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Is Android more efficient than iOS at generating search revenue?

Thanks to David Chu for forwarding the data that made this possible and reader Narajanan for spotting the divergence in platform efficiency.

iOS and Android are both growing rapidly. According to Gartner, during the first three quarters of 2010, about 44 million iOS devices and 36 million Android devices were put into use. That’s 80 million devices. An amazing achievement for two platforms that did not exist 3 years earlier.

But obviously not all devices are used the same way. Devices which have unused capabilities limit network effects for a platform and for the category of product in general. Question is: how can we measure the “smartness” of a device; how much more likely is a device to be used as a mobile computer vs. being a regular phone?

The best proxy I can think of is a measurement of browsing use. The smarter the device, the more browsing is a joy and the more it is actually done. Browsing leads to more data load on the network and creates a virtuous circle of revenues for the mobile computing value chain.

If we could measure the increase in browsing generated by each additional phone, we could compare whether one platform is better (specifically, more efficient) at generating value asymmetric to voice.

Fortunately we have data from Netmarketshare.com (see sources below) which attempts to track browser consumption and hence allows us to measure this variable. What we need to pair that with is the incremental increase in the installed base of devices.

In the chart below I plotted how much browsing share increased for every phone sold by platform over the first three quarters of 2010.

The arrows indicate the sequence in time from Q1 to Q3. The vertical axis shows gain in share three months after the corresponding number of units shipped in the previous quarter on the horizontal axis. So, for example, the second circle means that in the second quarter approximately 10 million new Android devices created a gain of about 9% in browsing share. In the same quarter, 14.8 million iOS devices created about 37% gain in browsing share.

In the third quarter approximately the same number of iOS and Android devices shipped (iOS  including iPads and iPod touch) but the browser gain was 20% for iOS vs. 9% for Android.

A line drawn diagonally from lower left to upper right (0,0 to 30m,40%) could represent the average gain in share per units sold–the sort of measure we’re looking for.

Measuring that slope tells us that, on average, every million devices sold should generate a gain of 0.75% share[1]. I took the additional step of labeling two quadrants which are orthogonal to the expected trend. If browsing increases dramatically faster than 0.75%/million units then I call those devices sold as creating “highly efficient” browsing gain. If browsing increase lags dramatically below 0.75%/million units then those devices added share with “low efficiency”.

So four data points follow the trendline down the middle of the chart, however, there are two notable outliers. Finding the causes for these outliers gives clues to what’s happening with the platforms.

I believe the explanation for iOS’s second quarter’s extraordinary efficiency is that was the quarter when the iPad launched. It seems to have yielded a very strong spike and the trajectory of iOS improved even into the next quarter as those iPads continued to be in use. iPad seems to be a very effective way to gain browser share.

I also believe that the cause for Android’s fall in efficiency in the third quarter was that it began to be sold in large quantities in the developing world. The third quarter saw a rapid acceleration of sales without a proportional increase in what was measured as sales in the US (and Europe).

Interpretation

If this trend continues, and there is no guarantee that it will, then a question could be raised about Android’s value to, of all people, Google.

The core value of Android to Google is the increased use of browsing and hence search. All the other Google services and in-app ads are tiny opportunities in comparison to the potential of search on mobiles. One could argue that the raison d’être for Android since day one was to create browsing consumption. In that regard it’s not as good at doing that as iOS is.

Perhaps Google can justify the under-performance of consumption of browsing (and hence search) on Android devices as benign since there is no marginal cost added to supplying Android to non-consuming devices.

But I wonder. There is the problem of opportunity cost: Those iOS devices that create more browsing activity are going to take more share. The more they do that the more Google will have to pay Apple for placement as the default search in mobile Safari.

It may be a stretch, and perhaps the data is wrong, but that’s what this exercise is all about: how much can we learn from fragmentary data? Without a hypothesis there is no discovery.

—–

Notes:

  1. Since these platforms have very low shares (less than 2% for iOS and 0.3% for Android by November) almost all the gains can be assumed to be against other browsers (e.g. Internet Explorer) and not against each other.
  2. Update: the original Unit estimates excluded iPad and iPod touch which have since been added.

