Why Android Doesn't Really Have 80% of the Smartphone Market

There's a classic Seinfeld episode in which Jerry buys his dad a $200 Wizard organizer, but his dad can't see the gadget as anything more than an easy way to calculate restaurant tips. If that episode were written today, the Wizard would be an Android smartphone. Morty Seinfeld would see the handset as nothing more than a device to talk and text, and the commentary would be dead-on.

We read plenty about Android's growing dominance in worldwide market share. The free mobile operating system is taking up more of the room every passing quarter, forcing Apple (NASDAQ: AAPL  ) into an increasingly tight corner. Google's (NASDAQ: GOOGL  ) platform now owns a whopping 80% of the world's smartphone market, while Apple has seen its worldwide share shrink to just 14%. 

Source: Strategy Analytics

What we don't read a lot about is how much all these web-connectors get used as actual smartphones. Those stats tell a much different story. Apple's iOS owns some 55% of smartphone web activity. Android, despite its overwhelming lead in market share, owns just 28%.

Source: Bloomberg Businessweek/NetApplications

So, what story do these numbers tell? Apple users are deliberately buying handheld computers. Android users, on the other hand, are often just upgrading from cell phones and feature phones to smartphones because their carriers are offering a nicer device with more capabilities for no greater charge.

Upgrading to Apple
This may help explain why more Android users switch to Apple smartphones than iPhone users make the switch to Android. And that's despite Android devices being available cheaper, and having around the same number of available apps.

Nearly 20% of all iPhone users have switched over to an Apple product from an Android phone in the past year, according to Consumer Intelligence Research Partners. There was not a similar trade being made on the other side. When measured against Samsung (NASDAQOTH: SSNLF  ) -- the world's biggest supplier of Android smartphones -- only 7% of Samsung phone buyers were switching to the brand from Apple devices.

With Samsung and other Android phone makers often seen as outpacing Apple in terms of smartphone innovation, investors need to question why this trend exists.

Apple CEO Tim Cook, who likes to cite usage statistics, addressed the web-use gap with Bloomberg Businessweek recently. Here's what he had to say:

Anybody that's used both (Apple and Android) should not be surprised that that is the natural result. And that's really important to us because we have never been about selling the most. We're about selling the best and having the best experience and having the happiest customers.

In any case, the fact that Apple's been able to maintain such a high web-activity share as competitors flood the market with cheaper alternatives would seem to bode well for the iPhone maker.

An evolving market
On the flip side, these are potentially troubling statistics for Google. Web activity is important to Google. The company has made its Android platform available for free, banking on increasing web use and web search, Google's bread and butter. Chairman Eric Schmidt told CNBC just last week that he still sees search advertising as Google's main growth driver moving forward.

If Google is going to more effectively capitalize on the near-ubiquity of its Android devices in the fast-growing mobile market, it needs its users actually using the phones as handheld computers. 

What these numbers also show is that the true smartphone market -- the one where people actually use their phones as computers -- may not be as saturated as device sales indicate. If Apple can continue to add customers looking to upgrade from a low-cost Android, investors could see market-share numbers begin to move in Apple's favor as the market matures.

The Foolish bottom line
Investors should keep their eye on web activity statistics. If Apple can hold its ground in this area, seeing relatively minor losses as Android makes significant gains in platform market share, it could be a sign that the iPhone has a stronger position in the fast-evolving smartphone market than many had believed.

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Read/Post Comments (12) | Recommend This Article (3)

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 October 10, 2013, at 12:47 PM, rusticguy wrote:

    At the beginning of the three year tiered pricing case study, Apple operating systems' data consumption was equal to if not higher than other smartphone platforms. However, Android-based devices have now caught up and their data consumption is 38 percent higher than that of Apple devices in terms of megabytes per month per connection usage (Figure 15).

  • Report this Comment On October 10, 2013, at 12:52 PM, Mathman6577 wrote:

    Great article.

  • Report this Comment On October 10, 2013, at 1:04 PM, pseudorandom571 wrote:

    Is that statistic global mobile web activity or mobile web activity in the US? You cannot compare two different types of statistics on different geographical locations because of course US statistic would be favored to Apple. Also iOS is tied to Apple online services like iTunes which use more data. So even if a person does little with iOS, it still uses more online data than a similar usage on an Android platform. Also that statistic on users who switched to iPhone from Samsung, is that a global statistic or just in the US? Again, you cannot compare the different geographical locations, and the US statistic of course favors Apple.

  • Report this Comment On October 10, 2013, at 1:05 PM, rusticguy wrote:

    Moreover, your analysis is completely cockeyed.

    You pick up global data on OS market share and then try and plug-in web activity of one country to try and prove Apple rules? This article is nonsense at best!

  • Report this Comment On October 10, 2013, at 1:31 PM, Mentallect wrote:

    Android owns at least 80% of the world market.

  • Report this Comment On October 10, 2013, at 1:57 PM, lrd555 wrote:

    Who cares?

    As long as Apple has 80% profit share.

  • Report this Comment On October 10, 2013, at 2:22 PM, mer2329 wrote:

    isnt market share determined not by howmany people actually pay for the device/OS but by how many people actually use the OS.

    if yes then that bloomberg analysis is completely skewed.

    im an android user who dosent have the money to buy a top line phone, so i choose the free samsung conquer 4g, and by bloombergs analysis im not a true android user

  • Report this Comment On October 10, 2013, at 9:22 PM, jekoslosky wrote:

    Pseudorandom571 and rusticguy, the NetMarketShare number of 55% iOS is is of all mobile Web activity. Chitika measures the North American numbers to be 62% iOS.

  • Report this Comment On October 11, 2013, at 2:31 PM, Johnny5k wrote:

    When these 80% Android stats are thrown around, are they just counting sales for the previous period, or devices in use? I assume they're sales, but that doesn't really represent how many devices are actually being used - not just for web browsing, but used at all. Apple devices are very likely to be resold or passed on after their 2-year contract is up, and used for another year or 2 or 3 (or 4). Android devices are much less likely to be used beyond 2 years after the initial purchase. I'm not saying this is the case with all Android devices - the high-end devices likely have a similar continued-use rate as Apple devices; but the majority of that 80% Android device sales are not high-end devices - they're cheap throw-away devices that likely don't last more than a year or two. This may explain why Apple's usage share is consistently higher than Android's, even though Android's quarterly sales are higher.

    It would be much more useful to see statistics splitting out sales of high-end Android devices, say $400+, and compare those to Apple's devices.

  • Report this Comment On October 11, 2013, at 2:56 PM, sheldonross wrote:

    Android doesn't have 80% of the market share, because I don't like the metric. Therefore I'm going to provide my own metric that supports my thesis.

    It might be more convincing if you actually used more than 2 metrics. Someone above mentioned a data usage metric that showed Android ahead. Any information on Apps? I suspect that Apple might still be ahead in that, but I'm curious.

    I just don't buy the "I don't like this metric, so I'm going to arbitrarily choose a different that I do like." Not very 'F'oolish.

  • Report this Comment On October 11, 2013, at 8:43 PM, jekoslosky wrote:

    Sheldonross, it's really not an either/or proposition -- "I can either use this metric or another." It's really a matter of realizing that not any one metric tells the whole story. The market-share metric captures a lot of headlines. Considering those other metrics, -- the one I chose in the article and others that have been mentioned -- is Foolish, indeed.

  • Report this Comment On October 15, 2013, at 10:25 AM, yaroniva wrote:

    This means that 80% of the "smartphones" are purchased due to their low price and not due to their vast application base ?

    Sell smartphone vendors shares now !!!!!

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