Categories

How much profit did vendors capture from Android-powered phones?

Following-up on the profitability discussion for the top eight vendors, I built a chart to show estimated profit capture from smartphones, further dividing the vendors into inter-dependent (own OS) and modular (licensed OS)[1].

The areas shown represent total profits by vendor and architecture. The totals:

  • Inter-dependent: $3.83 billion
  • Modular: $0.59 billion

Most of the modular profits came from selling Android devices.

[1]  Samsung and Nokia profits from Smartphones are not directly available and are estimated.

  • http://www.notesark.com iphoned

    Windows platform domination was reached on the back of failing hardware vendors who went out of business in droves and still struggle to make a living selling devices based on an inferior OS. BTW. The gains were made even at the time when the "Wintel" universe was selling DOS vs vastly superior Apple Windows-interface.

    We have now shown a dozen plus different ways that Apple makes way more profit then all other players. They were making way more profit then Wintel makers while those cripples sacrificed themselves on behalf of Microsoft to gaindomination for the Windows platform. That doesn't mean anything in the overall outcome for platform domination, which is what ultimately really matters.

    • Stu

      Well, yes it does. There is no "WinTel" monopoly that's making money. No one to push the purchasers into buying with massive advertising, strategic tie ins, massive subsidies to stay the incumbent.

      Windows won because it made boatloads of money & used it to promote itself further, while the hardware players fought for the (once large) scraps. Google doesn't make a dime on Android & doesn't promote it, and the hardware players are fighting for the small scraps.

      There is very little actual similarity, and thus no reason to expect the same outcome.

    • Yowsers

      One issue you rarely see addressed when discussions of platform domination come up, especially when comparing Windows v Mac of the 80's and 90's vs mobile platforms today, is what the effect monopolistic and illegal business practices had, and how to cancel it out for a fair comparison.

      I'm not sure it can be done. Absent that, such comparisons strike me as too simplistic and ignores an important factor.

      • Niilo

        Also, just to add to your comment, there was noone in the role of the wireless carriers back in the day. They are important gatekeepers between the handset vendors and the market and will have huge influence on how all this plays out.

    • Nate

      The other big issue back then was pricing. Apple was charging a higher price premium for a superior product but it was too high to win the majority of the market.

      In the smartphone wars the prices are subsidized (or relatively equal) so users are able to basically choose based on quality (software and carrier) rather than price.

      I think this will lead to multiple dominant platforms (that's a good thing) but looking at these numbers makes me worry about Android. If it can't make anyone a profit (including Google) then it isn't sustainable.

  • Dave

    Time to ditch Android for an own in-house OS, I would say. I believe Android-based phones will have some troubles ahead with iPhone 5 coming next summer. Windows Phone 7 taking away some of the Apple-haters, who would otherwise have gone with Android. There's less exclusivity for iPhone now. In Germany, it's sold everywhere now (before T-Mobile only). With Verizon selling the iPhone 4 next to Andriod Phones that will clearly take away some customers. Most Verizon customers have never seen the Retina display in person. It's something customers need to hold in their hands to fully appreciate. Then iPhone 4 going 100$ down with the coming of iPhone 5… iPhone 4 is a very good smartphone as it is right now… for 100$ less it will compete with Android phones even price wise.

    Also a good topic to be covered here I think: Google loves to brag about their activations claiming they have passed iOS numbers now. But I've never seen anybody mention that you simply can't compare numbers alone. Since most Android phones are mostly 200-300$ cheaper than iPhones. If the iPhone went on sale 200$ cheaper on average, I would assume the sales would explode. If Andriod phones and iPhones were priced the same, I doubt that growth numbers for Android would look as they do now.

    It's a fact that there are more VW Golfs around than Mercedes S-class cars. The growth rates of Android are being achieved right now due to the fact, Samsung, LG, HTC etc. are fine with small profits. Everybody loves profits. So why not raise prices? I think the mentioned makers are expecting the sales to drop, if they were to try mimic Apple's profits.

    • dchu220

      Most vendors can't ditch Android and develop their own OS. For most of them it's license Android or Win7 or get out of the hottest sector in a depressed economy.

      It takes a lot of capital, time and knowledge to know how to build and manage an OS. It isn't something you can just throw together.

      • Dave

        True. Good software is probably one of the hardest thing for competitors to replicate. But right now, what they're basically doing is handing their future to Google. What if Google slows development down? What if WIndows 7 and Android both rethink their pricing strategy and raise their software license fees in future? Say Windows Phone 7 to 100$ and Andriod to 70$… that would mean a profit cut for those manufactures as they don't have any other options other than accepting what Google and Microsoft dictate more or less. I'm not saying prices will be raised but it's a possibility and the future of those phones depends on this. Even if Apple decides to lower the price of iPhone 4 to just 450$ in summer with the release of iPhone 5… Apple would compete price-wise. And iPhone 4 is still a good smartphone even next year in summer for 450$.

      • asymco

        Ditch? No, they won't ditch Android. They will hedge. Samsung has three "brands" matching its three platform strategies:
        Galaxy for Andoid
        Omnia for Windows Phone
        Wave for its own Bada

      • Dave

        I think you're right. Samsung will try to diversify/hedge their strategy. So I think all manufacturers are welcoming Windows 7… The price of Android is … there's none. Meaning Microsoft really needs to step their game up, if they want to compete and also keep their license fees to a minimum since Android is free… otherwise retail prices would need to go up for Windows Phone 7 devices in times where it's crucial for them to win some share in smartphones back.

