Google ought to be terrified at this news. Apple's iOS operating system for iPhone and iPad is trampling all over the Android world right now. This isn't just an incremental shift in market share.
This is, if left unchecked, an existential turning point for Android and its developers and manufacturers. After all, if you can't win a battle against a product that costs about $700/£550 with a product that is equally good but free, then you're screwed.
"Defeat" for Android is relative, of course. Apple sold 75 million phones in Q4, whereas Android sold 206 million. So Android is still King Kong. But Android had never seen a quarter of sales declines. Market share usually shifts between Apple and Android, but Android always sells more phones. Now Android is selling fewer phones.
It has never been more depressing to be an Android fan than right now.
It wasn't supposed to be like this.
In the official playbook, the iPhone is the phone of the rich, that handful of Western countries in which $700 isn't a month's wages. Android is for everyone else — the poor, the working class, the ordinary people. For years, 80% of phones sold have been Android phones. While it might "feel" like everyone in London, New York, and San Francisco has an iPhone, the reality is that outside those wealth bubbles it is an Android planet. In country after country, Apple could muster market share in only the single digits.
ABI Research
Android's noble mission
Android's mission is a noble one, too. Google didn't just launch a new phone product. It launched a free mobile-computing platform that would let everyone have access to the internet at almost any price point. Google introduced the Android One in India and other countries for just $100. Xiaomi launched a best-selling Android phone brand in China that looked and felt as cool as an iPhone but for a fraction of the price. While Apple rejoiced at selling 75 million expensive phones, Google wanted Android to get into the hands of the next 5 billion people. Developing countries are buying phones at a rate of 100 million units a quarter, and not because of Apple. That's Android's doing.
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But Android was The People's Phone.
The People, however, appear to have had other ideas.
It's not simply the case that one product is better than the other. Android is arguably superior for users — you can do more with it in more flexible ways. Android had NFC payments years before Apple Pay showed up. And Android has a back button! IOS is great, but it's also boring — there is only one way to use it. And Apple is about to ship an update to iOS that is focused on "stability" and "optimization." In plain English, iOS is full of bugs and Apple wants to fix them. Remember when Apple shipped that iOS 8 update that prevented phones from making phone calls? That's how "superior" iOS is to Android.
All that turned out to be irrelevant, however. In Q4 2014, Apple didn't just sell a lot of iPhone 6 units — that was expected. Apple always sells a lot of its newly launched phones in Q4. Rather, Apple went a step further and actually stole market share from Android that — according to the playbook — Google should never have ceded.
Strategy Analytics
What's going on?
One thing that might be changing is the assumption around the role of price competition. The received wisdom is that if consumers are faced with two relatively equal products but one is priced much lower than the other, then the cheaper product will solidify healthy market share. That iPhones are the most expensive phones on the market suggests that the poor will choose Android.
But the ABI numbers (above), if they're accurate, suggest we're seeing a situation in which even consumers on modest incomes are saving up and buying iPhones. Few products compel poor people to do that — cars and weddings are two of them. Apple is making inroads much further down the economic ladder than it used to, perhaps.
And then there are the manufacturers. Samsung is essentially imploding. For years it sold big-screen phones and took advantage because Apple sold only phones with small screens. They were great phones, but those days are over. Now Samsung phones — filled with self-promotional Samsung bloatware — don't look so good by comparison to iPhone 6.
Android is in disarray, in other words. It has never faced so many threats from without and within. If Google makes the incorrect strategic decision about the direction of Android over the next five years, it will be in serious trouble.
One hesitates to write Android's obituary, of course. Google really is intent on bringing the next billion people online (and Facebook is helping the company do it). For those people, who live on a dollar a day or more but who need to be online, the iPhone may well be out of reach. Earth may once again become the Android Planet, and iOS may revert to its default status as the Rolls Royce of computer operating systems, used by people who think that having two cars, two televisions, and two showers a day is completely typical human behavior.
But Apple has proved one major fact that Google must now accept: The reach of iPhone will be far greater than previously thought, and simply being the cheap/adequate alternative may not be good enough.
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