Sources:

  • Ottawaman

    Very interesting. How do search apps figure into the data? If I do a search using a WikiApp on the iPhone, does that show up as an iOS browser search?

    Thanks for a great blog.

    • Horace the Grump

      Good question… browser share is a pretty crude measure, but is probably the only useable one at the moment… What would be great is the share of data traffic from mobiles hitting search engines, which then tells you how much of the data traffic is search and how much is going to each search provider… But does this data exist?

  • Chris

    Did the subeditor who wrote the heading (suggesting that Android was more efficient at generating search revenue that iOS) actually read the article?

    • asymco

      I'm flattered. Every syllable written and every mouse click to make this site the the work of one person.

    • http://franksting.net.au Gavin Costello

      The Author posits that part of Android's raison-d'etre was to deliver/protect search to Google. You would then imagine that it would deliver more efficient search revenue than competing platforms in the same place.
      The Headline was questioning that logic. It wasn't stating it to be a fact.
      As a trained sub-editor, I can safely say it is a good representation of what is being asked – as well as attracting interest or being "link bait" ;)

  • Horace the Grump

    Intuitively this analysis makes sense, but more work needs to be done on teasing out the data to see whether browser share really does generate search activity for Google, Bing etc etc…

    The problem for Google is that Android is being used by handset manufacturers and networks in a race to the bottom (think netbooks) where the users will be less inclined to add on expensive data contracts (developing countries etc) that access search engines etc…

    However, Google can afford to play a very long game… assuming that pricing of data plans falls in real terms then an increasing % of users of time will upgrade to data plans and more expensive devices and take advantage of mobile search etc… What the shape of that curve would be is a very interesting question…

    Your point about the value of search on iOS devices to Google is a very good point – Apple in theory should be able to siphon off an increasing share of cash from Google as a result…

    So what Google makes on the swings (via Android) it loses on the roundabouts (via iOS)… And it makes perfect sense for Apple to adopt a take no prisoners attitude towards Google in this regard.

    What you illustrate here is that a simple focus on 'market share' between the two platforms is completely meaningless… we have to follow the money to find out what is really going on.

    • Sandeep

      one can use google search on mobile phones without using an expensive data contract. Out here in India, we use GPRS/Edge to browse on mobile phones which is not expensive at all compared to the monthly 3G bill charged by AT&T, Sprint, Verizon. Also in US you have pre-paid carriers like Virgin who are repeatedly pushing down the data rates. Now they have a all you can eat plan for 25 dollars per month(voice+data)

      • Steven Noyes

        Except it is not all you can eat voice. It is limited to 300 minutes and Skype VoIP only works on Verizon with Android in the US.

      • Sandeep

        who needs voice anyhow? I thought its usage was drastically reducing in US ? and the data thing is interesting, it seems even though it is unlimited, some fair-usage policy restrict it to 5GB which should be more than enough. the only catch being you need to buy the phone outright. Virgin prepaid model is a potential 'disruptor' to Verizon and AT&T.

      • Steven Noyes

        You also have very limited choices of low end handsets on Vigin Mobile as well as being on Sprint. Sprint has worse coverage than AT&T. And lots and lots of people still use a phone as a phone. VM is far from disruptive.

      • dchu220

        From Wikipedia:

        "Generally, disruptive innovations were technologically straightforward, consisting of off-the-shelf components put together in a product architecture that was often simpler than prior approaches. They offered less of what customers in established markets wanted and so could rarely be initially employed there. They offered a different package of attributes valued only in emerging markets remote from, and unimportant to, the mainstream."

        So VM could fit the description of a disruptive innovation, but they themselves have to innovate before they can make a move up market. I have experience using their service before and I had problems with double billing and other account problems. These are big problems for any prepaid vendor who needs to keep service costs low. I also got the feeling that their system was a patchwork software systems that had problems communicating with each other.

        So while I think the prepaid model could be disruptive, I doubt VM will be.

      • Steven Noyes

        Exactly. It is not the model but VM. They do not have their own network but sponge off of others (in this case Sprint). Likewise, by the time you add up the price (including subsidies) to similar plans found on Sprint, T-Mobile, Verizon or AT&T, VN is only about $10/month cheaper.