      • ftaok

        Well, using Android may not really be free. Seems like OEMs that use Android exclusively are getting sued by various patent holders. As patent cases go, it's usually a tit for tat deal. If the OEM doesn't have a load of patents of their own, then they'll have to pony up if Google is found to have violated patents.

    • John

      >> There's less exclusivity for iPhone now. In Germany, it's sold everywhere now.

      Huh – who cares where a phone is SOLD? What sort of non-exclusivity do you suffer if it is sold by more than one ISP? How many people bought an iPhone because you could only get it at T-Mobile?

      • Dave

        In Germany you can Buy the iPhone with or without contract now. It used to be only with a tmobile 2 year contract at tmobile shops only. Now it's pretty much with any carrier (E-Plus, Vodafone, O2…etc). That means it's not exclusive to tmobile only.

  • Joe_Winfield_IL

    @iphoned, why is domination what ultimately matters? Apple is by far the most profitable PC maker today with single-digit share. Apple is a larger and more profitable company than Microsoft despite being "dominated" by Wintel.

    Also, as detailed throughout the site, Android is far from dominant. It is huge and growing, but for the last 18 months, Android has been the only option for most handset makers. Microsoft is going to blow a lot of money in the next year making sure that WP7 gets a fair chance. I was inclined to think that WP7 would be DOA, but then I started thinking about what Microsoft has done in support of Bing. Their online unit continues to lose money, but it is gaining share on the back of hundreds of millions of marketing. Phones allow for much more than marketing as a technique to buy share – as a physical device that has to be bought, Microsoft has the opportunity, and the propensity, to waste billions making stupid decisions in support of its own platform.

    • timnash

      Microsoft is in fact more profitable than Apple but it's now behind in revenue and fewer investors think it will grow as fast as Apple and so Microsoft is worth less as a company.

      • Dave

        Microsoft is more profitable due to their business in software only. Apple makes Hardware… the software they sell is mostly included in their hardware packs. I doubt they make a billion a year from software alone. Software has huge profit margins, once initial costs have gone into the project. Then all they get from sales is more or less pure profit. Whereas with Apple Hardware about 50% goes to hardware manufactures and parts.

      • Joe_Winfield_IL

        You're right. I incorrectly thought that Apple had surpassed Microsoft in both revenue and profits in the last quarter. I should have checked before throwing out a false stat. Also, MSFT would likely have a higher market cap than AAPL today if they hadn't paid out tens of billions in dividends over the past 7 years.

    • Pat S

      Joe
      Apple is not more profitable then Microsoft. Need to look a little closer at the numbers. Apple has now passed Microsoft in Market Cap & Revenue last quarter, the most recent qtr MSFT 16.195B Revnue Net Income 5.410B , APPL 20.343B Revenue, Net Income 4.308B

  • Iphoned

    The car analogy doesn’t hold here, because here it is a platform battle. As for “windows won because it used a boatload of money…”I am not even going to bother to refute this one.

    Isn’t it obvious by now that this is shaping up just as the Mac vs windows so far?

    • Dave

      I think platform war was won by Microsoft due to unbelievably overpriced Macs during that time.

      The same would happen now, if Apple chose to charge 3x as much for an iPhone compared to the average price of an Android handset. People tend to buy quality stuff…only if it's in their price range. Most people really don't care if they have an Apple or Android phone as long as they can make phone calls and surf the web from time to time. There's a fair amount of people who would like to have a smartphone today, but even the current lower prices are simply way too high for them. Their demand is very price elastic. We've seen this with the introduction of the original iPhone. After a month or so the price dropped by 100$… it's because of the price elasticity of most customers. 100$ aren't that much… but added to an already high price they can mean a lot… e.g. if you double the price you won't loose half the customers but most likely up to 95%… you will get new customers who would buy an iPhone for the same reason they buy Rolex watches. But the normal user wouldn't buy one. Macs were way to expensive… I've always wanted to get a Mac even in the early 1990s… but was financially unable to do so. Prices are going down at Apple in everything other than iPhone right now, helping Apple's growth. I think that's one of the key drivers of Apples growth currently.

    • yet another steve

      There are far more differences than similarities.

      1. The most obvious one that we forget is the internet itself: all platforms are compatible with the dominant lowest-common-denominator platform (the web.) It's not a winner-take-all situation. (This is also the most important factor in the mac's resurgence.)

      2. To understand the Apple vs. Windows battle you have to remember that Windows was merely an extension of the dominant PC platform. That standard was first and entrenched by the time the first underpowered and expensive mac shipped. All MS had to do (which took years) was to make Windows good enough to not be worth the incredible switching costs of going to the mac.

      Compared to these platform issues, quantity of manufacturers are a minor factor. Though that was different too–you could (can still) literally build your own PC in a way you'll never be able to build your own pocket device. I would argue that the jury is out on hardware diversity.

      • Joe_Winfield_IL

        Great point on the internet-as-platform!

    • Joe_Winfield_IL

      Again, why is that a bad thing for iPhone? In the long run, it has worked out handsomely for Apple. And the platform "war" for computers was different in infinite ways. Sure there are lessons to be learned from the past, but much has changed in the last 20 years.

      -Android is nowhere near the consistent user experience that Windows offers. Android is being used to power washing machines and printers because of its wonderful, open source code. It's amazing software, but much of the value of Windows to the neophyte computer user was its consistency. You could get the same look and feel, whether at work, home, or school. Applications and drivers were universal. None of this is true on Android. In fact, Apple is ironically doing better in this department as an early standard setter.

