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Verizon Strikes Out in Smartphones [Updated]

[Updated]

[ITG sent an explanation of their methodology and there is no indication that the data represents inside information.]

ITG Investment Research analyst Matthew Goodman is forecasting monthly sales record for all of Verizon’s devices “based largely on our proprietary daily point-of-sale data from thousands of independent wireless retailers across the US.”

Assuming the data is accurate, we are going to dive into it but I will state up-front that without confirmation, the conclusions below should be taken with a grain of salt. All statements should be read with a preceding “if the data is accurate…”

So, if the data is accurate, here is what I conclude [1]:

Verizon Has three strikes against them:

  1. The iPhone has stolen their growth
  2. They are facing the prospect of a single OS platform supplier
  3. Android is not competitive vs. iOS

The iPhone has stolen Verizon’s growth

The chart below shows the performance of all of Verizon’s smartphones vs. the iPhone at AT&T. The area chart shows how Verizon’s volumes grew from 2.7 million in Q1 to 3.3 million in Q3. Not a bad story in itself. However, the iPhone at AT&T went from 2.7 million to 5.3 million in the same time frame. Relative to just the iPhone, Verizon has been underperforming over the last quarter.

Those additional 2.4 million iPhone/AT&T activations in Q3 could be due to replacements but the same could be said for Verizon’s volumes. The fact remains that iPhone alone is nearly twice the volume of all of Verizon’s smartphone activations.

Just to be clear, this is a direct, apples-to-apples comparison. AT&T and Verizon smartphone performance figures are highly comparable. The two operators are highly representative of the US market. AT&T and Verizon Wireless raked in 75% of all mobile data revenue in Q2 of 2010 and account for 62% of the U.S. wireless customer base.

In addition, Verizon enjoys a larger customer base (has 92.1 million subs vs. AT&T’s 90.1 million.)  Over the time frame of the data the overall market did not increase dramatically therefore the conclusion that AT&T’s win is Verizon’s loss is plausible.

I used quarterly data so that iPhone at AT&T could be compared. But if we look at monthly data, the story gets worse:

These are absolute volume figures. You can see how RIM’s fade was replaced to some degree by new vendors. However, growth hit a wall in August. Following widespread iPhone 4 availability, sales dropped. Coincidence? Perhaps, but the drop happened even with the addition of Samsung volumes.

That’s strike one.

Verizon is facing diminished degrees of strategic freedom

The other notable is that even though Verizon doubled the number of vendors selling smartphones, it seems they are growing their smartphone base slower than the overall market.

Consider each vendor’s share is shown below:

From three vendors to six. Shares are roughly evenly split (except for Palm) but none of these vendors are able to drive volume growth.

Consider that Motorola Droid is outselling RIM. This should be rightly noted as amazing. It plainly shows the power of Android. However that power is not something Verizon will benefit from. Quite the opposite.

Consider the share map by units and share of each OS:

Android (and WM, though that’s likely to be a very tiny part of the green area) made up 75% of all smartphones sold in October. It’s possible that the share could grow to 90% as RIM continues to fade.

For Verizon this would be a serious problem. Although Verizon used to have a disproportionate share of RIM’s products, that OS was not enabling an ecosystem like Google’s. It was a product narrowly defined around messaging. Verizon is facing the prospect of a single OS supplier who may or may not maintain alignment with Verizon’s core profit algorithm. If they diverge, Verizon’s bargaining power will be strictly limited.

Strike two against Verizon.

Android is barely enough to keep the battle with AT&T from becoming a rout.

In an apples-to-apples comparison, in Q3 the iPhone at AT&T outsold Android at Verizon (remember, same addressable market) by a factor of 2.5. This is with a variety of devices and vendors thrown in the market. We hardly ever get to see this finely grained a comparison when looking at platforms.

I wrote this up as a lack of competitiveness. It may seem provocative, but I define competitiveness narrowly: the competition is for a purchase decision on equal terms. These purchase decisions are fiendishly complex to predict, but the data speaks: whether it’s due to brand, visibility or performance and in spite of “antennagate” the iPhone is cleaning up.

That’s strike three.

The devil they know

By 2009, Verizon was probably optimistic that they could head off AT&T (and Apple) at the pass. With the vast array of vendor Android roadmaps laid out in front of them they saw a way to stem the flood of defections. I think that optimism dissipated sometime this year and was replaced by a more dreadful prospect than what iPhone presented in 2007.

It is perhaps coincidental that the rumors of a Verizon deal with Apple seem to have started in earnest right after August. It’s thin, circumstantial evidence, but the only evidence we have to corroborate the data above is that Verizon has been signaling more desperation.

Reading further into the data, I would say Verizon faced these problems and decided that they had to throw in the towel. Apple may be the devil, but so could be Google. Apple was predictably evil. But Google? The devil you know is perhaps better than the one you can’t predict.