    • http://franksting.net.au Gavin Costello

      I don't think Google loses anything on the "roundabouts" as you say. If Browsing/Search is more efficient on the iOS, and the default search on the iOS is Google, I imagine, Google are making money from Search practiced on iOS

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  • Steven Noyes

    Horace,

    "According to Gartner, during the first three quarters of 2010, 30 million iOS devices and 36 million Android devices were put into use."

    really should read:

    "According to Gartner, during the first three quarters of 2010, 30 million [iPhones] devices and 36 million Android devices were put into use."

    FY1Q12 = 8.75 million iPhones
    FY1Q13 = 8.40 million iPhones
    FY1Q14 = 14.10 million iPhones
    ——————————————-
    Q1-3 = 31.25 million iPhones

    We know that at least 7 million iPads were sold in that period. The iPod Touch is also in there but numbers are not broken out by Apple. I think I remember once (based on WWDC numbers for total iOS devices) it amounted to abou 60-70% of iPhone sales or atout 20 million. This is closer to almost 60 million iOS devices for the first 3 quarters.

    Since Netmarketshare.com groups iOS as being iPhone, iPod Touch and iPad, I think you need to re look at this analysis.

    • asymco

      Thanks for catching that. I corrected the data. The divergence between the two platforms did not change but iOS looks less efficient now.

      • Kizedek

        It does look less efficient. But that goes back to another debate — how much of an iOS user's interaction on the internet is now being done through specialized apps versus directly in the browser? And are these surveys catching all that app time? Is browsing only done in a "browser" by definition — or do connected apps also help to "create a virtuous circle of revenues for the mobile computing value chain"?

        From your article: "The best proxy I can think of is a measurement of browsing use. The smarter the device, the more browsing is a joy and the more it is actually done. Browsing leads to more data load on the network and creates a virtuous circle of revenues for the mobile computing value chain…"

        I would say that using our specialized apps do create value in the chain, whether through in-app purchase transactions, or through in-app ads and referrals as with iAd. In fact, maybe they represent more value because we are less jaded to them. And if we like a free app, maybe we are more inclined to support the developer in some way.

        If these surveys do not reflect usage of internet-connected apps, then I think the iOS platform is more efficient at generating revenue (even search revenue, specifically) than it looks. I realize your title is specifically about "search revenue"; Even so, I think some apps use some Google services within them.

        Therefore, iOS is not only more efficient at generating search revenue for Google than Android is, but it is also far more efficient at generating revenue all around, through all kinds of means, adding value at all levels — to developers, payment processors, retailers, etc. I guess we will find out next week how Apple has been doing with in-app ads.

      • Steven Noyes

        Horace,

        Do you really think only 6 to 7 million iPod Touches were sold in the first 3 quarters? That really seems low to me. Like, lots low; it is at about 25% of iPhone sales.

        The reason I think this is important is that a higher number of iPod Touches (while not used for web browsing as much due to no always connected status), lowers the primis of platforms being effective at generating ad revenu. NOTE: I have not looked at the iPod Touch numbers in about 9 months so 2 to 2.33 million/quater might be right.

      • dchu220

        What method did you use to estimate the sales numbers for the iPod Touch?

        I read a statement from Apple from a year or two ago where they said that iPod Touch sales were at 40% of iPhone sales, but I would expect that number to be lower this year since iPods have not been seeing the rate of growth that the iPhone has.

      • Steven Noyes

        In the last WWDC Apple released the number of iOS devices sold. You had the number of iPhones sold from earnings calls as well as iPads. What was missing was the number of iPod Touches.

        So you had:

        iPod Touches = Total iOS Devices – (iPhones + iPads).

        At the WWDC, iPod Touch sales were about 70% (I think) of iPhone sales. From that, you can also get the mixes of iPod Touches VS other iPods. I have not run the numbers based on current earnings calls for the iPod volumes. Horace might have but the 2-2.33 million/Q sounds low to me.

      • Hamranhansenhansen

        iPod touch is also the most popular iPod since about a year ago. You can look at iPod sales and see that Apple is selling a lot of iPod touch. You can also see them around you all the time.

        Also, iPod touch is "the kid's smartphone" … there are a lot of young people who will take their apps and music and movies and so on right from iPod touch to iPhone in the future.