      -There was no credible third option in the PC clone wars. Today we have RIM, Symbian, Windows, and "other" competing with iOS and Android.

      -Distribution of PCs does not involve a contract with an interested third party. A consumer just buys the device and goes home. In many geographic markets (including the largest one), the cell operator has a lot to say about things. The telecoms have tens of billions invested, and are not interested in even a duopoly between Android and iOS, let alone a monopoly. The carriers set the price, and they also pay their reps on commission. They can use pricing and sales incentives to drive device sales in any category.

      -Apple hasn't gutted it's management. They are not going to go after a low-cost solution to drive profits the way that they did last time.

      -Mobile platforms go beyond phones. The tablet bonanza is just beginning, and these devices will also affect phone buying. Apple is quickly putting up walls around the iPad, and business users are in love so far.

      -Windows will enter this month, and within the year HP will join the fray with new WebOS devices. RIM will begin to market QNX devices next year. It doesn't really matter if any of these are particularly successful; there will be enough confusion among buyers to prevent anyone from emerging as dominant.

      -Motorola is all in on Android. Sony Ericsson has said the same. The rest of the OEMs are agnostic. They will simultaneously support all available options to spread their opportunity. The guts are basically the same on all phones, so the cost of supporting multiple OS platforms is doable.

      Otherwise, you're right. It's Groundhog Day, and we're all Bill Murray.

  • D.Z.

    Apple can take 60% profit for each dollar, spent for I-Phone production. RIM can take 40% profit rate. All other manifactures can take only 10% ones. Does it mean that Apple and RIM are using some unique features, which can be provided only by their inter-dependent architecture and as result they achieve so big profit rate of their mobile buisness in compare with other campanies? It looks so. How can other manifactures try to achieve more profit rate if they will use very similar software (WinMob or Android )? I think they will try to create some new key features in HW area (phone + game console combination or 3D screen or only voice control without any keys) or some new features in SW area (some specific multimedia services, for example, available only by using these campany's servers).

  • http://www.notesark.com iphoned

    >>The same would happen now, if Apple chose to charge 3x as much for an iPhone compared to the average price of an Android handset.

    BOGO offers means many Android handsets are half the price of iPHONE. Check on Amazon – $40 Android handsets.

  • http://www.notesark.com iphoned

    @Dave

    >>I promise if Apple matches the current EVO / Droid 2 etc. prices…

    I promise if Apple matches prices in this way, the margins will implode, and so will the stock. At least short term.

  • http://www.notesark.com iphoned

    @ Stu.

    >>For $40, you get a crappy, plastic phone with a UI that's not intuitive but has lots of ways to do things.

    In the old MS vs Apple PC days, for less money you got a crappy DOS machine vs the beatuful Windowing-based Mac, and later a less so, but still crappy MSWindows machine. Still, we all know how the platform game has played out.

    I.e. not of that matter as far as winning the platform war. You just need to look at the incredible Android phone update vs iPhone, and even adjusted for iPhone spread to other carriers, you can see how it is shaping up – not to different from the MS-Mac days in the late 80's.

    The two wild horses are Windows 7 Mobile and IP lawsuits – certain outcomes there could change things.

    • Steven Noyes

      But the Android phones will all be about the same price as the iPhone. Unlike Mac/PC days, the cost of the phone is a minor part of the cost. As a result rehire are no Android phones that are much cheaper than an iPhone.

    • asymco

      In http://www.asymco.com/2010/11/03/what-do-you-have
      I pointed out that the addressable for Android is gated by licensing partners and, in earlier articles, gated further by operators. I don't see similarity to the MS-Mac days but to the iPod-PlaysForSure days of 2000's or even the RIM-Windows Mobile days of the same decade.

    • Stu

      @iphoned

      Do you really not get it? $40 vs $99 or even $199 is not a big difference. $500 vs $2500 is. That alone makes it nothing like the Windows vs Mac war.
      For $50 more, you can get a high quality phone. For $500+ more, you can get a high quality computer. That's a huge difference.

    • TomCF

      MS vs Apple PC was a battle in the business market. iPhone vs. Android is a battle in the consumer market. They are fairly different decision making processes ("No one got fired buying IBM/Microsoft." and a list of feature checkboxes and prices to pass to procurement vs. "Why are there 30 buttons on the remote and which one turns on the TV?")

  • http://www.notesark.com iphoned

    …I meant Android "uptake", not "update". Sorry.

  • http://twitter.com/tommy4490 @tommy4490

    For the Android vendors, the race to the bottom is on at full speed, with just 15.4% of what integrated vendors made.

  • dms

    The margins are pretty thin in the MODULAR camp, which I guess is OK if you're running Android.

    But what about Windows Phone 7? For Windows Phone to gain any sort of traction, one of two things need to happen:

    1. Handset vendors need to be able to charge a premium for Windows Phones, an unlikely scenario.

    2. Microsoft needs to subsidize the cost of the license. I'm assuming this is what's going on right now. Does anyone have any hard facts on the economics of Windows Phone licenses?