What’s more, the devil Apple seems to be helping your worst enemy way too much and the unpredictable one does not seem to help all that much.

Final question: how many iPhones will Verizon sell

I think this data shows that Verizon has another reason to sell the iPhone. The underperformance of their smartphone franchise is not the only determinant, but it is perhaps another straw on the camel’s back.

What would happen if (or more likely when) Verizon sells the iPhone? I believe they will sell them at the same rate as AT&T does.

The data shows that Verizon sold, on average, about 3 million smartphones per quarter during the first nine months. That’s about 1 million a month. That was based on three platforms, six vendors and widespread promotion.

The iPhone sold almost 4 million a quarter over the same time period.

Verizon users bought smartphones at a lower rate than AT&T users bought iPhones. This is even though the two carriers have approximately the same subs base which churns very slowly. Since a mass-market product will appeal equally to statistically equivalent populations the product should be taken-up with similar vigor.

So the question is not whether Verizon can sell iPhones at the rate of 4 million a quarter. The question is only whether these 4 million will be in addition to the 3 million that are currently buying non-iPhones.

My guess is that the 3 million run rate for non-iPhones will drop, but not to zero.

The impact on the other vendors supplying Verizon may be strongly negative depending on the level of promotion Verizon puts on the product. That promotion budget is usually fixed as a percent of sales. What Verizon applies to iPhone will be taken out of what is spends on Droid. I have always said that operators will be motivated to balance their supplier power. The promotion budget is the primary instrument to meet that end.

On the other hand, the overall market will grow so 2010’s 3 million/Q will be 2011’s 6 million/Q. There is plenty of room for multiple platforms.

So my conclusion remains that iPhone will find at least 8 million new users with Verizon. The analysis above give me confidence to increase the upper bound to possibly 12 million.

Verizon striking out means they need to change the way they play. The iPhone is a new ball game.

——

[1] To assemble this discussion I used only the data provided in the article linked above and the officially published iPhone activation numbers from AT&T. Obtaining specific smartphone vendor volumes is a matter of reverse engineering the share chart and cross-referencing it to the table of vendor sales.

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

    Interesting analysis of Verizon and one worth paying attention too. My gut tells me things aren't quite that bad. Iphone coming to verizon early in 2011 will necessitate a complete rework of the numbers by the end of next year, as well as a complete reassessment of how well vz is doing in smart phones. Most surprising here is the disaster that rim has experienced at Verizon in 2010. The iphone at vz surely will seal it's fate in the US. Of course, there is always Thailand and Indonesia.

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

    "…if the data is accurate…"
    CDMA weakness: can't multitask a cell call and data.
    So, all those CDMA iPhones are gonna need a way to get data from somewhere. Hhmmm…if Apple only had a data center! If only Apple had a simple way for all those new subs to pay for that data, like thru iTunes. You know, like the way all those 3G iPad users do, straight from the device!
    If only Apple knew how to innovate!

    • ChriS

      How would a data-center located in a network overcome the limitation of managing a simultaneous voice & data connection between the device and the network?

    • Marc in Chicago

      Your information is out of date. CDMA is now technically capable of simultaneous voice and data, and Verizon is rumored to be in the process of implementing this new protocol.

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

        I'd rather not rely on a rumored reworking of vzn's DNA, thank you very much…

      • Adam

        You're a little confused. Apple can't just magically get data to the phone from their data center. Data comes over the air from towers that Verizon owns. Apple would have to build their own towers to do what you are suggesting, and that's not going to happen. 3G iPad users get their data over AT&T's towers — nothing to do with the data center.

        This whole data center thing is way over-hyped anyway. It's just necessary supporting infrastructure that Apple is building out for their services. This data center will likely play just a minor supporting role in any future Apple disruptions. People latch on to it because it is a large, physical thing that pops up in the media all the time. It fills the Apple news vacuum.

        All this aside, I can't agree more with Horace's implied assessment of the threat to Android in the US from the rumored spring Verizon iPhone. It's going to be an interesting 2011.

      • Dmccoy

        SO tommy4490.. how many multi-billion companies do you run smartguy?

  • Narayanan

    … Explosive leak and analysis on top. I am going to slow read as soon as I get to my iPad.

    As a followup, this probably means all those Android activations are mostly from Chinese variants.

    • asymco

      I am starting to believe that if Android is going to be disruptive it will be with ZTE and Huawei et. al. Not with the top tier vendors.

      • r00tabega

        Really wonder how much stickiness those Android sales have… if anything, Apple's acquisition of market share in the recent years result in unparalleled loyalty, meaning they often don't give up ground once they take it.

        Is the same true with Google/Android?

  • dms

    Horace, do you have any data on avg service revenue per iphone user vs Android user?

    I'm wondering if Verizon can offset some of the volume losses by getting higher revenue per Android phone and any kick-backs from the hardware vendors.

