have larger numbers on some metrics.
What makes the Samsungs unusable is the *software*.
Apple profits are insane, but not the number of devices sold per year.
There’s roughly 1.75 billion phone users, which will double within three years or so. It will only get more “insane”.
Steve is giggling from the grave.
Thom, In the past, you’ve expressed concern about propping up “shipped” numbers as compared to “sales” as the former statistic is exceptionally misleading. I recall you specifically taking issue with Apple when reports indicated that their sales were significantly larger than previously assumed.
You pointed out that their “sales” were in fact “shipped” numbers and that this statistic ought not ever be propped up when making comparisons from one os, company or product yet you’re doing exactly that here in your summary.
I’m going to assume that you didn’t have any accurate sales numbers for Android lest these would have been referenced instead. One would think you might be inclined to not reference that comparison at all if you were hoping to be consistent.
Edited 2015-01-30 16:41 UTC