Are Apple Developers Planning a Mass Exodus for Android?

I'm sure by now you've heard the news that Google's (NASDAQ: GOOGL  ) Android OS has reached another milestone by commanding an astounding 75% worldwide market share. In an effort to seize the opportunity, Google has been making improvements with its Google Play store to drive more monetization. If we're talking about total available apps, Google's app store is right on par with Apple's (NASDAQ: AAPL  ) 700,000 apps to choose from. But if we're talking about which users are more valuable between iOS and Android, iOS takes the lion's share.

In a 20-country study, analytic firm Distimo determined the Apple's App Store brought in four times more daily revenue than Google Play. Over the summer, analytics firm Flurry found that a developer can expect to earn $0.24 on Android for every dollar made on iOS. Although Distimo's findings aren't anything new, it bought up the ever-important topic of revenue growth, an area where Google is currently making inroads. Over the final four months of the study conducted last year, daily revenue for Google Play had grown by 43%, handily beating out Apple's 21% growth during the period. If this momentum can be sustained, it's only a matter of time until Google surpasses Apple on total revenue basis. However, total revenue isn't everything.

Usage share
Although Google's worldwide market share has been growing like gangbusters, it hasn't translated into ad-impression growth. According to technology and advertising provider Velti, which operates in 68 countries, iOS devices made up 63% of ad impressions on its network, whereas Android only made up 37%. In other words, all those emerging-market users aren't proving as valuable to Google's bottom line.

The important smartphone market
According to app analytics company Distimo, the U.S. holds the trump card in terms of overall ad impressions and revenues from app purchases, where Apple currently commands a market-leading 53.3% share. The iPhone 5 and carrier subsidies were both key drivers behind this 17.5% year-over-year growth. During the period, Android suffered a 10.9% decline year-over-year, and currently holds onto 41.9% of the U.S. market.

Considering demographics
There's more than just carrier subsidies that's helping Apple generate 75% of the industry's profit with only 20% of the market share. According to Toshl Finance, Apple users on average earn $501 more in monthly income than Android users, meaning iOS users have more disposable income for App Store purchases. The main driver behind this difference is the fact that unsubsidized iPhones typically cost more than Android phones, which attracts a wealthier user base. Though it seems obvious, this shows how Apple manages to run a significantly more profitable mobile business than Google simply by catering to a richer demographic.

The investor's perspective
If iOS and Android users were considered different species of fish, Apple users would be the most sought-after kind. Compared to Android, Apple attracts a wealthier user base, giving it a more desired demographic for its App Store. Although Google currently lacks in profitability per user, it makes for this shortfall with volume.

Over the long term, Google can leverage its current 75% Android market share as a vehicle to promote its more lucrative services. In this context, it's all about driving greater reach of Google's services, which in turn creates greater mind share, and in the end enhances future prospects. This approach may not directly benefit its mobile business per se, but it could have a meaningful longer-term impact on other businesses, such as the desktop version of Google Search.

Apple, on the other hand, will likely continue seeing a high profit share relative to its market share, which keeps developers happy. If Apple decides to go after market share in emerging markets, it could lower overall profitability, potentially enticing its loyal developer base to move to a larger pool. Unless this happens, iOS is poised to remain the more lucrative ecosystem for developers.

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Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 14, 2013, at 7:52 PM, tychicum wrote:

    Don't be too quick to drink the Android Kool-Aide.

    Something that has to be given away for free to sell just isn't that business smart.

    Question: What has presence in the Enterprise space ... Unix or Windows? Why?

    Windows reigns 100 to 1.

    Even OSX has a bigger presence to Unix in the Enterprise space.

    What does Grandma want for Christmas? A Unix PC?

    How about your 13 year old daughter. Does she want Android and Unix ... or a cool iPod?

    LOL.

  • Report this Comment On January 14, 2013, at 8:02 PM, PSU69 wrote:

    Droid phones are gr8 for making phone calls.

  • Report this Comment On January 15, 2013, at 12:10 AM, paulywally1029 wrote:

    "Something that has to be given away for free to sell just isn't that business smart."

    Android is free. You pay for the devices, and google makes money in advertising/play store from your device. The company makes a ton of money, why is it a bad idea to give the software away for free if your business model is to make money off of the software you give away?

    "Question: What has presence in the Enterprise space ... Unix or Windows? Why?"

    "Windows reigns 100 to 1."

    -Where did you get that stat? Must have been from lala land because its just not true, maybe for end users (pcs), but enterprise servers? Pretty much all unix based

    "Even OSX has a bigger presence to Unix in the Enterprise space."

    Just wow, you must not work anywhere near a computer. The world runs on UNIX dude, just about every place I have worked has mostly unix back end servers with a few windows servers for applications that don't support unix. OSX has no place in the corporate world, I have never seen it used in my personal experience.

    "What does Grandma want for Christmas? A Unix PC?"

    Does grandma really want a mac or a pc or any computer for that matter? I hate to generalize old people but i mean that's not exactly the target market here.

    "How about your 13 year old daughter. Does she want Android and Unix ... or a cool iPod?"

    People still buy iPods? mp3 players are extremely cheap and common now. The appeal of apple products being "cool" is a thing of the past. Android products quite simply better now, take a look at the latest market share figures, it is not just my opinion.

    "LOL."

    Everyone else is laughing too bro... but not with you.

  • Report this Comment On January 15, 2013, at 7:01 PM, EquityBull wrote:

    How long until Samsung demands google pay it a cut of the Play store and if google does not fold Samsung builds its own play store further fragmenting things.

    Samsung also has to be thinking about eventually dumping google search and using one they build or buy. Or maybe just making a better deal with Microsoft to put Bing on their phones.

    Google bought motorola to try and protect against this but samsung is now too big and google fears the monster they created.

    As for Apple. They need to quickly slice the market segments for iphone and create a larger iphone to compete with S3 sized phones. They should also test a phablet to cover their bases. If it fails just dump the size and move on but don't be late to that party too.

  • Report this Comment On March 11, 2013, at 10:35 AM, core2 wrote:

    @tychicum

    My 6 and 8 year old beg for the newer android galaxy tabs.

    My kids already think Apple sucks.

    Grandpa (My 70 year old father) just a couple years back got the iphone 4s- he loves it. Its simplistic.

    Me, I love my 10.1" 4.1/4.1 Android tablets with 11.1 adobe flash...and HDMI 1080p connectivity

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