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The biggest loser

According to data from comScore, in the past 24 months 50 million Americans became Android phone users. In the same time frame Apple added 24 million iPhone users. As I mentioned in my Asymmetric Competition post, it would be unwise to consider this data in isolation. Consider the following graph showing the net change in users in the US.

Android and iPhone grew mostly at the expense of non-smart users. The BlackBerry lost 8.1 million users and all the others only lost about 4.5 million.

With penetration at 50% it’s still impressive that there is so little “churn” between platforms. In fact, measuring churn as the net platform user loss as a percent of all smartphone users, we get something less than 1% per month.

The smartphone competition is still primarily with non-consumption.

That will change at some point when smartphone penetration (shown below) will begin to saturate. The basis of competition will have to shift from converting non-smart users to converting users of other platforms while maintaining one’s own user base.

The market has not experienced this sort of rivalry on a wide scale. The defections of BlackBerry and Symbian users are relatively rare events.

  • Tatil_S

    What is the +0.1 on top of the top graph?

    • http://www.asymco.com Horace Dediu

      Other.

  • Jay

    I don’t think the available data can tell us anything about defections. It can only tell us the absolute changes over time.

    • famousringo

      Well, the point being made here is that defections aren’t actually very important right now. Why should Google care if Android loses a user to iPhone if that user is replaced by two non-smartphone users?

      As nasty as this market is right now, imagine how cutthroat it will be when the only way to get a new user is to seize it from a competitor.

      • Tatil_S

        It depends on whether the customers are deemed valuable enough to fight for by one or more of the competitors. At this point, people who don’t own a smartphone in the US are mostly either too young, too poor, or don’t care about tech or about purchasing apps, music or videos. Cheaper, advertising supported platforms will naturally do better. It also means ecosystems, other than those that lock users into social or communication networks, will not matter as much, so the churn will be much greater. Facebook, Skype and Gmail exist on all platforms, so I don’t see anybody’s ecosystem being a big factor for the remaining non-users at the moment. That nullifies Apple’s big advantages, but it may also lock other manufacturers into low margin sales, just like PCs. If Apple retains most of the top, despite having little of the bottom market, sort of like Macs, but with greater overall share, it should declare victory and concentrate on emerging markets.

        I am not sure where that leaves MS though. It is difficult for MS to compete with free and its ecosystem is not as strong as Apple. Its biggest leverages are Xbox integration and familiarity through Win-8 tablets if they ever take off.

      • KirkBurgess

        In the US, the high cost of smartphone ownership is based on the extra monthly payment needed for a data contract – which is needed by even the cheapest android smartphone. Therefore the race to the bottom isn’t going to happen, apple can easily keep its current sales share of 50% +

      • KirkBurgess

        In the US, the high cost of smartphone ownership is based on the extra monthly payment needed for a data contract – which is needed by even the cheapest android smartphone. Therefore the race to the bottom isn’t going to happen, apple can easily keep its current sales share of 50% +

      • Tatil_S

        That used to be the case, but Virgin (well basically Sprint), T-Mobile and a couple others are bucking that trend by offering unsubsidized phones with substantially lower monthly plans. I am planning on taking VM on that offer next year, even though I would not save that much money over 2 years due to my corporate subsidy on the monthly fees.

      • HelloSalty

        “As nasty as this market is right now, imagine how cutthroat it will be when the only way to get a new user is to seize it from a competitor.”

        When that time comes, when even the dumbest phones on the market are all running white-box Android or whatever, the game will be to displace traditional PCs and servers. That will indeed be quite cutthroat.

    • Nine Yarder

      Eventually this will come down to a price war. Apple can afford to cut margins and to gain market share. Google will watch from the sidelines unless they pay out subsidies.

      • Tatil_S

        Google’s target is $10 per year income from each Android handset and it is not there yet.. How much subsidy can it afford to pay?

      • KirkBurgess

        The carriers aren’t interested in lowering the price of monthly contracts, so the hidden subsidy cost will remain high. The only price war can be from manufacturers competing with each other for Verizon’s/At&Ts business – the end user won’t see the effect of lower prices so no use launching a price war for them (there are plenty of free smartphones already available on US carriers).

      • Stefan Popescu

        Watch the upcoming bold move from Apple when it comes to aggressive pricing.
        Tim Cook was saying something along these lines: We learned that our customers don’t want the cheaper version of the best product, they want the best product. In this context – and knowing the huge undergoing manufacturing capacity expansion – I see this translated as: Instead of offering several Iphone models from $0 to $649 will will offer only one or two at a much lower price.That price will probably be so low that switching from any non-smart phone to an Iphone will be a no brainer…

  • Glimmerman

    Seems there is significant competition within Andriod that doesn’t show up on these graphs. HTC just posted a significant loss attributed to smartphone competition.

    • http://www.asymco.com Horace Dediu

      HTC did not post a loss. They posted a reduction in profits. HTC along with the other minor Android vendors are finding it difficult to get a piece of the growth in the market. They are stuck with unit sales below 10 million units/quarter. This is mostly due to a lack of reach, visibility, and brand value. The products themselves are not bad, and may be even better than the market leader’s.

      • oases

        Any chance you’ll do a post or podcast on the reach, visibility and brand value of the phone makers? I think this could make a great hive experiment. Get your readers to record what’s going on in their respective countries vis-à-vis reach, visibility, brand value and chart it with sales etc. (you’d have to ask specific questions). But any kind of scuttlebutt is good when latticed on top of analytical data.

