It has no price and hence there are no ways markets can signal demand or value creation. Furthermore, Android is not being offered to users like the iPhone. Android’s “customers” are phone vendors who package the software with additional value-added hardware and sell the combination to operators or distributors who then package it further with services and offer the total to end users.

So obviously, comparisons between Android and iPhone center on instances of Android used in real products and the “market performance” of Android therefore relies on these proxies for Android — the aggregate sum of products that have some form of Android in use.

I wrote this in response to a very short brief: “We’re looking for an editorial piece that comes down on either side of the debate of iPhone vs. Android”. The challenge I saw was on the approach to the question of “iPhone vs. Android”. I chose to measure value creation by the means available to shareholders.

Read more here: Horace Dediu Android Vs. iPhone on BusinessInsider.com

[I am posting this here in the hope that comments will accrue to this forum as well.]

Warning: This requires Flash.

Try the following settings:

• Set y-axis to Profit (units: $ Billion)
• Set x-axis to Volumes (in Millions/quarter).
• Set Size: Revenues in $Billion. (Scroll within gadget to see Size selector).
• Set Color: ASP (Average Selling Price in US Dollars)
• Press Play or use scroll bar to scrub through time.

Note the “Vendor data” tab where you can see the source data and options for different chart types (upper right of chart).

I recently posted a comparison between the profit capture of phone vendors in 2007 and the most recent quarter:

The idea was to show what a disruption looks like. A phenomenon where an entrant with none of the advantages of incumbency takes the profits away from companies privileged with ideal market access and knowledge.

The view of profit shift is the ideal view since it shows the “bottom line” impact and thus the denouement rather than more nuanced sub-plot. However, we don’t always have access to profitability data. Sometimes we only have access to revenue estimates.

Fortunately revenues have a similar story and are often a good proxy. Consider how the evolution of revenue shares occurred in the same market:

comScore published the latest data regarding US smartphone installed base. To summarize:

• Penetration reached 37.4%, an increase of 2.9 million or 1.24 points of percentage.
• Approximately 650k consumers switched from non-smart to smartphones every week during September
• Based on trailing average of six months’ growth, 50% penetration will be reached by end of September 2012, though the trend is for accelerated adoption (see chart below).

Of the platforms available, Android reached

As shown in the yesterday’s post, in the third quarter, overall mobile phone profitability declined. The eight vendors I use as a proxy showed a total net profit of $8.51 billion, down slightly from $8.57 billion and a drop of $9.01 billion in the first quarter.

Overall, the industry dropped by 1% sequentially but is still up 30% over last year and has a 20% compounded growth rate over a three year period.

• Nokia returned to profitability, though at $180 million it’s only about 2% of the top eight.
• Motorola remained in the red with a small loss of $20 million, an improvement over the $90 million loss of the previous quarter. Motorola is being acquired by Google after an accumulated mobile operating loss of $4.69 billion since the beginning of 2007. It’s unlikely we’ll receive any updates on performance thereafter.
• Samsung had a great quarter with a sequential increase of 19% and year-on-year growth of 130%. The total profit amounted to 25% of the peer group.
• Sony Ericsson broke even with about $50 million in operating profit. Like Motorola its performance was barely break-even during the last four years and its also disappearing from our list of independent vendors as it becomes part of Sony.
• LG had its sixth consecutive quarterly loss and is now appealing to investors for more capital to continue operating as a smartphone vendor. Raising dilutive capital seems a radical approach and not one that inspires confidence.
• RIM had a sequential reduction in profit of 35% and y/y reduction of 30%. The company is exhibiting clear signs of decay and the stock market is valuing the company below book value.
• Apple profit dropped by 19% but grew 43% y/y during a transitional quarter. The growth remains 43% compounded over three years.
• HTC has a 1% sequential increase but a 78% y/y growth.

To illustrate the performance in terms of profit, pricing, volumes and margins, I developed the following chart.