    I'm also thinking the per phone subsidy AT&T pays for iPhones is higher than what Verizon pays for Android phones. Finally, network maintenance costs is substantially less for Verizon than AT&T, I'm guessing. Or is this insignificant.

    Of course, stock prices are what drives executive decisions these days. And nothing moves stock prices like new users added.

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

      per phone subsidy AT&T is definitely paying a lot higher on the iPhone. Just check out the ASP data also available on this site – iPhone ASP is $600, while Motorola smartphones are around $300, and we know the retail price to consumers are the same at $199, so Verizon is pocketing that $300 difference

    • asymco

      The cost/benefit for Verizon should include a discussion of ARPU and subsidies, but I think in the end, iPhone customers are more profitable than average smartphone customers and smartphone customers are more profitable than non-smartphone customers. What any operators should seek to capture today is as many smartphone users. Verizon's challenge seems to be that they are not getting their "fair share".

      • ChriS

        Hm, not sure if iPhone customers are generally more profitable than avg. SP-customers.
        If we isolate ARPU + subsidies from other profit-factors, Android apparently doesn't look that bad in US, looking at the web-traffic it is generating according to Royal Pingdom
        (http://royal.pingdom.com/2010/11/30/mobile-os-usage-splits-the-world-chart/, shows traffic-share of ALL iPhones vs. ALL Android devices…)

        Sure, the total traffic is still lower than the iPhone, and traffic cannot be converted directly into profit, but even when taking this just as a indicator,
        adding required subsidies and the different level of "billing freedom" for the operator on top of that, profitability might end up quite even between the 2 platforms.

        The gap in Europe is much more dramatic it seems…

      • kizedek

        Android web usage data might not "look that bad" in some comparisons in some specific countries….
        BUT, does this data include the direct connections to the web that iOS users are frequently making via specialized apps? Or, is the data for using a mobile web browser only?

        I know I "surf" through iOS a lot less than I used to. I now spend a considerable amount of my online time using specialized apps: fb, twitter, springpad, evernote, flipboard, invoicing and project management and other web services for free-lancers, file storage, news channel and media apps, networked games, etc.

        Can Android really claim the same types and same amount of internet use by any stretch? I am sure Android users are making some use of Google Maps and Google Docs, Pandora, etc. But I can't imagine that the use of specialized internet services on the web is anywhere close to iOS use.

        Go to a site like Appvita.com. This surveys and reviews a load of great web apps / services. I would love to see someone compile data for these: how many of these services offer an iOS app? (vs. Android apps); What are their usage statistics by OS? Services like these provide practical, real-world functions.

        In some discussions, "Cloud computing" has been placed in opposition to "web browsing" and some even say it is "killing" the web. I think it is just a new and deeper expression of "being connected". It's like window shopping (browsing) versus going into the store, talking to a sales person and handling the merchandise.

  • Priit

    There's something I don't understand in Android sales numbers. Andy Rubin says, they activate (what that means I don't know) 300K phones per day, it is around 9 million per month. Verizon, arguably the biggest Android seller in the world, only sells if I understand correctly 750K per month. So who and where sells those 8,25 million phones?

    • asymco

      Good question. The answer seems to be in Asia and with vendors that are not in the top five today. I should mention here that with Microsoft's Windows Mobile there were hundreds of Asian licensees making small numbers of devices. In that case however HTC still ran with 80% of the volume. Perhaps we will never know because not even Google knows and no analyst is able to track the sell-through data in all the asian markets.

    • Stiick

      How about The Rest of the World? You know, that place outside of the U. S. of A's borders?

      • joeYYY

        Good point, but this is still an analysis of Verizon that is a US carrier.

      • maddoguk69

        I don't see how you acknowledging Stiick's point somehow gets away from the flaw in Priit's original question, where the discrepancy between the sales figures of one US-based carrier and the global activation figures from a platform vendor is seen as some kind of mystery…?

        I'm actually surprised Horace thought it was a "good question".

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

        Stiick, you took the words right out of my mouth.

  • Sid Knowles

    Something doesn't add up for me. Andy Rubin says that Android is activating 300,000 devices a day. I also seem to recall that the majority of Android phones are in the US(this is probably where I am wrong, and if so please correct me).
    Horace in your graphs above, monthly Android sales on Verizon are only 1 million. 300,000 devices a day adds up to more than 1 million per month – even if some are outside the US.

    • asymco

      I answered above, and I would add that Verizon and the US are a tiny part of a global market. Consider what Verizon's 90 million is as a percent of the global 4.6 billion phones in use: less than 2%.

    • dms

      Doesn't AT&T, Sprint, and T-Mobile also sell Android?

      And yes, ROW is probably the bigger chunk of Android. But in China at least, these "activations" don't mean much, since the Android phones there don't use Google services.

