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The new switchers

During the last quarterly earnings call, Tim Cook said that Apple has seen the highest switching rate from Android ever. That there is switching isn’t surprising. We’ve seen many surveys which show higher loyalty with iOS than with Android. But it’s been very hard to spot the evidence in the data which is visible publicly. Both iOS and Android are adding users and sales for both platforms are still increasing.

The switching effect is easier to discern when the market is not growing overall. In that situation one platform’s growth has to be at the expense of another. However, some markets do show evidence of “churn” in users.

Screen Shot 2015-08-10 at 8-10-12.52.52 PM

Consider the ComScore data on US platform users (above). If we look at the last six months’ data[1] we can count that there are about 8.2 million more Americans using iPhones than there were six months ago. At the same time, there are 1.6 million Android users. One million users left the BlackBerry platform and about 700,000 left Windows Mobile. The data also suggests that the total number of first-time smartphone users is about 8.3 million.

Now, we could say that Android recruited all the Windows and BlackBerry users that switched (1.6 gained equivalent to 1.7 million lost) and Apple recruited all the new-to-smartphone users (8.2 million gained by Apple vs. 8.3 million non-consumers).

Screen Shot 2015-08-10 at 8-10-12.44.31 PM

But this is not very plausible. It’s much more likely that Apple converts existing smartphone users while Android converts first-time users.

In this scenario, 8 million non-users first started using Android while 1.7 million BlackBerry and Windows users switched to iPhone. But that leaves the question of what happened to the missing 6.3 million that Apple should have gained.

That’s where the switching number comes into the picture. This Scenario 2 is shown in the figure above and suggests that although Android gained 8 million new users, it lost 6.4 million to iPhone for a net gain of 1.6.

Apple may have also lost a few users to Android but overall gained switchers from other platforms, mainly Android. This is what would support Tim Cook’s comments.

Thinking further ahead, as the markets mature globally, they may well evolve into the way the US market evolves today. Apple’s brand promise ensures loyalty while competing platforms slowly “leak” users. If this sounds eerily familiar then you’d be right. This is exactly how the PC market behaves today.

Notes:
  1. these data are actually three month averages []
  • Will

    Apple’s brand promise ensures loyalty while competing platforms slowly “leak” users. If this sounds eerily familiar then you’d be right. This is exactly how the PC market behaves today.

    But the PC market today doesn’t look that great for Mac users, in terms of pure numbers. If anything, it shows that stabilisation will happen to single digit marketshare.

    • rattyuk

      I think you’re missing the fact that the Mac never had significant market share, as opposed to the iPhone. The point being is that generally Apple has the higher end customers and their money.

      • Will

        Yes, I agree. But I don’t think the article says that. It references the PC market as Macs growing and PC eroding. Which is true but it’s also far from the impact implied.

      • ptmmac

        Perhaps you are defining you markets too narrowly to understand the point that the other commenters are making. Look where Apple is trying to gain customers and look at their market share there. Apple has been only competeing in the high end laptop market, the home office pc market, and the digital design market. The only place they have been at all serious about taking market share has been the high end laptop market(even Apple’s desktops use mobile processors and gpu’s). With that limited effort to compete, Apple is still growing market share while the PC market share is either declining slightly or staying even. Even more telling Apple is stripping the cream out of the market place and starving other PC companies of design and development money.

      • Eugene Kim

        I think the impact is even greater. The Mac commands a huge amount of the industry profits, even with small market share. In contrast, the iPhone commands a large market share in addition to overwhelming profit share, and it continues to grow while the competitors leak. If Mac is doing so well in spite of it’s small marketshare, what will the iPhone look like in the long run?

      • Mel Gross

        Actually, the numbers are more interesting than you may think. While Mac marketshare in the USA is 14%, it’s estimated that one out of three consumer computers bought here are Macs. And while that implies that Mac purchases are much lower for government and enterprise, sales there have been starting from a small base, and have been increasing at about 50% per year, the last several years.

      • Will

        Why is everyone talking only US numbers around here? If you consider only Silicon Valley, the numbers are probably 90% macs. You can’t just play with statistics like that.

      • Walt French

        Spoil-sport.

