The Orange View (on hiatus) Because Apple is great but it isn't perfect

3Apr/11Off

In an iPhone hole? Keep digging

The iPhone is going to gain a lot of U.S. marketshare by being on Verizon, and it’s going to come significantly at Android’s expense. (BlackBerry will lose some of their Verizon customers to iPhone, too, but I bet Android will lose proportionally much more.)

-Marco Arment, January 12, 2011

Marco is a very good software developer but business predictions don't seem to be his strong suit. He is constantly looking backwards, noting old surveys, out of date sales figures and wholly made-up rationales for phone sales trends. And so, despite his prediction, the iPhone's move to Verizon has not increased its market share and Android phones are proving more popular at many Verizon locations with a big wave of additional 4G-capable Android phones on the way. And in Europe, some chains like Tesco and Carphone Warehouse that stock the iPhone and Android phones are now selling more Android phones.

Marco's treasured anecdotes are also sounding dated as big-time game developers like Spacetime Studios and Rovio announce bigger Android revenues, Google works to improve the payment options in its market and Amazon invents a whole new app store plus a cloud-based music service. Even Lifehacker got on the Android band wagon a bit the other day. That's not to say Android is crushing iOS by any means, but it's not the app laggard that it used to be and it's coming on fast.

Marco was hardly alone in thinking the Verizon iPhone would be a big blow to Android's growth. John Gruber was saying much the same. Watts Martin. Many others. Why so wrong? Why can't Apple fans see what's going on?

A popular chart cooked up by Horace Dediu a few months ago showed that the iPhone outpolled Android phones on AT&T by a 15 to one ratio in November last year. Apple fans including Dediu completely misunderstood the situation, thinking the chart was a harbinger of what would happen when the iPhone hit Verizon.

But what the chart really showed was that AT&T, engorged on its five-year iPhone exclusive, had failed to develop, market or even stock any worthy competing handsets. All of Apple's massive advertising campaigns, all of the iPhones sold by Apple's hundreds of stores, all of Apple's cleverness and design smarts all fed the AT&T network exclusively and AT&T sat back and reaped the rewards. The iPhone on AT&T was a like a rare bird that evolved on an island with weak competitors.

Now the bird has flown to the mainland and competition is fierce. Not only does Verizon have a strong and growing line-up of Android phones, but AT&T is rapidly moving in that direction, as well. The carriers realize it would be foolish from their point of view to allow Apple to gain too much leverage. The lack of Verizon iPhone boosted Android but the lack of AT&T Android phones boosted the iPhone, too. Now things are getting more in balance.

None of this is to say that Apple is doomed or that the iPhone isn't great. I expect when the iPhone 5 finally arrives it will be a huge hit, especially if it narrows the gap with Android in a few key areas like 4G compatibility. But Apple isn't running Android out of town, far from it.

As a final aside, Marco Arment is back today with the much same argument and takes offense at being described, indirectly, as an Apple fanboy. But how else to describe someone who is an exclusive user of the iPhone, has no real life experience with an Android phone and yet constantly writes sweeping predictions based on the idea that nobody really wants or likes Android phones? It's like complaining about how bad the food is in China after eating at a Chinese restaurant in the East Village. Time to get out a little more.

Posted by Aaron Pressman

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  1. I think everyone’s analysis is flawed here including Fred Wilson’s.

    1. “And so, despite his prediction, the iPhone’s move to Verizon has not increased its market share and Android phones are proving more popular at many Verizon locations…”

    This is more anecdotal evidence than statistical analysis. I’m willing to bet a heavily significant amount of iPhone buyers go to an Apple store or order online from Apple.com so we really have no idea.

    Secondly, I wouldn’t expect there to be a mass exodus of Verizon customers, who’re willing to pay an unsubsidized price from their current smartphone, to immediately move to an iPhone. That is not what average people do. Most likely Verizon customers who wanted a smartphone purchased one regardless of whether or not they wanted an iPhone. Those that didn’t get smartphones were not interested in paying the high price over the life of the contract and probably weren’t going to pick one up anyway. If this is the case, which is more than likely, it will take a couple of years to really see what trend really is.

    2. “But what the chart really showed was that AT&T, engorged on its five-year iPhone exclusive, had failed to develop, market or even stock any worthy competing handsets.”

    I totally agree with this and we must also wait a couple of years to see if there is a trend of iPhone users migrating to Android on AT&T.

    3. “As a final aside, Marco Arment is back today with the much same argument and takes offense at being described, indirectly, as an Apple fanboy…”

    I’m always hesitant to call someone a fanboy or any label because it puts an end to legitimate discussions but I’m sure that Arment, as a tech guy, has had some experiences with Android and maybe at length. I think he’s wrong in thinking that the average person doesn’t generally have some idea of what Android is but they probably don’t know much about a specific Android device.

    There is room enough for more than one platform to be successful and I think Wilson is wrong in believing that this is the PC wars revisited.

  2. I always find it funny that these pundits try to issue sweeping statements about the fortunes of a particular platform without even mentioning hardware. It’s all software, ecosystems and app stores with these guys and they miss a fundamental point about this industry: phones are hardware. These people (with the exception of Google) are in the business of selling you a machine, not an operating system. Apple states that they are a hardware company quite fervently, yet time again, we have these arguments for Apple domination based on developer stories.

    Android will continue to overtake Apple because they can smother the market with more hardware with more features, faster. Apple will never be able to compete with the economies of scale afforded by multiple OEMs churning out new phones every three months. They just can’t keep up.

    Here’s the rub, and I have no idea why Apple zealots can’t see this: it doesn’t matter. Apple is clearly doing just fine with the margins on their hardware. There’s more than enough room in the market for at least three big players. They don’t need to dominate to do what they do. They’ll always have a market because they cater to certain demographics, and there’s nothing wrong with that.