    • Dave

      Correct. Currently it looks like Microsoft is entering the modular camp and competes for lower profit margins and profits in general. Taking into account all the money invested in Windows Phone 7 plus half a billion worth of marketing they are going to force into… I'm currently not seeing how they can get that investment back, as they're competing with Android in first place, which is "free". What most companies don't realize… there's a huge amount of people who just know what an iPhone is… it almost the Coca Cola of smartphone brands in the industry. Apple won't rename their phone to anything exotic … e.g iPhone 5/6 most probably. That's very clever. iPhone as a brand is growing stronger and stronger with every yearly release of a new model. I doubt there's one interested smartphone buyer, who doesn't know what an iPhone is. Competitors have dozens of names and change them way to often. It's very hard for them to create a brand…. and brands are basically enough pretty much everywhere else to charge a premium. That's the reason why Mercedes/BMW etc. won't rename their models. They stayed the same forever. S-class is still the s-class. 3/5/7 series BMW etc. Competitors have done very little so far to build a brand premium. Most people won't know what an EVO is or Droid X or Droid 2… the Galaxy S even has dozens of different names in different countries. That's not the way to go if you want to build a solid brand IMO.

      • airmanchairman

        Microsoft has the resources (as witness their last quarter profits announcement) to play the long game, and must actually be relishing all the attention deficit due to Android's meteoric rise versus Apple's sweeping dominance, taking the spotlight away from their own progress.

        Apple and Steve Jobs know better than to lose their awareness of potential and hidden threats. Mobility is the key – Apple's speed of execution is stunning but must not flag – Motion is a Law in Creation.

    • Niilo

      … or current Android licensees need to feel scared enough of Google that they will pay for a license in order to get an alternative OS leg to stand on.

  • Sander van der Wal

    Samsung has both ANdroid and Bada phones. Are Bada phones selling that badly, that you do not include them?

    Also, the horizontal axis is in millions of phones sold. So the total area of the rectangle for each vendor is total profit made on smartphones. However, it appears that for instance SE sold more phones than Samsung and Motorola sold more phones than SE. This is a bit confusing.

    • asymco

      The margin of error in Samsung data on smartphone profitability is greater than what Bada contributes. Note that I said "most" of the modular area is due to Android.

      The way to read this is the horizontal dimension is number of smartphones sold, and the vertical dimension is the profit per phone. SE is much narrower (x-axis) than Samsung. Motorola did sell more smartphones than SE.

      The charts can be confusing. I am illustrating four dimensions: smartphone volume, smartphone profitability, vendors, vendor category. (x-axis, y-axis, multiple areas, two charts).

      • Todd Salerno

        Horace-

        There's a duplication in the x axis of both charts: "Millions of phones Phones sold". Otherwise, awesome visualization.

        Is there any research into the true value to purchaser of BOGO offers? Mathematically, it implies a cost savings of 50%, but since as a single person I can only make use of 1 phone, it logically follows that the value of the offer is something much less than 50% off to most people. Sure, I can give it away to someone I know, or try to sell it for some fraction, but those are not always practical options. Intuitively, it seems to me that if I want X phone, I will pay full price. If you want to toss in a free one, of course I'll take it, but that's not necessarily creating a new user for the platform. It may well sit in a drawer as an at-the-ready insurance policy. From a sales perspective, RIM or Android can certainly count the raw number of boxes shuffled, but my gut says that's probably a 20% – 30% overstatement of user base when BOGO is in effect. Curious if there are numbers out there to confirm or deny this…

  • Ricardo

    When I see people comparing the smartphone competition of today to the platform wars of years ago, and somehow concluding that history is going to repeat itself, I have to wonder if their neurons are made from spaghetti noodles. It's not anywhere near the same scenario.

    People bought an IBM PC back in the day because it had the name "IBM" stenciled on it. Back then, if you were going to think of a computer you thought IBM. You know, THE computer company. Not some small California outfit with a silly name like Apple, especially since the price tag was a multiple of what IBM's was. Forget the OS. No one had a clue what an OS was, or that an equally small outfit named Microsoft wrote it (or stole it, depending). Ease of use? Some people saw that and went for it, but most went with what their office had.

    So how do you relate that with today's smartphone wars? You can't. If anything it would imply that most folks are going with Apple's phones because that's what they see & hear about most. But the real reason, the real reason, is what happens inside their head when they pick one up and look at it, touch it, and play with it. The usual result is that they sell one.

    Android & iPhone, side by side, same carrier, and iPhone will win the sale an overwhelming majority of the time. Just look at Europe to see this. It's no platform war of the 70's and 80's.

  • Pingback: Profitability of Smartphones Shows Who’s Making the Money | Fused News

  • Steko

    Gruber asks:
    "HTC seems to be making a nice profit from their Android phones. Why isn’t Motorola? I don’t get it."

    I'm guessing Samsung and Motorola sell many more unprofitable dumbphones which dilutes the metric being observed here (profit/phone). Profit/phone = profit/smartphone for Apple, RIM and HTC.

  • Wayzom

    "No dawg. Thanks for playing, but isaying "look at Europe" is pretty funny given that Android just overtook the iPhone WORLDWIDE. Meaning every place where you can't play the dumb "Only on AT&T" card. "

    You are simply not comparing Apples to Equivalent Android phones. There is no market whee full featured smartphones running Android are outselling iPhones on the same carrier. If you want to compare piece of crap free and $20 phones, essentially dumbphones running a smartphone OS.

    Show me one single carrier that sells more phones running Froyo than iOS 4.1 (Assuming both are running on hardware that is supported). You will not fing any…

    • kevin

      Here's some proof that you can look up (as opposed to asserting "selling like hot cakes" which you just made up.)