    • Jules Hobbes

      As far as I recall the PC market is shrinking and the Mac market is expanding – at a slow but steady pace. Do you call this stabilization? If this trend is repeated in the smartphone market, than the future of the iPhone is bright.

      • Will

        It is pretty much stable. Macs have been growing for a very long time and not much to show for it. Extrapolate that “steady” growth linearly and see how long it would take to reach at least the iPhone marketshare.

      • Jules Hobbes

        Well, you may also put it like this: growth will continue for a long time before that marketshare is reached. I prefer long, steady growth to explosive growth.

      • Will

        Yes, agreed. But not the point.

      • decline

        Well, you have to combine it with steadily declining sales of Windows computers. Probably don’t be as long as you think.

      • Will

        What are you talking about? Sales are slowing because people don’t buy new computers (and why would they?). It doesn’t mean they stopped using PCs.

      • decline

        Where did you read me saying otherwise? Do you know the definition of market share? Do you think people are using their Windows computers more or less than previously? Do you think that the installed base of Windows computers is increasing or declining?

      • Will

        The death of the PC has been greatly exaggerated. This is nothing more than a rehashed version of “The year of Linux”.

      • decline

        Sure, decline is not death. Little comfort to all the companies going out of business, though.

      • Will

        It’s gonna take a long time of declining from 90% marketshare. One OEM dies, two take it’s place, while Windows itself not going anywhere.

      • Walt French

        Yours is the recipe for zero innovation, zero growth and zero profit (roughly in that sequence).

        The PCs’ #1 challenge is that people who buy them (I got my new laptop a few weeks back, woohoo!) buy them to replace an older model that probably worked almost well enough. Or for a new employee because the old employee had a dog machine. But the jobs done on them are about the same as were done 5 or 10 years ago.

        No new jobs-to-be-done = no new software sales = stagnant specs = competing on razor-thin margins = developers & engineers take their talents elsewhere, where they’ll be better appreciated/compensated.

        This is all very good for a person like myself who wants to code the same type of stuff as a couple of years ago. The financial analyst who has to build the spreadsheets, maybe a bit bigger or with fancier charts. The same, tired PowerPoint presentations. The stuff works better, is more reliable and is cheaper. Yay!

        But the next new function, in any of hundreds of fields, will be on the iPhone or iPad. And the replacement cycle for laptops & desktops will stretch out longer & longer.

        At this stage, you can pretty easily straight-line extrapolate the PC industry. The rate of decline may speed up a bit. Windows machines will stay at their Enterprise cubicles while the consumer market will fade even more sharply.

        Looking at the Mac as a <10% share of PCs will deceive you, because Macs are largely bought for functions that are in dynamic businesses, those that need close synchronization with iPhones & mobile more generally. Those jobs & uses are likely to continue increasingly important, a larger piece of a smaller pie and hence a surprisingly steady increase in share.

        But the share is the end result, not the terms of the market. Macs aren't growing because they're taking away Office jobs; they're growing because they're being used for new ones. Market share will fool you that way, when you mis-identify the market.

      • Will

        But the next new function, in any of hundreds of fields, will be on the iPhone or iPad. And the replacement cycle for laptops & desktops will stretch out longer & longer

        Yet Macs, which by definition are PCs, still sell and iPads plumet…. As I said, the death of the PC has been greatly exaggerated.

        those that need close synchronization with iPhones & mobile more generally

        What synchronisation? You can’t even use the iPhone as an external drive. If your talking about your Evernote and Dropbox syncing with your laptop, all smartphones do that just fine and it has nothing to do with Apple.

        Macs aren’t growing because they’re taking away Office jobs; they’re growing because they’re being used for new ones

        I don’t really get your point. All Macs are new users and all PCs are replacements? Hogwash. Macs aren’t growing THAT fast, they don’t even have double digit marketshare yet. But it’s the “year of Linux” all over again, isn’t it?

      • Mel Gross

        Actually, according to the figures, the usage of PCs has declined. The biggest use for a home computer has been the Internet, and now, the majority browse, and buy, through smartphones and tablets. So yes, the use of PCs has declined.

      • Will

        Yes, people use Facebook on mobile more than on a PC. That doesn’t mean they don’t need a PC.

      • handleym

        The decline in use of PCs does not mean that fewer PCs will be in future homes. (PCs meaning Windows or Mac.)
        PCs are cheap enough and useful enough that people will keep them around for the tasks they are good for. You don’t use your oven everyday, but you do use it occasionally.

