1 Can't Miss Insight Into the Battle Between Apple vs Google

Google (NASDAQ: GOOGL  ) has finally claimed the top spot in mobile ad impressions, but Apple's (NASDAQ: AAPL  )  iPhone "consistently topped Android in monetization," according to a just-released report from Opera Mediaworks. In other words, Apple has managed to make more money off of less ad impressions.

What did Opera find?

Mahi de Silva, Opera's CEO, said his company's analysis found that "iOS consumers just spend more time with their devices. They browse more, they use more applications...that's what really drives the iOS lead over Android [in monetization]."

The CEO is quick to point out that Apple's iPad plays a key role in this advantage, accounting for a little over 10% of Opera's ad revenue. Android tablets, comparitavely, are responsible for less than 0.5% of all revenue.

This is nothing new

Judging by Opera's analysis, Apple maintains a monetization edge over Google because of user engagement. Other research firms have reported a similar advantage in Cupertino's corner. According to Chitika, the iPad is responsible for more than 80% of all tablet web traffic, oodles ahead of the 18.5% share held by Android. 

This is nothing new. In 2012, IBM  (NYSE: IBM  ) reported that the iPad was responsible for 88% of all Black Friday shopping done on a tablet. If all mobile devices are taken into account, the combination of Apple's iPhone and iPad still accounted for almost 20% of the traffic. Android's share? Just 5.5%.

This year, IBM again tracked Black Friday mobile traffic and found almost identical results. Total sales from iOS devices dwarfed Android by a ratio of five-to-one.

In the app world, BI Intelligence draws the same conclusion. Its data shows that for every $1.00 iPhone users spend on in-app purchases, Android users spend just $0.24. In agreement with Opera's findings, a gap in mobile ad engagement also exists. BI Intelligence says that advertisers, on average, earn 23% less revenue per Android user.

The obvious question

It's not hard to see that all of these studies point to a similar conclusion. The obvious question, then, is: Why are Apple users more engaged than their Android peers?

Theories vary. Some bloggers believe Android's low-cost users skew these statistics because they might interact with their devices less than others do. Apple fanboys think the iPhone and iPad simply offer better quality than Android.

I don't disagree with these opinions, but there's a better explanation. One that Michael Schrage of the Harvard Business Review has touched on before. I'm talking about operating system design. As Schrage puts it so eloquently:

Apple's UX metric seems to encourage...Return on Engagement...where Android emphasizes ease-of-use and opportunity. More vulgarly, Apple is an 'active invitation' where Android offers a more 'passive menu.'

Put simply, Apple devices are built to stimulate user engagement activities like app downloads, games, and music, while Android's design is inherently more submissive.

What now?

Gartner estimates the mobile advertising market is worth at least $11 billion now, and projects it will be worth $24.5 billion by 2016. That's a large chunk of change, and makes this conversation very worthwhile.

Google and Android can pat themselves on the back for taking the lead in ad impressions globally, but the monetization battle will still be Apple's to lose for the foreseeable future. Data from Opera, Chitika, IBM, and the rest of the research industry points to this inescapable truth. The engagement gap between the iPhone and Android's smartphones is significant, and it's downright enormous in the tablet space.

Until Google chooses to design its Android OS around what Michael Schrage calls an environment of "active invitation," this situation is unlikely to change.

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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 December 12, 2013, at 2:19 PM, GaryDMN wrote:

    Many Android devices are bought as toys for children, that are to young to use the internet. Parents buy a $99 tablet or low cost Android phone for their children and limit their access to the internet. I bought my kids Android devices, until they became teenagers and wanted iPhones and iPads. It was a cheaper path for me, because they broke every android phone they ever had and they were cheaper to replace.

  • Report this Comment On December 12, 2013, at 4:19 PM, djtetsu wrote:

    Interesting to notice the UI, but speaking of the overall experience, Apples also have higher resolution in general and lot more apps, and the ratio of descent apps to crappy apps is a lot higher, and is very true with tablets.

    It might be the sum of all those things.

    The initial explosion of cheap android tablets/phones had people learn this (the hard way) over the years (that they simply tossed them aside) and it will be interesting how many of those people will now try Apple.

    It seems that their Brand is becoming increasingly magnetic, and I just don't see this ending well for Android.

  • Report this Comment On December 12, 2013, at 4:27 PM, EyeHateFools wrote:

    "Apple's UX metric seems to encourage...Return on Engagement...where Android emphasizes ease-of-use and opportunity. More vulgarly, Apple is an 'active invitation' where Android offers a more 'passive menu.'"

    Apple encourages people to take full advantage of their smartphones because the ecosystem is so good and integrated,, they actively promote the entire ecosystem and make it simple to use. Google, on the other hand, has a bunch of stuff scattered around and cobbled together and a user has to expend more effort to figure out what's even available . It's a passive approach because, while they make it available, it's up to the users to go figure it out. I'm not sure how the Google approach emphasizes ease of use?

  • Report this Comment On December 13, 2013, at 8:22 AM, duuude1 wrote:

    Too simple of an analysis with only one variable analyzed: phone supplier. I bet this is a wealth effect similar to many other issues. If the analysis added another variable - like income or household net worth - and then looked at both Android vs iOS users - I think they'd see folks with more money spend more regardless of the system they are on.

    I would bet that the biggest impact on monetization of ads is user wealth, followed by operating system.

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