      US – At its quarterly call, AT&T said it activated 5.2m iPhones last quarter, even though the total number of postpaid subscribers with integrated devices increased by only 3.8m. It's clear no other smartphone of any kind on AT&T comes anywhere close. Verizon continues to heavily advertise its promotion of buy one Droid, get a 2nd phone free (with contract); it's not a myth. The total number of Verizon Wireless subscribers with smartphones increased by approx 2.6m, based on Verizon's reported numbers. T-Mobile USA's CEO just said today the reason they're not growing, and losing postpaid contract customers is iPhone (not Android).

      Japan – As announced today, Galaxy S on the week of its debut on the largest carrier NTT DoCoMo still sold less units than the 4-month old, supply-constrained iPhone (16GB and 32GB capacities) on the third largest carrier Softbank. Softbank only carries one Android phone (and its not outselling iPhone). In terms of subscribers, Softbank has about 40% of that of DoCoMo.

      • Dom

        Geez no wonder you were deleted. Lots of abuse but in the facts column you got nothing – Kevin's just quoted you some data but you're not really interested in the truth are you, little man?

        In fact in Japan, for Android it's worse than he's written. iPhone currently outsells ALL Android phones – not just the one (HTC Desire) on the same carrier. Japan's a major market, one that a couple of years ago – many loudmouths like you were declaring would be a failure for Apple where it has instead been a stunning success with the iPhone handset regularly topping the sales charts against all other handsets – including feature phones.

        So other than Gruber taunts – what else you got?

  • Ricardo

    Seems you're the one "playing". I don't have anything to say to you, but maybe you'd like to look at some numbers from people who know:
    http://www.netmarketshare.com/operating-system-ma

    "Although Android devices are rapidly gaining usage share, iOS has 4.9 times the global usage share of all Android devices."

  • Mindbender

    The thing that everyone seems to forget when comparing the Windows vs. Mac platform battle to the current mobile situation is that MS actually charged for the Windows OS– Google does not charge for Android. It's a very different business model and therefore a false comparison. This might eventually work out very well for Google, but for now, they're not really making any money off the Android platform. This is obviously not the case with Apple where they are making billions by bundling iOS with highly profitable hardware.

    • Dave

      True. It's one thing to give away stuff for free. If you have to sell that's a different story. That's also why I see some tuff times ahead of Microsoft. They came late. Charge for something Google gives away for free etc.
      But never forget, that since the OS is free they also can't make money with it. I've read that Google pays over 200 Mio a year to keep Google the standard choise on iOS. That about the same amount they claimed to make from mobile (meaning Android?). All in all in the longterm, I think it's best for all manufactures to come up with own Android/iOS clones. Then they will at least benefit from Search advertising, Map service sponsorship etc. Right now it's basically, you get what you pay for. Since Android is free don't expect to earn anything from Google. They will happily earn all the benefits from the internals of the OS. In the long-term I doubt the manufactures would like to give those benefits and profits of an in-house OS away.

  • Dave

    1. You're right.
    2. I know that Android is free as of now. Maybe that will stay that way. But who knows? Most likely they will keep it free. I know Google is in it to keep their Google Search in place. With the iPhone becoming a real weight during the last couple years, I think Google felt like they need to keep up if they want to keep Google on iPhones and of course now on Android.
    3. It doesn't make sense to compare the devices now with the iPhone 4 that is still going to be sold next year's summer, you're correct. But the iPhone 4 will compete with future Android smartphones next summer. And I'm sure, the price won't be going down for Android phones as they win marketshare. HTC/Samsung etc would love to raise their profit margins as well. That's why Apple always keeps the old model for a lower price. I'm just saying it's already a good smartphone capable of almost anything one might need. It's fast, very nice display, the camera is alright too. Of course next version will always have some higher specs but I doubt that most people will benefit that much from it. For 450$ iPhone 4 is a very very solid product IMO.

  • Dave

    Where did you get that information? I would be very thankful, if you could post a some reference. As of now, I can't confirm that Android as a platform did indeed overtake iOS in Europe.

    • No Need For Facts
      • Dave

        Ok… the only thing this article is saying is that there were 2 Mio. more Android OS'es sold than iOS devices. That doesn't mean Android just overtook in total marketshare. It means they had a better growth rate last quarter but there's still some catching up to be done by Google. What are 2 Mio devices when there are about 130 iOS devices out?

      • Dave

        If Google isn't able to provide any serious data about current new activations, then I guess the data provided it completely bulletproof. Even if Android was installed on two times the amount of iPhones… Apple's ecosystem and customers cannot be completely left out by developers. That's the only thing that really matters to Apple/Google. They want to have the best ecosystem around their products. That was the problem with Mac in the early days… it's not so much about market share but about the fact, that most software then ran on Windows and Mac OS simply didn't have enough software. We've now passed the point, where developers can afford to ignore iOS. As it currently looks, most software will be made for iOS and Android in future. That's the end for market share as a measure. Apple is and will still be earning higher profits from their mobile handsets business and iOS devices than any single of the Android manufacturer. Again it's not like Apple will be going out of business anytime soon. The thing is Apple can still go down with their prices and go for market share. NO SINGLE Android manufacturer can replicate that. They are earning the absolute minimum profit in this market.

      • Dave

        Summery: iPhone competitors are already going for market share with super low profit margins. Apple ASP is now even higher than when it entered the market in 2007. Apple and the rest of Android-club have totally different strategies in place. Apple is currently not out for market share. With the iPad that's a different story, hence the 500 USD launch price. By the time competitors are entering the market early next year, Apple will another sweet present for them, when they slash the current model's price to 350-400 USD. Good luck trying to compete with that! Here Apple clearly goes for market share first in order to get their ecosystem developed. Once this is done, we will see some enhancements like Retina display update, more RAM, A5 processor more storage that will justify them going after profit again with higher prices.