      • Mel Gross

        Well, the Mac has been drowning at an average of about 10% per year the past few years. Before the ipad came out, and destroyed the computer industries’s growth overall, it was growing at a 30% rate per year. But with Windows shrinking at about 4% a year, the growth seems more significant.

        I remember that Win 7 was supposed to slow the growth of the Mac, but instead, Mac growth increased. Perhaps the same will happen with Win 10.

      • pk_de_cville

        “Macs have been growing for a very long time and not much to show for it.”

        Over the last 7 years US Mac marketshare has grown from 7% to 13.4%.

        If trends don’t accelerate, Macs will be at 27% mktshare by 2022. If the likely acceleration happens (as the enterprise and governments open to Macs) Macs will reach 27% in 4 years.

        This is not “not much to show”.

      • Will

        In the US. And probably only the US. Worldwide it it went from 5% to 8% in 5 years.

      • pk_de_cville

        “Worldwide it went from 5% to 8% in 5 years.”

        This is not “not much to show”.

      • Will

        It kind of is in terms of users. Windows 8 by itself is bigger that OSX, that should tell you something.

      • pk_de_cville

        Win 8 is losing users, going negative. Win 10 is beginning with upgrade troubles. We’ll talk next year and see if the trends continue.

      • Will

        My quote “that should tell you something” was supposed to tell you that the worst of Windows has more users than all of OSX, that’s the scale of difference between desktop OSs today.

        Subtlety is a lost art I guess

      • pk_de_cville

        Good Night Will.

      • Will

        If trends don’t accelerate, Macs will be at 27% mktshare by 2022

        Your math is wrong. If Macs grew 7% in 7 years and trend remains the same, by 2022 you would have 21%.

      • pk_de_cville

        Called ‘doubling’ in 7 years.

      • Will

        Exponential growth is only happening at small numbers in these markets. The IBM contract alone is a surge of 5% . I don’t think exponential growth is sustainable. Also, I don’t think Mac had exponential growth by definition, learn some Math.

      • pk_de_cville

        Good night Will.

      • jameskatt

        The PC market is shrinking because people have been switching to mobile devices. Of this shrinking PC Market, Macs have grown in market share. It is still a huge market. But certainly Apple has most of the profit.

      • GC

        You seem to be implying that Mac marketshare is only growing in contrast to the shrinking PC market. That is not correct. Apple has, in fact, been selling more Macs. Apple has seen YoY sales growth 43 out of last 48 quarters.

      • pk_de_cville

        Extending your 2015 with a Q4 estimate of 6,000,000, we arrive at a 2015 total near 21,000,000.

        Not bad.

      • Skeptic9

        Can you post a link to that data?

      • GC

        Sure! You can get it, and more, from the same place I did. Apple’s financial statements.

        http://investor.apple.com/sec.cfm?view=all

        HINT: Look through the 10-K Annual and 10-Q Quarterly reports.

      • Jay

        Apple has increased market share over PCs for something like the last 21 out of 22 quarters if I recall correctly…I am sure someone out there will correct this if I am wrong

      • Mel Gross

        About 35 quarters.

    • Angus Matheson

      It is good for Apple, because regardless of share 1. Apples makes money on each device and 2. Even at Mac’s current low share it is being well supported with software. All you need is those two things (which iPhone has even better than Mac) and you are golden. Windows and Blackberry – probably don’t have the first and definitely don’t have the second. Especially with declines like that in an otherwise growing market.

      • Will

        Windows does have the first and the second. Blackberry is all but dead.

      • fl1nty

        #2 isn’t quite so true for Windows or for Macs. The number of net new software applications written for both Macs and Windows has either plateaued or has been dropping steadily for the past 3-5 years. Most new desktop work has been centered around web apps.

        http://appshopper.com/mac/ – 23,893 apps on the mac app store

        http://news.microsoft.com/bythenumbers/index.HTML – 669,000 apps on the Windows phone and windows store combined.
        http://www.windowscentral.com/microsoft-now-has-over-500000-apps-its-windows-phone-and-windows-stores based on this article from nearly a year back the phone store had ~400,000 apps. That means the windows store has ~ 200,000 apps for desktop.

