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.
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.
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.
Fool contributor Steve Heller owns shares of Apple and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.