      • asymco

        I did calculate the total percent of iPods as part of iOS units sold at some point, but that was in total. It's hard to be precise on a quarterly basis. My estimates are probably too low.

  • DavidAFenton

    Headline seems oddly out of sync with the data in the article

    • asymco

      The headline asks a question. The data suggests the answer to the question is "no". I would not say it's out of sync, it's just unconventional, which is not a bad thing.

  • r.d

    This just shows the power of iPad and nothing more.
    wait until you see the iPad numbers for January.
    For dec. it had .52% with growth rate of 33%.
    For January it might be 50% growth rate.
    but then again netmarketshare says that numbers
    are inflated because of holiday season and
    that they will go down.

    Then again whole thing is suppressed because of they
    way netmarketshare messages the number.

  • Sandeep

    I don't think Ipad should be counted as a mobile device just because it has a mobile OS, IPad should be counted as a notebook or as a PC. Mobile devices should be restricted to Iphones, IPod touches and Android phones only. People definitely browse more on IPad since it has a bigger screen and the requirement for apps is limited as browser is a better way to consume content and people buy IPads instead of buying a notebook or netbook. People look on it as netbook or notebook replacement. No wonder the rate of growth of IPad browsing is greater than IPod touch or IPhone.

    • Steven Noyes

      Except the iPad really is a tweener. Not a PC but it is and not a mobile but it is. Gartner and IDC don't include the iPad in either. Mostly because it makes their predictions and models look really really bad.

      As a developer, the iPad represents 50% of my small sales of iOS software. Same software on iPad and iPhone and iPod Touch. Tough call what to call it. From a competitive standpoint, however, it is a purely a mobile product.

    • Hamranhansenhansen

      That's not relevant to the point of the article, which is Google's opportunity on Android versus their opportunity cost on iOS. iPad runs iOS with Google Maps built-in, Gmail apps, and so on.

      Google is missing out on more Web browsing on iOS, period. Doesn't matter why users are doing more (bigger screen, better user interface, etc.) it just matters that they are doing more. Google's role in iOS has diminished since 2007 and will continue to diminish, solely because they are doing Android. Whether that diminished role is on just iPhones are on all iOS devices doesn't matter.

      Besides, we could just as easily argue that we should ignore Android devices that are in areas with Verizon coverage but no AT&T. Comparisons are hard enough without putting your thumb on the scale.

  • Steko
  • Iphoned

    I have a hard time following this analysis, but…

    The best predictor of fure performance is one's past track record. and Google's track record with anything new is miserable. I have this unproven hunch that Android will end up in the same place. Everything about it just smells bad to me.

    • Sandeep

      yeah just like how search, maps, mail, youtube, chrome browser, google earth have failed miserably eh :)

  • Nikolay Andreev

    One has to consider that in general an App pulls less data than a website even though it presents the same information

    iOS users in general have migrated their Internet use largely trough APPs that are generally more efficient than a browser.

    Another examples are paid apps with large video/data content that sell well on iOS but are not available for Android, whose users rely on streaming services like YouTube to get that content.

    I thing that purchased content trough the respective app stores in MB should be added to the traffic mobile devices generate.

  • Steko

    People complaining about the headline are missing the point. You'd expect Google to develop an OS that maximizes browsing.

    But Google has multiple goals here: efficient for browsing yes but they also want to drive prices down. These goals are somewhat in conflict since the browsing lifestyle is less ingrained to people buying cheaper phones. At any rate without Android's competition Steve might have been able to pry another $50-$100 (from carriers or customer or both) for each iPhone and that would mean less browsing too.

    • Jon T

      And above all, Google could not afford to see Microsoft take any meaningful share.

      The big issue for me is that adverts are a pain in the butt on a small screen and I want as few as possible. So for me, paid iPhone Apps are the way to go. And it's much the same on the iPad.

  • dchu220

    The main question that I think is being asked is, "what are people using their Android phones for?" If they are mainly using them as a feature phone, then should they be counted as a smartphone? In my opinion, I would still consider them non-consumers of smart phones.

    Remember, for a long time a lot of mobile phone manufacturers didn't think that internet access was important to customers because the usage data showed that customers weren't using their phones to get on the internet. The truth was that it was too difficult for customers to use their mobile browsers so they weren't using them.