        These numbers pale in comparison to the amount of development happening on the smartphone platforms and on the web side. This direction isn’t likely to change any time soon if ever. The only exception to this is perhaps enterprise apps built specifically to be run on the intranet in companies. These might be built for windows specifically. But chances are higher that even these have moved to be browser based rather than desktop based.

      • Will

        Well that may be true but Web apps are accessible from a desktop, so I don’t know why you wouldn’t count them.

    • Troy

      “pure numbers” is irrelevant on the hardware side now that Apple is riding the same x86 train as the Wintel mainstream. The only relevant metric is the Mac’s share of segments like “graphic artists”, “PC gamers”, “small business” etc etc and whether or not there’s enough users in these segments to support ISVs making the software that serves the needs of these segments.

      After plateauing at 4M/yr sales in the late 90s, Apple hit 10M Mac sales in CY09 and is on track for 20M this year.

      %s of the global market is completely irrelevant for users (e.g. Chinese-language software thus far has offered zero utility to me), actually in many ways it’s been a benefit being single-digit-midget, fewer attacks targeting the platform.

    • Mel Gross

      Don’t be so sure. In the USA, which is what’s being talked about here, for example, the Mac already has a marketshare of around 14%. Worldwide, it’s much lower, at about 7.8%. That’s mostly because it’s easier to find a Mac here than in most other places. But that’s changing.

      • Will

        How is it changing in any significant way?

      • handleym

        I thought I was going to disagree with you, but going back five years or so, Mac world-wide percentage sales are essentially flat. I don’t think it’s viable any more to argue the existence of Apple stores changes things.

        BUT that’s not the whole story.
        (a) If the question is merely one of revenue flow, it is sales that matter. But if the question is one of user satisfaction, it is installed base that matters, and I don’t think we have clear information about that. Anecdotally we mostly believe iOS devices have a substantially longer active use time than Android devices, and the same could be true of Macs.

        (b) It took some time for the halo effect around Apple devices (iPods) to translate into Mac sales in the US, presumably in part because PCs are not updated that often, and in part one needs a growth in familiarity so that people feel comfortable that when they buy this new machine it will do everything they think they need. That same long lag-time may still be present outside the US.

        As a contrary point, one can ask how many PCs (outside the US) are bought
        – for “cheapest box wins” applications (cash register type job). No-one cares who wins that market. Maybe it will all go Android in ten years.

        – for business market. This is what we discussed earlier in the context of how long MS (Windows and Office) remains essential. In the US that essentiality has largely disappeared (cf IBM now allowing its employees to choose Macs, and plenty of them doing so). One would expect the rest of the world to follow, but slowly over a few years, anglosphere first then Europe and Japan, only then China and emerging markets, where they only learned what computers can do yesterday and are still sorting out business processes, mostly by copying what the US did ten years ago.

        – in homes for video games. This has traditionally been a substantial Apple weakness and while in theory it can be worked around, eg with Boot Camp, in practice that’s a hassle and more money to buy the copy of Windows. This is the segment I have least confidence in predicting because I do not understand the mind of the gamer. Maybe Metal makes it easy enough to port games that this is no longer an issue? Maybe gamers mainly switch to consoles? Maybe gaming just isn’t that important a factor in buying PCs any more — the teenage one gets a PC and the three other members of the household all buy a portable Mac?

      • Will

        Too many tangential point to cover properly. All I can say is that is that you are basically assuming a lot of things.

        No, I don’t think the world is trailing the US 10 years behind (what an odd concept). The iPhone is 8 years old, the vast majority of countries are not adopting 40% iPhone marketshare, why would they do that for Macs?

        IBM is anecdotal and most probably due to their new closer relationship that facilitated this. It’s not representative of enterprise as a whole. I know it’s popular around here to think companies are stupid for licensing Windows, but I don’t think that’s really the situation.

        No, Apple won’t have a true living room contender any time soon. Partly because it already tried for years. What you’re talking about is mere speculation on nothing concrete. I don’t even know why you mentioned it.

        You also forgot the consumers from both ends of the spectrum: casual users who want a “good enough” computer and gamers/developers who need really high spec machines. They don’t really go for Macs.

        What’s your point anyway, that no-one will use Windows in 50 years? Maybe. But I don’t think it would be for the reasons you think.

