January 2011
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Month January 2011

iTunes has paid over $2 billion to app developers and $12 billion to record labels

The last analysis of the iTunes content store showed amazing acceleration in download rates. Since we know something about the pricing of apps in aggregate, we can make some guesses about the income from apps for both Apple and suppliers.

The key assumptions are:

  1. Average selling price per app $0.29 (as reported in June 2010 here).
  2. Price per song $.99 increasing to $1.05 over time
  3. Music gross margin 10%
  4. App gross margin 30%

The first chart shows the accumulated payments made to suppliers of content to the iTunes store over time.

More than 60 apps have been downloaded for every iOS device sold

The iTunes App Store is about to reach 10 billion downloads. That makes this a good time to revisit app growth metrics and compare them with the other digital media store that we have data for: the iTunes Music Store.

First, the download totals as time series[1]:

What Google can learn from John Sculley: How technology companies fail by placing their strategy burden on technology decisions

And so we come to the question of Chrome and H.264. First off, it should be clear that video codecs are infrastructural technology[1]. They are commodity algorithms which are generally invisible to users. They are ubiquitous and are “shared” in the sense that they are available for licensing often without much in terms of cost.

So they don’t really offer strategic advantage to the adopter. Some may end up adding slightly more to a cost structure than others, but not in a way that determines strategy.

Flash on the other hand is not infrastructural. It is not shared, it is not invisible to users, it is a brand, it has a significant business model and market value. It is sustaining to Adobe.

So the argument I’ve heard against Google’s decision is that they are using an infrastructural technology decision (a new video codec) to placate or sustain Adobe Flash, at the expense of Apple, a potential or perceived rival.

If this was the plan, it would be a strategic mistake.

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.

Big in Denmark: iPhone captures 36% of phone market value

Thanks for Rob Marsh for forwarding the following snapshot of data from Denmark:

Salget af smartphones eksploderer i Danmark.

According to GfK data in Denmark, during the first quarter of 2010 29% of phones sold were smartphones. In the second quarter, the share grew to 37%. In the third quarter, 51% of units and 71% of sales value was captured by smartphones.

Looking at September alone, Apple’s share of the smartphone market was 34%. In terms of value share, 51% of all the dollars that consumers spent for smartphones, was spent on the iPhone.

In other words,

Remembering January 14, 2008: The day the market lost faith in Apple

In a recent but recurring lament I asked why Apple shareholders are not being rewarded for the company’s growth. I pointed out that there is no fundamental reason why the company should receive such a low P/E multiple (about 18 ex-cash trailing and 10x forward while maintaining 70% earnings growth for over a year).

There were many objections in the comments. Most of them dealt with recent reasons why doubts might have arisen among investors: Android hegemony or some perceived lack of competitiveness leading to margin compression or some macro hangover from the recession.

In this article I argue that none of these objections hold water. My argument hinges on the fact that there is a precise date when Apple ceased being seen as an exceptionally valuable company and that date precedes any of the causes being suggested.

The day of disillusionment was almost exactly three years ago: January 14th, 2008.

Verizon back at bat: Revisiting the last inning

A month ago I wrote an exposé on the problems I felt Verizon was facing with their smartphone strategy: Verizon Strikes Out in Smartphones [Updated]

Given new information on subscriber growth and the relationship between Verizon and Apple, it’s time to look back and assess how the conclusions are standing up.

The conclusions I drew were that Verizon had 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

Did iPhone really hurt Verizon?

For every AT&T Android user there are 15 iPhone users: What will be the ratio at Verizon?

The following chart uses comScore data to show the relative consumption of Android vs. iOS by the subscribers of the four major US operators. I modified an original chart published by Silicon Alley Insider.

A few observations:

Knowing me, knowing you

Among the current (~1800) followers of Asymco on Twitter, about 1000 have published “Bios”. In the interest of me getting to know you (and you one-another), here is a list of the most common words present in reader bios:

Who killed the Intel microprocessor?

The recently announced move by Microsoft to support the ARM architecture with their Windows product, indicates something profound is happening in the market for microprocessors.

Dr. Hermann Hauser puts in bluntly:

“The reason why ARM is going to kill the microprocessor is not because Intel will not eventually produce an Atom [Intel’s low-power microprocessor] that might be as good as an ARM, but because Intel has the wrong business model,” said Dr. Hauser. “People in the mobile phone architecture do not buy microprocessors. So if you sell microprocessors you have the wrong model. They license them. So it’s not Intel vs. ARM, it is Intel vs. every single semiconductor company in the world.”

via Intel Microprocessor Business ‘Doomed,’ Claims ARM Co-Founder – Tech Europe – WSJ.

To make sense of that you have to step back and look at what’s been happening in microprocessors and how mobile computing is affecting the whole processor value chain.