  • Valeb

    @Joe_Winfield_IL Apple is not more profitable than Microsoft.

    • http://twitter.com/lllull @lllull

      Not yet, but soon, VERY soon. Q2 2011?

  • gerwitz

    I have to disagree with you, Mr. Doe.

    I've worked with a majority of these players regarding their product development strategies in the last two years and the distinction between vertically integrated design-build and assembler/integrator is as good as any for competitive analysis. There are other dimensions, of course, but this one is considered valid and taken seriously.

  • Chris

    Android is not "open-source" in the way that you imply. A community of non-Google programmers is *not* contributing to the Android OS itself. Google has complete, closed control over the OS that it delivers.

    Mozilla = open-source. Android = not open-source.

    • Dave

      True. Open-Sourse and really "open" means to me, that the community can decide to drop Google Maps or Google Search in favor of an other supplier, just because the community or Android users would prefer Bing over Google. But in that Google keeps Android very closed or at least Google branded.

      I'm also not sure, if developers could simply take Android and take on development if Google were to slow down in future. I'm not sure Google would take their code and move from there. So in the end it's a nightmake for the end user. Most people won't be looking out for private builds on forums.

  • swift2

    @Valeb This past quarter, Apple had more revenues that Microsoft. Being a hardware manufacturer, they didn't have as high margins on the iPhone as Microsoft took out of Windows 7 and the Office suite. Microsoft's profits on their hardware division were miniscule.

  • dave

    so apple/rim/htc are the big winners here.

    modular/not modular. if you cant make good hardware it doesnt matter what the software is.

    if you can make good hardware and your software is terrible. it doesnt matter either.

  • Niilo

    Great post. Quite mind-blowing.

    How did you estimate the smartphone profits for those that don't report it? e.g. Nokia?

    Also; what would you do if you were MOT or SEMC? How do they beat Anssi's Urine Trap?

    My thought: They ride the Android wave until Google's feature innovation slows it a bit. Then they start to differentiate again by forking and making their own versions (also customized versions for MNOs), ramping their software competence back-up as they do so…

    What do you think?

    • asymco

      To estimate Nokia's smartphone profits, it's a matter of taking the ASP which is known, the volume which is known and using the operating margin for the division with a slight increase.

      • http://twitter.com/Niilolainen @Niilolainen

        Hmmmm. Difficult to estimate the fudge factor on the operating margin I think. GMs in Symbian should be bigger than S40, but R&D and SG&A will be higher for Symbian, given the enormous size of the org.

        Still; bravo for trying!

    • asymco

      If I were MOT or SEMC I'd develop my own OS. Either fork Android or build using LiMO. Focus on the UX and use HTML5 for the apps. This seems like such a no-brainer I am going to be surprised if they don't do it.

      • http://twitter.com/Niilolainen @Niilolainen

        Bad news for Google. Fragmentation a-go-go. Dynamics of Android market might ultimately start to look a lot like the dumbphone market; different Android forks at each major OEM, plus a layer of operator confusion on top of this.

        Still, I'd rather have a Droid 2 than an N8!

  • Dave

    You're statement has been wrong… I guess that is why it got deleted.

    • kevin

      Then provide some real data.

      Just continuously invoking "Gruber" in every post gets you no brownie points here.

    • Dave

      There's nothing wrong about liking Apple. It's not like they're stealing money out of people's pockets. Your statement was that Android overtook Apple, which is not true. 1. I doubt these statistics are very trustworthy. 2. It's just one quarter date… if you look at the whole picture Android is still behind. 3. Market share is just one measure. Apple doesn't go after marketshare. They do fine with Macs earning more profit than any other single hardware manufacturer having about 8% market share.

    • asymco

      For clarification, comments showing lack of civility are deleted. See: http://www.asymco.com/what-we-do/rules/

  • Yeeeech!

    Perhaps my browser is not showing some CSS properly, but what I'm seeing is a bunch of unrelated content that is in columns but not 'walled off' to differentiate between the nav links, ads, and actual content. What a design mess.

    I'm using Safari 5.0.2 on 10.6.4.

  • allgood2

    Any idea why Motorola's profits are so small compared to HTC? The comparison is cost per phone right? Does HTC have a slightly more integrated/less modular approach than Samsung and Motorola. It seems that they are uniquely in the position to actually make money off their phones without requiring excessive volume of sales.

    • kevin

      Based on Motorola's last quarterly report, it sold 9.1m units, but only 3.8m were smartphones. Their ASP was about $220 last quarter (rising from $124 in 3Q09). Plus they still have to spend on SGA expenses, including R&D, and have fewer sales to spread that over. Those could be some of the reasons.

      HTC sold 6.8m units last quarter, all smartphones, with ASP around $350.

    • D.Z.

      Based on asymco's charts for smartphones you can see that:
      in Q3 2011, HTC sales are 3 billion $, Motorola sales are 2 billion $, HTC profit is 0.4 billion $, Motorola profit is 0.2 billion $. So the both manufactures do have ~ 10% profit rate. Absolute values of HTC profit is bigger just because HTC spent more money to generate this profit.

  • Hamranhansenhansen

    > Isn’t it obvious by now that this is
    > shaping up just as the Mac vs
    > windows so far?

    No, it’s not.