      • sha

        Explain to me how Google detect activations if there's no Google services then…

  • Sid Knowles

    @Pritt
    Sorry I didn't see your post just before mine, where you asked the same question.

  • billy

    It will be interesting to see the effect the iPhone at Verizon will have on Motorola, with Motorola basically being propped up as a business by Verizon. Without the full support of Verizon, and the iPhone stealing Droid sales, I can see Motorola dropping back into the red fairly sharpish.

  • Mark Newton

    It was in early August when we reached broad acceptance that iPhone was indeed coming to Verizon (AT&T’s 10Q filing around 6 August suggesting AT&T was preparing investors for its iPhone exclusivity to come to an end; Gruber's 11 August revelation that Apple's N92 project was a CDMA iPhone, etc).

    Perhaps the simultaneous, across the board fall-off in Verizon smartphone sales simply reflects Verizon customers holding off for release if iPhone in Q1?

  • timnash

    From the Quarterly reports, nearly every quarter since iPhone launched, AT&T has attracted more net new postpaid customers than Verizon and the size of the Verizon-Sprint-CDMA market has decreased. This backs up the numbers Horace discusses above.

    I suspect that Verizon users simply want the best phone they can have on their calling plan. Currently that is Android but if Verizon's iPhone charges are competitive with AT&T, Android will have serious competition for the first time and no longer be protected by the CDMA walled garden.

    Any Verizon iPhone agreement should not affect the ASP for reasons discussed in http://lowendmac.com/nash/10tn/no-verizon-iphone….

  • Rob Scott

    Amazing!

    Yesterday we were celebrating/mourning the death of the Blackberry OS at Verizon at the hands of Android and today you are shocking us about how bad Android is actually doing at Verizon vs. iPhone on AT&T!

    And in both exercises, the conclusions seem valid. Blackberry is dying at the hands of Android and Android is not saving Verizon. What a week.

    I sure hope that Google is going to release an update on their activations and break them down by region. This is the biggest indictment on their 300K activation claims. Because if the activations are in some poor developing countries like China, India, Brazil, etc., then they do not carry the same disruptive weight/force as the iPhone. It also changes all the developer assumptions as to which platform to prioritize between Android and iOS. Does this explain the relative weak sales from the Android Market?

    There are quarterly numbers that have been published that show that Android in the US has overtaken both the iPhone and Blackberry OS. How do you reconcile those numbers, because they seem to contradict these numbers and thus your conclusions in this article, I know that you have a disclaimer.

    I’m wowed, by both the fact that there has been a “leak” and two by how amazing your analysis is. No one saw this coming, not yesterday anyway.

    The ball is with Andy Rubin now. Need to check my twitter stream.

    • asymco

      Don't forget that the Android overtaking iPhone (not iOS) was in Q2, before the iPhone 4 launched. With Android on all US networks, it was entirely possible. It may still be possible today but that does not disprove the overall situation faced by Verizon. The world may obsess over Android vs. iPhone but if you're an operator manager you have to make your numbers.

      I don't make a claim against Android's growth potential or its run rate. What the data may be showing is that in a head-to-head battle, the operator without iPhone cannot compensate with Android against the operator with the iPhone. In all the countries where the iPhone is a de-facto exclusive, the operators who carry it are smaller than the largest non-iPhone carriers (e.g. China, Japan). The US is the only country where we can do this specific comparison between two similar giants.

      The operators have similar coverage, similar pricing and similar products. The exclusive iPhone operator sells a huge number of iPhones and those iPhones are an overwhelming proportion of the portfolio. The excluded iPhone operator sells fewer smartphones than their counterpart regardless of OS/Vendor mix. That's what we're witnessing.

      • timnash

        'In all the countries where the iPhone is a de-facto exclusive, the operators who carry it are smaller than the largest non-iPhone carriers'

        In Spain, Telefonica still has its exclusive and is the largest carrier. This exclusive should soon end though.

        If China Mobile converts the majority of its 600 million subscribers to Android phones, the numbers will dwarf iPhone while doing little for Google as Baidu and local apps will be installed.

        The largest current constraint in the Android-iPhone battle seems to be iPhone production. While the iPhone sells out, it is difficult to have a good idea of what the eventual balance will be.

      • El Aura

        In Germany, the iPhone was exclusive from November 2007 for three years to T-Mobile which is of similar size to its next rival Vodafone (with E-Plus and O2 being smaller). Naturally, an unlocked iPhone was able to operate on all four carriers all along which blurs the comparison a bit.

    • Iphoned

      This data does’t prove that Android is doing badly on Verizon vs ATt. It just proves that Android is doing equally well on all carriers, thus giving none the relative advantage. It could also idicate that Android on ATt is doing just as well in the presence of iPhone as without it.