      • Peter

        The “good enough” is the Mac Mini (which I am using right now). It’s still a bit more expensive than the throwaway Win boxes, and that’s unfortunate. But they’re solid, reliable and last a long time (I have three, for various uses and users).

      • http://godofbiscuits.com/blog godofbiscuits

        Apple Stores. Of course. How many new ones in China just in the last 12 months?

      • Will

        China has a grand total of 19 stores… that’s not it

    • bloftus

      gs.statcounter.com shows Mac numbers improving yearly going from 5.82 to 9.51 so far this year. http://gs.statcounter.com/#desktop-os-ww-yearly-2008-2015

      • Will

        That’s from 2010 you idiot.

      • Accent_Sweden

        Just because someone makes a mistake does make them an idiot. Moderate your tone and behave like an adult or leave.

      • Will

        Sorry about that

  • Angus Matheson

    brilliant as usual. But maybe there is a third option – where 1/2 of the new phone buys buy android. Leaving fewer Android switchers. And slowing the dynamics of the churn. But I have an anecdote that argues that 2 is right. New smartphone family asked my advice then bought 3 Samsung S6 which I suspect were being heavily discounted at the store.

  • Walt French

    “there are 1.6 million more Android users.”
    I presume.

  • Larry MacPhee

    I think it’s likely that Android attracts more first time users because of lower entry price, and that Apple converts more users who tried Android but were unsatisfied with the experience.

  • Augure

    That’s absolute bullshit. A bigger proportion of iOS users have switched to Android http://forums.macrumors.com/threads/ios-and-android-retain-loyal-users-at-similar-rates.1907058/

    • minifi

      4000 samples within 2(!) years? Uh well yeah… :)

    • Walt French

      Dunno whether you INTEND to look like a troll, but it’s common in this forum to provide some evaluation of data beyond saying “absolute bullshit.” In fact, the site owner has actually set that as a standard. Perhaps in your haste to put out your opinion, you overlooked what the site is for. That would speak ill as to the insights you’re claiming to present.

      It’s quite possible the data you cite is utterly correct even though it points to an opposite conclusion. Going back to 2013, it includes a period when Android was gaining share; depending on how those 4000 samples were drawn (it seems iPhones are under-represented versus average sales in the period, so more-than-usually suspect), and especially if most of the participants were early in the period, you might have the switch.

      The data shown above, in contrast, is time-specific and covers the entire US market. I can’t speak to its credibility, but simply note that you haven’t, either, but still threw out an inflammatory, emotional, content-free (and therefore, reasoned-discussion-forum-hostile) first sentence.

      My preference, is to realize that many features of the two ecosystems are highly similar. Both have unique features that their customers LOVE, but the competition has something similar. And “flagship” phones in both systems are quite expensive but you can find less-expensive options for doing all sorts of things. The future direction of the industry will likely turn on features and capabilities that are nascent or non-existent today, or perhaps, like security, are discounted today but become Big Deals® in the near future.

  • http://stockmarketmap.wordpress.com/ Market Map

    When one isn’t worried about the status of having an I-product and has the choice of paying $10 a month for phone service, messaging, email, (and internet within Wifi range) ( Republic Wireless Motorola phone, Android ) instead of $100 a month ( Verizon Apple Iphone ), it’s a no brainer …

  • http://www.roundrects.com Alex Santos

    “But this is not very plausible. It’s much more likely that Apple converts existing smartphone users while Android converts first-time users.” I would have to agree with this scenario, in fact, this is why they are defined as ‘switchers’ from Apple’s point of view.

  • Sacto_Joe

    Apple appears to be gaining market share across the board. It instantly gained a majority of market share in smart watches within the first few hours the Watch went on sale. Is the rate of gain in market share correlated to the maturity of the market for computer-based devices? IMHO, no. I think it’s correlated to production capacity. The exception to the rule seems to be the PC market, where Apple had early-on market share but lost it. Still, in those days, Apple was a very small company fighting very large companies. Even when the Mac came on the scene, they were still disadvantaged in terms of production capacity, and quickly became more so with the advent of Windows. And when the iPhone came along, Apple quickly lost ground in relative production capacity with the advent of Android. But now it is gaining relative production capacity across the board.