    The key to Windows was the leveraging and illegal maintenance of monopolies, from IBM to Microsoft/Intel. For the Mac/Windows analogy to be pertinent, iPhone would have had to have shipped into a market where a “DOS” phone had 90% of the entire handset market and a lot of must-have apps on a dozen handset vendors, including the biggest (analogous to IBM), who also had a monopoly on business purchasing. The phone market is very different, much bigger, more mature, and consumer-focused, not business-focused. The killer apps on phones are also open standards: GSM calls, W3C Web, MPEG-4 audio video, which is very unlike the PC era.

    Windows Phone 7 or Android 2.2 is not Windows 3.0, it is not being installed onto 90% of existing devices. Android 2.2 is not even being installed onto the majority of Android devices. The generic part of the PC market was the majority but in phones it is a minority. There was no monopoly to kill off all the integrated devices.

    If iOS was alone against one other generic system, that might be similar, but it is not. Nokia and RIM were not crushed by a monopoly that then became generic.

    The one similarity we may see is Windows Phone 7 may do to Android on phones what Windows NT did to Linux on the desktop and netbooks. The generic phone market may mimic the generic PC market. But the integrated PC market was Apple alone for so long (and a Pepsi-run Apple for much of that) that there are few analogies to draw to today’s phone market where the majority of phones and vast majority of profits are integrated devices.

    A key thing also is that PC users of the 1980′s and early 1990′s were businesses and nerds. Phones are a consumer device, plain and simple. Apple was alone in pushing the consumer PC (and still is), but is far from alone in pushing the consumer phone.

  • mortjac

    You've just confirmed my doubt about the profit for Android vs iPhone. It was a shock to see it graphically. Great information!

  • berult

    Every single smart phone vendor, including Apple, pays a disguised private tax to Google. Low grade, low cost Advertising ubiquity levies a universal tax on mobile, as it does on desktop. And with the added benefit of slipping under the radar, witness the charts above.

    It does look good for ios compared to Android. But for weighing Google's comparative fate, one has to look at it through Apple's prism. The better Apples does, the better Google does, for the creed here is to feed on Apple's and other's fortune.  

    For Google, the principle is simple and so easy to implement that it startles the mind that few people really get it.

    Grow the smart phone global pie as much as you can, tease Apple to do the same, and Microsoft, and RIM, and the rest of them, and kill them with advertising easy profit and revenues. Aïkido the ebullience of the smart phone market, and subvert its dynamism towards your corporate goals of invading and controlling your hosts. Freebies galore for sneaky vectors. This is a development model that Nature has a patent on, so kudos to Google for not having to pay licensing fees on Nature's meme.

    What geeks did with Software at MSFT, geeks "plus" do at Google with advertising: make every damn stakeholder pay a Google tax, money wise and degraded user experience wise, on their very own success, and systemically breed a "geekdom" monopoly. I know Apple gets it but have their hands tied up by Google's "close to the vest" game with Governmental overseeing Agencies.

    As MSFT once controlled the software part of mainstream computing, and made a money printing press out of its practices, Google has its sight on streaming the bulk of advertising mind share to its global monopolistic scheme. A quite "natural" endeavor to prey on your competitor's hosting capacity, especially while the defense mechanisms are neutralized by a third "not so neutral" party.

    I guess iPhoned has a point here.

  • Alexkhan2000

    I've pondered Google's Android business model and their overall mobile strategy for a while myself. What Google is doing is nothing at all like what Apple or even Microsoft does. Google doesn't "own" a product in the classic sense. In fact, Google can be viewed more as a "services" company and that is really how they make their money: selling ads. It's all about owning the "free" Internet space (pages that people view) on which they can sell their ads. From a business model viewpoint, Google is closer to real estate companies than a "classic" technology company like Apple or Microsoft.

    Apple's market share gain (phones or the iOS) isn't necessarily Google's loss. In fact, with Google being the default search engine on the iOS and the Mac, Google gains more search revenues with every iOS sale/activation. Google has no hardware and no monolithic software packages that they sell. Their "stuff" only exists on a virtual space and the more they get people viewing the pages that they own (Gmail, Google Maps, YouTube, Flickr, etc.), the more ads they can sell to whoever that wants to sell their stuff to those people.

    So why does Google feel the need to have their own mobile OS and ecosystem? One word: control. Why cede that control to Microsoft and/or Apple? Apple was an ally in their initial combined attack on Microsoft's Windows Mobile and their agenda to make sure that Microsoft doesn't dominate the mobile space like MS does in the PC world, but Google also came to see that Apple could turn out to be a long-term threat with their growing walled-garden ecosystem. If unchecked, Apple could potentially lock out Google from Apple's gated community unless they paid a fee to Apple. Again, this can be viewed more like real estate land grab or TV advertising minutes on the very best prime time shows or the Super Bowl.

    It's funny that even the most diehard Android fanboys and Apple haters fail to understand Google's business model. It really isn't about offering the best phone experience or earning any money through the sales of the phones. Google really doesn't care what Samsung, HTC, Motorola or other handset vendors make with the sales of the Android phones or if they're given away on BOGO deals. All Google cares about is that the consumers search with Google with lots of ads that Google rents out. Google wants you spending time on their "land" as long as possible so that they can sell ads to advertisers on that real estate property.

