The job the iPhone is hired to do, part II

I repeat what I’ve mentioned before: The iPhone is primarily hired as a premium network service salesman. It receives a “commission” for selling a premium service in the form of a premium price. Because it’s so good at it, the premium is quite high.

The job the iPhone is hired to do 

The original post on the hiring of the iPhone by operators was anchored in data about the revenue per unit (or price) that the product was able to obtain. The remarkable resilience in the exceptionally high average price showed that the iPhone was still getting a premium for moving users to higher levels of spending on network services.

The evidence was circumstantial however: By knowing the price and knowing it was far higher than competing products and knowing that much of it was paid by the operator and not the consumer (at least not up-front) implied that it was the iPhone, and only the iPhone, that was hired as a network service sales tool.

Now we have more evidence thanks to Ben Thompson (@monkbent). I illustrate the data here as an x-y scatterplot.

Screen Shot 2013-04-23 at 4-23-11.21.37 AM

The data consists of ARPU (Average Revenue per User) ITU data from 2010 for 60 countries combined with browser share data on a country-level from the current period (sourced from StatCounter).

The first observation is that there is a modest correlation between iOS usage and ARPU. It may not be particularly interesting by itself but it is interesting when compared with the lack of correlation between Android usage and ARPU.

The presumption behind smartphone usage is that it leads to more browsing which leads to more network usage which in turn, leads to more network revenues and, finally, more network investment. If there is no additional browsing then there is a far smaller economic incentive to network operators to invest in infrastructure. It is this link between usage and revenues which I hypothesize drives operators to carry, subsidize and promote the iPhone. And the resilience of this link indicates that it still works.

The ASP data seems to support this hypothesis and so does the ARPU data. The more iOS is in relative use, the higher the network revenue per user. Correlation is not causation, but when combined with data about Android, we can also say that the presence of the primary iOS alternative does not lead to more revenue. In other words, if a lot of iOS is present then revenues are higher and if there is little iOS present then revenues are not higher.

I’m not suggesting that Android users use less bandwidth—the share data is after all relative—but rather that Android use itself does not seem coupled to paying more (or less) for service.

If there is something to be concluded it’s that not all usage is created equal. The data regarding how apps and ads are consumed is consistent with a qualitative difference between iOS and Android. This data is more of the same.

It’s something of a cliché to say that audiences vary in terms of quality, but that does not make it less true. Indeed, network operators depend on it being true.  And so does Apple.