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

        Assuming the data is accurate, it's not about Android doing badly. It just shows that even the largest carrier with Android cannot come close to the sales of an equivalent carrier with the iPhone.

      • largefooted

        While the iPhone and Android are competitors, its wrong to assume that they are going after all the same consumers.

        iPhones are targeted at the top of the market for people who just want things to work.

        Android is targeted at the top of the market for power users, and bottom of the market "smart" feature phones (such as the Backflip).

        Android's real growth will hit when the sub $100 chipsets start coming through and we will probably see a lot more Backflip like phones with either a more limited Android Market, or a Carrier-based Market. Thats not really the competition for the iPhone.

        I like Android as a high end OS, but I'm not sure thats where its heart is.

  • gctwnl

    Has a feel of doom about it (for RIM, this together with the other story about gobbling up the late adopters), but it is still "if the data is accurate". Let's not forget that at this stage.

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  • http://notesark.com Iphoned

    I suppose this shows that you can prove any point of view with statistics.

    So Android outselling iPhone 2 to 1, but Verizon is “striking out”. Well, to me it indicates that Android is selling equally well on all carriers including ATt.

    And of course, Verizon is at a disadvantage since every carrier has Android, but only ATt has IPhone.

    • asymco

      What does Android outselling iPhone have to do with Verizon? If Verizon can't match the growth of its competitors and if it loses the most lucrative customers to AT&T, global Android performance does not help.

      This data just became available. I did not select a subset of data to prove a preferred point of view. I used all the data available. I looked at it from all angles and there are no other conclusion I can draw. If you can spin it into another point of view, your analysis is welcome.

      You conclude that Android is selling equally well on all carriers. I would love to have proof of that. I don't have any idea what Android is doing on any other carrier.

      What I do know is that AT&T announced 8 million "integrated" devices were sold in Q3 of which 5.3 million were iPhones.

      • http://www.notesark.com iphoned

        I am merely putting a different interpretation on same data, as the article seems to convey the implression that Android is somehow a hidden failure, because it didn't help Verizon vs competitors.

        The fact that Verizon is ostensibly not "benefiting" from Android in a "relative" way, is easily explained by the fact that ALL carriers carry Android phone. So Android can be wildly successful as it apparently is and it still wouldn't help Verizon match the growth of its competitors, because they all offer same wildly successful phones (just by different brand names).

        It doesn't take deep analysis to conclude that iPhone accounts for ATT's relative success in smartphones as iPhone is the only top-selling smartphone exclusive to ATT. Wasn't that obvious all along?

      • LB51

        THis is about VZ, not Android.

      • Rick

        Yeah, but clearly the point of the author was that Android is not helping Verizon. It's not helping Verizon that much because Android phones are available on other networks, too. Plus, this shouldn't be a big worry for Verizon anyway. Verizon will soon get iPhone, and a LOT of those AT&T iPhone users will switch to Verizon. So it's all fine.

      • airmanchairman

        "Verizon will soon get iPhone, and a LOT of those AT&T iPhone users will switch to Verizon. So it's all fine."

        Surely you mean it WILL be all fine. And what does that analysis say about the present situation?

      • maddoguk69

        @iphoned
        I believe you've just put forward what is known as a "strawman argument" and are exhibiting traits commonly associated with a "fanboi".

        Nowhere in the whole of Horace's article did he make, or attempt to make, the argument that Android is a "failure". Hidden or otherwise. He was drawing a conclusion, based on empirical data, within the clearly defined parameters of comparing sales between AT&T and Verizon, and what those sales figures might mean for the latter.

        This is currently one of the few places I can come to on the 'net and not be subjected to ludicrous logical fallacies dressed up as knowledgeable points of view or well-reasoned discussion.
        Please don't spoil it for the rest of us.

      • largefooted

        Doesn't this data also show that Android is saving Verizon as with BBerry not figuring out how to move forward and WebOS stalling, without Android, Verizon would be up the creek without a paddle.

        I agree that Android is not attractive to the mass market the way the iPhone is yet, and that Verizon needs the iPhone more than Apple needs Verizon. Ironically, this probably makes Apple more willing to make a Verizon iPhone because they can better leverage their position with both Verizon and AT&T if they both need Apple for the foreseeable future.

        This is sort of like Apple's relationship with IBM and Motorola on PPC chips, only in reverse.

        Apple just can't let Android or WinMo play Intel.

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

      There is no contradiction.

      All carriers in the world combined, Android can outsell iPhone. (Although I do not know of this 2:1 number you are talking about).

      But Verizon, the king of Android, is not even matching its closest competitor with iPhone. Carriers combined doesn't help Verizon.

  • Michael K Pate

    So Verizon is striking out because AT&T has an exclusive on the iPhone? But what happens when Verizon has it, too. As someone who just switched from AT&T to Verizon, I couldn't be more pleased.