  • Canucker

    This is perhaps why the telcos are trying to re-assert their weight. They are all about churn and have seen this story play out several times before as they jostled for customers. They’ve also lost some of their retention tools with number portability and lack of control over phones themselves. Apple likely loves the Sprint deal as it is the only one (in the US) that penalizes the telco for pushing other phones over the iPhone. Not so much the others who are just interested in keeping their customers no matter what – they have every reason to reduce their costs by pushing the lowest cost devices (to them). They are also likely less worried about an Android monopoly as it would still be comprised of multiple OEMs (a case of a benefit from OS version fragmentation too).

  • http://profiles.google.com/npatricksmith Nathan Smith

    The first chart is entirely confusing (not to mention unneeded). Why not just stick with a bar chart? Better yet, a table?

    • KirkBurgess

      Seems to tell the story best for me – great chart.

    • suddy

      I second this

    • http://www.asymco.com Horace Dediu

      The way to think about this presentation of the data is to imagine what the graph would look like if the competition was in the form of rivalry between two platforms.

      • http://profiles.google.com/npatricksmith Nathan Smith

        Yes, I see that. You are grouping iPhone and Android (winners). But this is confusing because of your color selection, and lack of a consistent vertical axis. I would use only two colors — one for the winners, one for the losers (perhaps with slight variation to separate vendors). You have to be careful with color. BTW, you don’t even need color if your chart isn’t stacked.
        Anyway, I seem to be the only one that doesn’t like your presentation today ;) .See you next time. Cheers.

      • http://www.asymco.com Horace Dediu

        What is inconsistent about the vertical axis? Isn’t the point of a stack that you can see symmetry (above and below zero). Adding a horizontal dimension forces a comparison in two dimensions which is additional complexity. Regarding colors, perhaps the point is to see that Android is more effective vs. non-consumption than the iPhone.

      • Frank Vaughn

        It will be interesting to see how much iPhone5 reverses or reduces the Android momentum. I’m already betting on Apple, and wish I could more easily bet the Android (Samsung) growth.

  • Relentlessfocus

    Steve Jobs described exactly this situation to Walt Mussberger at one of the D conferences (can’t remember which). He described two phases for iPhone vs Android competition, the first being the scramble to gain share in an open ended market in which both coukd be successful followed by a (I remember him using these words) zero sum game.

  • http://twitter.com/echotoall echotoall

    When saturated, the churn rate between platforms will be interesting. The ‘moat’ theory of the platform will really be put to the test. (seems about 3-5 yrs away)

  • JT

    Was just listening to Ep 45 Management vs Leadership. Just one thing regarding rebooting of platforms. Just one thing I was remembering even before the iPod, Apple killed the Apple 2 & 3 platform with the Lisa & Mac at the peak of the Apple 2.

  • http://twitter.com/m4rkusr Markus Ramstedt

    Worth noting that Samsung, Motorola (and LG) also had a significant share of the US featurephone business. For Samsung converting existing users from featurephones to smartphones a pricepoint and an operator at a time (likely at a pace requested by AT&T, TMO, VZW and Sprint) might just be business as usual and the use of Android mainly opportunistic. The competition is asymmetric if power switches from operators to device vendors or from device vendors to OS vendors, like in the case of Apple. For Samsung, I would argue that this is not the case.

  • frankcapra03

    Here is how I think of it, There are 1.6 Billion hand sets sold per year, as emerging markets develop 2B handsets per year is likely in the next 5 years. Worse case scenario Apple captures 30% market share and sells 600MM Iphones per year even at lower ASP of $500 still = $300B in annual revenue from the Iphone hardware franchise per year. By then stock will be $1,200+ and I will be on a beach retired fanning myself off with $100 bills, while you guys argue about who is “winning” the platform war! :)

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  • senter

    “The smartphone competition is still primarily with non-consumption.” Isn’t this like saying that an olympic runner is primarily competing with spectators? Isn’t an olympic runner primarily competing with the other runners in the Olympiad? A non-consumer may eventually compete with other consumers to perhaps buy a product on the market, but can not possibly compete with the manufacturer of that product.

    • JaneDoe12

      “The smartphone competition is still primarily with non-consumption.” This means that the manufacturers are competing for new customers among the non-smartphone users. This will continue until the market is saturated, and then they’ll try to lure away their competitors’ customers while trying to keep their own. Up until now, the manufacturers haven’t competed this way on a wide scale.

      • senter

        The explanation makes sense, thank you for making it clear: the smartphone competition is still primarily for new customers.

  • AndrewNZ

    In terms of desertion by Blackberry users, I’m in Indonesia at the moment, and Jakarta would still seem to be a stronghold for the technology, if not RIM itself as many of the devices used are cheap knock-offs. However the Whatsapp SMS app does seem to be persuading some to switch away from Blackberry. However they seem to be switching to Android rather than iOS, with price the main issue.

  • Mathias Anderson

    What data set(s) from comScore is the US phone install base chart based on? Any chance you could provide a link to it?

    • http://www.asymco.com Horace Dediu

      It’s the combination of mobiLens press releases

      Sent from my iPad

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  • Brickwall

    “The smartphone competition is still primarily with non-consumption.” — Makes my head hurt. Author should learn to better express his thoughts.

    • http://www.asymco.com Horace Dediu

      Indeed, as my primary competition is with non-comprehension. Additional competitors are: Apathy, Pedantry, Philistinism and Dilettantism.