    Yes, Google feeds on Apple's fortune but Google also feeds on phone vendors barely breaking even or even losing money selling Android phones. Google's mantra is: "Just get the phones out there anyway you can and as fast as you can. We just want to sell the ads." Google has no sympathy for LG that has been losing money or Motorola that is barely breaking even. And of course Microsoft understands what Google is doing. That's why they paid Verizon some big bucks to have Bing the *only* default search engine on some Android phones. My guess at Google's response: just a shrug…

    Apple's war with Google is multi-pronged and not as direct as it may seem. Google doesn't *need* to win the platform battle as long as they can make sure that they control Internet real estate. Still, Google would much prefer the platform/ecosystem control than leaving that up to Apple, Microsoft, Nokia, RIM, HP/Palm, etc. This is why the iOS vs. Android battle cannot be properly compared to the Windows vs. Mac war of the past. It simply isn't the same thing – at all…

    Google worries a lot more about Facebook (and other similar web-based upstarts) than either Apple or Microsoft because Facebook controls the space that hundreds of millions of people spend a lot of their time on. Apple and Microsoft aren't the companies that can kill Google although Microsoft has to give it an earnest try since Google's horizontal and stretched-web business model is something that directly threatens Microsoft's monolithic vertical software business model.

    As for Apple, all Apple can do is to continue expanding their walled-garden to its base of users while convincing more to join this "closed" and integrated system that offers end-to-end experience from the feel of the hardware and the aesthetic industrial design that is pleasing to the eyes to the ease of use of its OS platform and an ecosystem that provides rich content, apps and services with both greater breadth and depth than what the competition can offer.

    My assessment is that there is enough room for all and that there will be no single dominant player – at least not in the Windows-in-the-PC-world paradigm. Android, by its very nature, won't appeal to a large segment of the population. But that doesn't mean Google won't be able to continue its dominance of the web real estate and grow their core ad-selling business.

    • http://www.trnsfrmr.com Fijai Cairo

      But how much more money is out there to buy ads? As more people use google, isn't there a risk of declining revenues per user?
      Surely as web advertising real-estate doubles, there is no guarantee that advertising budgets can or will stretch to fit.

      • Alexkhan2000

        I'm not an expert on the ad industry but I believe it's quite substantial. I couldn't give you the numbers but I think I'll start doing some research on that. It is no coincidence that Apple is putting a lot of focus on iAds and opening an office in New York to focus on the ad industry. As various media industries (music, TV, publishing, movies, apps, etc.) converge on the Internet and mobile platforms, selling ads becomes a huge opportunity that Apple cannot ignore.

        And let's not forget that this is not just about the US but the rest of the world. Let's remember that the US only represents 5% of the world's population and the remainder (especially China and India which combine to make up more than a third of the world's population) are poised for continued economic growth with a growing middle class with purchasing power that will increase at an exponential rate.

        Wealth is shifting to Asia and unbridled consumerism is sweeping across the continent like a raging uncontrolled wildfire. Drive across the urban landscape of Asia and all you see are ads and more ads. Why does Google want music services and TV? Why did Apple feel compelled to add social networking to iTunes? Big or small, *every* business across the world has to advertise somehow to reach customers.

        Let's say you're traveling to an out-of-state town or a country in eastern Europe or somewhere in southeast Asia. It's early evening and you'd like to find a decent local restaurant. Virtually every restaurant is paying to advertise their eatery so that you'll come in. More likely than not, you'll be doing a search on Google to find some restaurant that you'd like to walk into with the minimum of hassles or waste of time.

      • dchu220

        Google makes the bulk of their money on search where the revenues are not dependent on the number of users, but the value of the 'keyword.'.

        Display advertising accounts for a small percentage of google's profits. Like Youtube or iTunes, there is little profit to be made, but google uses it to make their search advertising more attractive since it provides advertisers a one stop shop to buy online ads. It also provides with a scale that competitors can't match.

    • Dave

      Agreed. And I think it's as simple as you wrote it. Google wants the masses. Apple wants to deliver the best experience. Google tries to offer all Apple is reluctant to support. Both OSes are substantially different. The iPod is the best selling MP3 player in history due to the quality of the product. Apple tries to do the same with the iPhone. Difference Google doesn't care much about the iPod. It's not even interesting to them since they can see ways of putting ads on it.

      Google: Ads is the major income. OS is only there to ensure ad spaces are there.
      Apple: Build Quality products and make them better over time. They want people to buy the next version even if you have the current. Google doesn't care here, as long as you have their OS anyway. iAds is there to get some of Googles ad money since that's what their after. Apple is saying. We can have your cake without sharing ours.

  • Pingback: Study suggests Android handset makers will suffer the fate of PC makers | UmeedainTimes.com

  • kevin

    Thought I'd point you all to another sign of the angst in the Android world: HTC is planning to open their own app store for "e-books and magazines, as well as applications." Don't know if it's for it's Android phones, or both Android and WP7. See Financial Times article – http://www.ft.com/cms/s/2/7a16b2fe-ea92-11df-b28d

    Key quotes:
    "These moves highlight increasing pressure on device manufacturers to differentiate themselves through content and internet services, as competition heats up in the fast-growing smartphone sector, particularly among Google Android-based devices." Note Samsung passed HTC in number of smartphones and number of Android-based smartphones sold last quarter.

    "Peter Chou, chief executive of HTC, … said that it was no longer enough for HTC to simply customise the standard Android user interface with its own “skin”: “It is not enough to be skin-deep. We need to go bone-deep.”" Whatever that means specifically, it clearly points to more Android fragmentation, and so it continues…

  • Pingback: Study suggests Android handset makers will suffer the fate of PC makers | Richard Hartley