    And I switched from a iPhone 3G to a Droid X. Two years ago, Apple was the clear-cut favorite. Now, to me, they are essentially even. In two years, I expect Android to have a solid lead and these numbers to be an interesting footnote.

    • asymco

      Apple was never a clear-cut favorite. In fact, it's been clear-cut loser from day 1: http://www.asymco.com/2010/03/10/getting-misty-ey

      • davel

        that is a nice piece. but most of those analysts did not/do not get apple. they do not grasp the holistic approach of the company to its markets. it does not square with their by the numbers spreadsheets and bullet point charts.

  • okeydokey

    RIM is toast

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  • kaveman

    A good analysis; however, I do not agree with the assessment that the Verizon is losing strategic freedom with a single OS supplier. It is true that Google is setting the strategic direction of the Android OS, but Verizon has commercial dealings with the 4 key Android phone OEMs and has and will continue to tweak the Android phones with its "vision" of services & apps. Verizon still has a significant leverage in leveraging the underlying Android ecosystem and add value-add services as it sees fit.

    • asymco

      The problem is the same that AT&T has. As iPhone became too much of their portfolio AT&T turned to Microsoft (and Google). The issue is not just pricing power but with platforms it's about ownership of strategy and customers. Android promises to be open source, but there are limits when Google cares enough. Why did Google have stop ship control over Droid?

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  • davel

    I am shocked that apple is selling almost 2:1 iphone vs. android in usa.

    i have been reading all year about the market share pickup of the google platform. i guess they get their wins in latin america/asia/africa?

    i luv your 3 points about verizon. it seems a slam dunk that apple goes to vz in 1q 2011.

    yes. i know i read your big disclaimer. but if true. wow!

    great piece.

    • asymco

      That's not quite right. AT&T is selling more iPhones than Verizon is selling Android phones. The data above does not say anything about any of the other operators. All together they could easily outsell the iPhone.

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

      that's not what was said. there was no attempt to estimate andorid sales on any carrier other than verizon in this analysis. you need to add android sales at T, Sprint, Tmo,US Cellular, Metropcs, and others to your numbers before claiming iphone is outselling android 2:1. My own sense is the Android juggernaut continues to roll on and take share as the price point for Android continues to drop here and abroad.

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

        He didn't need to say that.

        He wasn't examining total Android sales vs. iPhone. He was examining Verizon's sales, and Verizon is the flagship of Android carriers in the US. For that, you only need Verizon's data.

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

        his numbers are wrong.

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

        They are not his numbers. They are ITG's numbers. Do you believe the methodology is inherently spurious or deceitful?

      • asymco

        They may be, but for you to know that you must also know something we don't. So what is it you know? Do you know the actual numbers or do you have proof that these numbers can't be right?

        I'll do a sensitivity analysis for these numbers vs. the fragments of data we are given by Gartner and IDC re. the US market. I should warn however that the thing that attracted me to this data set was the precision (one operator, monthly, by vendor and share of smartphones). No other analyst I'm aware of shares this level of granularity with the public. Therefore the chances are we will have to multiply more assumptions together to find what other analysts *might* estimate the same figures to be.

  • jmmx

    The latest rumor is that V will announce vPhone right after Christmas AND it will be 4G:
    http://macdailynews.com/index.php/weblog/comments

  • Rob Scott

    ITG's response and clarification is most welcome. It however changes nothing as there was a disclaimer from the beginning.

    This however highlights the problem with the lack of actual data regarding Android. Discussions are mainly informed by what these analysts or research firms publish. So those who criticize this piece because the data might be inaccurate are being hypocritical as they readily accepts data that boost Android (including this data when it was first published as a Blackberry vs. Android analysis).

    The 300K claim from Google needs to be broken down by region even city. If we can breakdown data by suburb in our network Google should be able to break down the data at list by city.

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  • Brian

    Android is the best stand-in for iPhone. But it's only a stand-in. Verizon iPhone sales will set new records. The main thing helping Android sales is that some people have no service via AT&T. Many of them have already settled for the 2nd best–Android. But many others are waiting for Verizon to finally get it's act together.

    VZ could have pulled WAY ahead of AT&T had they any foresight at all, since Apple went to VZ first and VZ took a very very expensive pass on the iPhone.

    I wonder if VZ will get a real iPad–one that works without a separate hotspot device.

    My guess is that Apple is only willing to roll out to VZ since they are finally ramping up an 4G network. If true, there will only be an announcement in January, and it will be Spring or nearly so before the actual iPhone 4G or whatever it will be called, ships.

    • lb51

      Does APPL need VZ?

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  • Jbelkin

    Googles activations are closer to 200,000 and not 300,000 – that exec got a little excited – the written pr says 200k … But the bottom line is that android is a bargain hunters is DEFAULT choice – when they want a smartphone and choose android by default over RIM … just look – every android phoneis .01 or bogo free after 2 weeks – the IPhone is never discounted for the ENTIRELIFEOF THE PHONE – unheard of! That is cream of the audience.