    That's the problem with a lot of these low-end Android phones. They have a poor user experience. It is my theory that they are not being used as smart phones and therefore their numbers should not be counted in comparison to iPhones.

    I look forward to hearing your thoughts.

    • Sandeep

      even on feature phones, browsing the web is increasing. OPera mini is widely used on low powered symbian handsets as they compress the pages before sending it to the user, thus saving on data costs.

      snippets from http://www.opera.com/smw/2010/11/

      "Opera Mini users viewed over 44.6 billion pages in November 2010. Since October, page views have gone up 7.3%. Since November 2009, page views have increased 137.3%."

      "In November 2010, Opera Mini users generated over 677 million MB of data for operators worldwide. Since October, the data consumed went up by 10.0%. Data in Opera Mini is compressed up to 90%. If this data were uncompressed, Opera Mini users would have viewed over 6.3 petabytes of data in October. Since November 2009, data traffic is up 137.6%."

      • dchu220

        The Opera Mini project is very interesting. It's also available on iOS and Android. Is there any data on which platform it is the most popular on?

    • Rhadamanthys

      Just the result of observing mobile device usage in the Paris public transport system:

      I have mostly seen two types of users:

      Those with an iPhone
      Those with something else as a phone + iPod (mini, touch, etc)

      In the later case, a quick glance showed me that the most used feature was text messaging, even where 3G network was available for web browsing.

      • dchu220

        Thanks for the observation.

        Especially about text messaging. That seems to be the preferred method of communication these days.

      • http://franksting.net.au Gavin Costello

        that's certainly what Tomi Ahonen is saying in his piece (http://arseh.at/3en – skip past the self-congratulating first few paragraphs) on how people are using their Mobile Devices – something like 3.5 Billion people sent SMS in 2010

  • Lisa

    It's likely that android-powered tablets will improve it's slope in the above graph significantly in the near future.

    • Hamranhansenhansen

      It is likely that iPad 2 and Verizon/CDMA iPhone will improve the iOS slope also, going forward. What's your point?

  • Jon T

    To coin a phrase:

    Android is the iPhone for the third world.

    • asymco

      Symbian used to be. Why didn't they hold on and why should we believe that Android can?

    • Sandeep

      to rephrase, IPhone is the status symbol of elitists who think they are smart ;)

      PS: I find it highly insulting since I am from a third world country (India) but nevermind, I can take an insult or two in stride :D

      • Kizedek

        Yeah, my 65 year-old mother is an elitist! ;) . She was deathly afraid of computers, and sent about 5 emails total in her whole life. She now has an iPad and an iPhone and she is very happy. I actually see her online now, and using the Fb account my sister set up for her a couple of years ago! :) . My five year-old gets busy training her on modern, personal computing! He's an elitist, too ;) That's the power and appeal of Apple right there ;)

      • Steven Noyes

        In many ways, the above "Android is the smartphone for the third world" is true Sandeep. You value, above all, price as a measure of value. As disposable income increases, however, people really do get to start looking at things outside of raw price/feature as the sole measure of value. These include implementation, form, service, convenience, polish and, yes, image.

        Android, for example, has lots of features but very little polish. All you have to do is look at their near horrid cut/copy/paste implementation to see that. However, there is no arguing that Android has many more raw features than about any other smartphone platform. Its features/price is exceptional. The question is, are those features perceived as added value or added complexity (a liability) to the greater number of people?

        People will always say they "want choice" and that "choice is always good", however, consumer behavior is really different. This is a great TED talk on choice and decisions:
        http://www.ted.com/talks/lang/eng/dan_ariely_asks

        Worth the 17 minutes of your life to watch (as most TED talks are).

      • Hamranhansenhansen

        By "third world" you mean Sprint?

      • asymco

        In the context of disruption theory Jon T is making a compliment. And I would agree with that compliment.

      • http://franksting.net.au Gavin Costello

        Odd that an Indian considers their own country the "third world", especially when it appears to be far outstripping most of the supposed "first world" countries both in growth and innovation in the last couple of decades

    • chano

      Isn't that the direction the US and Europe are headed in the next 50 years?
      Learn Mandarin or Hindi and thrive, perhaps?