  • Garard Smitch

    It's very clear when everyone has Apple's iPhone the iPhone wins hands down. Android is simply a product of Google thievery but now that they aren't sitting at Apple's boardroom table Google will have to innovate a whole ecosystem and create future products from thin air. This will be very difficult and at one point Google will simply offer enough money to Apple to gain the advertising space, they need to survive, and that Android until now has given away to create advertising space.

    • Guest

      Google thievery? You do know that there are *tons* of Google services (Google Maps, GMail, Voice Search, Google Voice [finally] …) on the iPhone, right? If Google left (or were forced off) the iPhone it would hurt Apple far more than it would hurt Google.

      • asymco

        Not sure about the code pedigree for some of these Google services (Maps was developed by Apple in-house). However, I would suggest following the money. In the case of Google's presence on the iOS (and Safari) platforms, Google pays for the privilege (i.e. they buy distribution). Estimates are over $100 million are spent yearly for presence on Apple's products.

        Sure Apple would be hurt if Google left (they would lose $100 million dollars in rent). But they may be hurt in other ways. On the other hand Google would be hurt by losing distribution. Deals are entered into because both sides see value for themselves. Since that deal got renewed, I'm sure the calculus was rational and Android was not the only consideration.

  • mojo6411

    The analysis seems sound relative to the purpose, comparing AT&T's advantage over Verizon. What I would like respondents to think about is the fact that the iPhone is a phone, Android is an OS, you are therefore comparing Apple to oranges. Another important issue is the fact that Apple does not actually care about the volume of Android OS equipped phones, they are concerned with their product, the one that brings them a huge fortune from purchasers with the expendable income to acquire them and the multitudes of add-ons. Look at their share of the worldwide smart phone market earnings, I believe it's around 47% or 48%. Accuracy requires comparing the iPhone to HTC, Motorola, Samsung and others, individually. When comparing, it's more accurate to say Android versus iOS, which would then lead to the inclusion of iPad and iPod Touch sales.

    • dvdxtreme

      Finally an objective assessment!

  • http://twitter.com/dherb @dherb

    If I look at the ATT filings for the period you have data for here, they claim new subs for iPhone have cut almost in half during this period from about 40% of iPhone sales to about 24%. Even while iPhone sales are up its ability to attract new customers to ATT is falling. This makes me wonder if we aren't seeing more of a general trend of the "superphones" selling into the same customer base who upgrades every 9-12 months while losing momentum as an acquisition tool whether its the Droid or the iPhone.

    • asymco

      The data is fragmentary. Don't forget that the total number of iPhones being sold by AT&T has grown dramatically (about 100% y/y). Of course there will be more replacement sales in later periods. What we don't know still outweighs what we do know about AT&T's iPhone performance.

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

      and obviously Apple is not happy with the status quo of ATT only…

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  • sha

    Just found this link: http://tech.fortune.cnn.com/2010/11/01/canalys-ap

    canalys said 5.1 millions for RIM in Q3. let's assume Verizon is one third of that, that makes 1.7M. This does not match at all with the 800000 units from your chart

    • asymco

      One clarification: these are not my numbers.

      The data from ITG (which I cite above) says there were 909 thousand RIM units sold in Q3. Canalys says there were 5.1 million RIM devices sold in the US. Both are estimates. ITG measures point of sales and extrapolates. Canalys uses different methods. From experience I can tell you that the error rate for Canalys data can be as high as 20%. ITG error is unknown. We don't know if Verizon was 20% or 30% of the US RIM volumes.

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  • http://www.androider.de Jojo

    The theory is interesting and it will be more interesting to see the reality next year. Obviously Verizon should add the iPhone to its line up. But there are questions, that are unanswered to me:

    How big will be the hit to the AT&T iPhone sales when Verizon offers the iPhone? It seems like there are quite a few who had to choose AT&T, but would prefer Verizon.

    You are comparing slow months for the iphone with probably the best months of the year, when the new iPhone was released. Let´s see how they will do in the fourth quarter.

    As you said yourself. This doesn´t tell the whole story about iOS and Android. (But of course a lot about AT&T and Verizon). The Android sales are splitted through all carriers.

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  • Hamranhansenhansen

    Sorry to be off topic, but the WPTouch theme is broken on your site, just like on 90% of the sites that use it. When I turn it off, it shows me the home page, and then comes back on when I choose an article. It should be off by default. Doesn’t it defeat the purpose of having a real Web browser in a phone if you don’t let me see the real website?

  • Steven

    As for Rubin's numbers, remember that a good number of Verizon Android phones are part of 2-for-1 deals, meaning that numbers for 2 activations may actually reflect only one sale. This probably does not account for the entire discrepancy, but it may be a good portion of it.

    It's not surprising that carriers only speak in terms of activations – they don't make any money until deep into that 2-year contract. However, why is it that you never hear Rubin or anyone else from Google trumpeting actual sales? Because it doesn't matter to them, either – every person using Android is another person using Google apps and reading Google ads. Except, of course, for the Android phones on which Verizon has replaced Google with Bing. Talk about the devil you know.

    • famousringo

      From the carrier perspective, 2-for-1 deals are two sales. Two phones, two data contracts. The second phone is just getting a bigger subsidy than the first.

      That being said, obviously the handset manufacturer isn't earning as much revenue on such a deal.

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  • The_Omega_Man

    DID ANYONE ACTUALLY READ THIS VERY IMPORTANT PART OF THE BLOG?
    "Assuming the data is accurate, we are going to dive into it but I will state up-front that without confirmation, the conclusions below should be taken with a grain of salt. All statements should be read with a preceding “if the data is accurate…”javascript: postComment(0);

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  • John Booger

    This is an *extraordinarily* biased analysis.

    AT&T benefits 100% from every bit of Apple advertising, cachet, market presence, Verizon is only one of many carriers that benefit from Android, and right now maybe you would get a Sprint Evo 4G, or a T-mobile G2, or a Samsung Galaxy S at AT&T, and on and on.

    So what if Verizon didn't have Android? Then what? What if every carrier had the iPhone?

    The bit about "single OS" is just extraordinary, as an aside. Recall that Verizon are the ones who are busy replacing Google with Bing, etc.

    You are so drawn into desperately trying to gain the attention of Gruber that you've lost any rational perspective. This is yet another absolutely *horrible* analysis that I've seen on this site.

    • lb51

      Please make your future comments coherent and less about yourself. Try to stay focus and on point. If you disagree, then provide facts, not inscrutable rants of frustration with the author.

    • famousringo

      I'm not sure why you're complaining when you seem to have accepted Horace's main point: That Verizon does not gain as much from an army of Android SKUs as AT&T gains from iPhone exclusivity.

      Why so much anger when you agree?

    • asymco

      Biased is different from “wrong”. Being biased means having a point of view. Being wrong, is well being wrong. We are all biased if we are working with incomplete information, which is always if you're trying to create value from analysis (if you had perfect knowledge, it's not analysis but just reporting of facts.)But semantics aside, the point of the article is to look at the situation from Verizon's point of view. To put you in the shoes of the decision makers there.The headline says: Verizon has struck out. I am suggesting they are at the end of their strategic rope. If the numbers are accurate it looks like Verizon is in trouble and the iPhone would help them a lot.

  • John Booger

    As an aside, your comment base is some of the most fervent, obvious fanboys I've ever seen on any site. The desperation absolutely REEKS.

    • lb51

      This is not an 'aside', you already wrote of your disgust and portrayed yourself quite eloquently.

    • asymco

      Oh, I get it, John Booger is a take on John Gruber.

  • http://www.mollerus.net/tom/blog/ Tom Mollerus

    My question about this data? Where are the monthly charts of AT&T iPhone sales to compare to the monthly charts of Verizon smartphone sales? What does it mean if AT&T is showing the same October drop?

    • lb51

      Again, this is about VZ, not Android, not iOS, not ATT, not the rest of what ever else you need to assuage your obtuse analysis. It's all about VZ, nothing more.

      • Rob Scott

        @lb51

        You are 100% correct. Android is doing great, Android fans must relax. Their OS of choice is doing great in Asia and soon Latin America. The analysis is Android on Verizon vs. iPhone on AT&T, the main focus being that Verizon has not done that well despite going all out with Android. The analysis does not question Android's performance overall but concludes quite correctly that when everything is more or less the same, the iPhone kicks Androids ass,..,hard.

        By the way the iPhone on AT&T competes with all major OSes, Android included, which is why it is amazing how well it is doing. Verizon on the other hand has been almost exclusively (at least since 2009) an Android playing ground with the OS enjoying a big chunk of Verizon's marketing budget.

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  • patrick

    Again about the google / android sales figures of 300.000 activations.
    -Is there anyone following up on that statement ?

    I find it very interesting to understand if they do sell these numbers, or was that a number not so accurat and true ..?
    On top of that important to know how many android devices there are , really. Could give a good picture of the actual situation globally. is it only iPhone's out there perhaps

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  • http://www.cashforiphones.com sell iphone

    A good analysis; however, I do not agree with the assessment that the Verizon is losing strategic freedom with a single OS supplier. It is true that Google is setting the strategic direction of the Android OS, but Verizon has commercial dealings with the 4 key Android phone OEMs and has and will continue to tweak the Android phones with its "vision" of services & apps. Verizon still has a significant leverage in leveraging the underlying Android ecosystem and add value-add services as it sees fit.

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