    • Esteban

      Only that Android isn't. It isn't selling all this well, at least not here in Brasil, where in my experience, when most people using or talking about getting an smartphone are using/talking about iPhones. Maybe it's because even though it's an expensive device here, it's available in all 4 of the major cellular companies.

  • Alan

    Horace, you state that you labeled two of the quadrants as Low Efficiency and High Efficiency – but it should not be the quadrants just the two sides of the center line. Otherwise you can't have High Efficiency with over 15m units sold and can't have low efficiency with less that that number sold.

    Just a nit, but you might consider drawing in a dotted line and removing the perpendicular axes that make quadrants.

  • poke

    I think Android is a very cynical play by Google. The goal is to stop other companies who might lock Google out as a search/ad provider rather than to make Google money directly. Everything they've done in this space has been aimed at being disruptive to RIM/Apple rather than creating a platform for Google's services. They're worried about proprietary smart phone ecosystems so they're trying to grow an "open" (where "open" in Google terminology means Google can make money there from search/ads) platform without giving much thought to taking advantage of the opportunities available. I think they're reasoning is that as long as no one else dominates the market there's always space for Google services. From observing Google over the years this tends to be how they approach most markets.

    • Hamranhansenhansen

      Yeah, Google is playing 100% defense. They're vandalizing the market with Android. You can see the same kind of play in their dropping of the ISO standard video codec from the Chrome browser and suggestion that users and publishers should use a Google codec instead. Rather than compete, they piss in the pool.

      • dchu220

        Vandalizing is a bit harsh of a word, but I do agree that they are on the defensive.

        They don't want another company to define what this next generation for factor is going to be. Removing H264 will effect mobile device the most since all our video cameras and smart phones use h264 hardware acceleration for play back. On the PC, people can always fall back on Flash.

      • poke

        The most important thing to remember about Google is that their customers are their advertisers and not the people who use their products. Most of their seemingly irrational behaviour can be explained by this. They're rather like the television networks. With the television networks we often see them spend a great deal of time and money to develop a product only to drop it soon after. This is something Google does frequently. We see them develop competing products in a cynical manner often to simply "piss in the pool" as you put it and take the wind out of the sails of a competitor or simply to have anything that competes in the same space as the popular product of a competitor. This is also Google's MO. The networks are always on the defensive because all that matters is the next quarter of advertising revenue and sometimes the best way to ensure that you get it is to simply attack anything that competes for people's attention or anything that might lock you out from being able to advertise in a given space. That's why the networks are so litigious and that's why Google is cynically co-opting open source ideology to suck the value out of markets where it's worried it might be locked out.

  • Walt French

    Based on flimsy and anecdotal evidence, I’ll claim that many more iPhones than Androids sold in 2010 were upgrades that resulted in a 1G or 3G being given to a kid while any Android models that were replaced went into a drawer. That would dramatically and unpredictably shift the basis for your noble effort.

    • Sergio

      Technically that would still increase iOS efficiency – phones in drawers don't browse.

    • Hamranhansenhansen

      The second hand iPhone market is huge. Gazelle is a company that buys second hand gadgets and resells them and their biggest product is iPhone. They actually set up outside of Apple Stores on iPhone 4 launch day to buy people's 3G/3GS as they came out of the Apple Store with a new iPhone 4.

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  • Walt French

    @Sergio, the “iPhone” sale results in two devices generating traffic while the “Android” story merely maintains a similar level— no incremental usage.

    • Sergio

      OK, I was thinking more from a browsing-per-device-lifespan perspective, but strictly on the terms of the graph you are right. And then again, 'inherited' devices might not be used in the same way as the first owner used to (less browsing, perhaps, and more specific apps like facebook or games).

  • http://twitter.com/Faisal_q Faisal

    Jobs Re: Google’s entry into mobile: “We didn’t get into the search business”. Regrets?

  • Henry 3 Dogg

    Android is an advertising display platform whereas iOS is a mobile device OS.

    Generating search revenue is the sole reason for the existence of Android, often to the detriment of the user, because Google’s customer is not the user, it’s the advertiser.

    Generating search revenue is a minor side issue for iOS, and to be done with the minimum of user impact, because the user is the customer.

    Take your pick.

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