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What Happens When iPhone Users Become the Majority?

While it seems that each one of Apple's (NASDAQ: AAPL  ) iPhone generates more value for advertisers, developers, and general e-commerce than Android-based smartphones, Google  (NASDAQ: GOOGL  ) could always point to Android's overall market share in response. While Android users may not be as valuable to business, there were always more.

But not for much longer. Through extrapolating out the data, while somewhat of a shaky exercise in such a disruptive industry, the iPhone will soon capture more than half of the U.S. smartphone market within a few years.

What does this mean for the smartphone market?

August 2015
This is the expected date that the iPhone will become the most popular smartphone operating system in the U.S. with 50% market share, according to Horace Dediu of Asymco. This takes into account the growing market penetration of the smartphone industry as a whole, and the iPhone's ability to grow share with the industry. Right now, Android has 52% market share, iOS captures 41%, BlackBerry limps along with 4%, and Microsoft rounds out the pack with 3%, according to comScore.

What happens when the once premium-placed platform becomes the standard?

Building network effects
Greater adoption of iPhones means that Apple will continue to strengthen the power of its product and service ecosystem. With more users, more will use iMessage to communicate, iPhoto for pictures, iCloud to store their data, iTunes for media purchases, and users will want to tie it all together with other Apple products like a MacBook or iPad. As one study from last year notes, "Of the households that own Apple products, they own an average of three."

A less lucrative crowd
By continuing to adopt more users, the outlandish iPhone statistics in terms of user value will skew more toward Android's figures. That is, facts like how Facebook ads generate 1,790% more return on investment on iPhone than Android won't lean so heavily in favor of iPhone in the future. With Apple's move down the market with the less expensive iPhone 5c, the iPhone will be less of a signal for a consumer with plenty of disposable income.

Struggles for other platforms
The fact that iPhone users are more valuable and will become the majority of smartphone users will hurt the ecosystems and potential of other platforms vying for users -- especially ones attempting to build a base from very little. This is because of how developers will choose which platforms to build on. Right now, they make the trade between a potentially more valuable iPhone user with the larger, albeit less lucrative, Android user (while developers who can afford to build for both do). In a future where iPhones not only have a more lucrative user but also the greater number of users, the cost to build for Android may not be worth the hassle.

And as BlackBerry and Microsoft know, one of the keys to gaining users is a healthy developer ecosystem. Both companies have offered plenty of incentives to developers to create applications. This year, Microsoft offered $100 per application for up to 20 applications for its Windows 8 and Windows Phone 8 platforms. BlackBerry offered developers a free development device along with software worth $400.

A growing Apple
The implications of Apple capturing the majority of the smartphone market could be impossible for other companies to reverse until another great technological disruption. However, such a look into the future must be tempered with the fact that BlackBerry once had a stranglehold on the same disruption-prone market. Apple could very well achieve 50% market share in 2015, but only if it keeps up its past performance.

A company that could benefit no matter which smartphone wins
Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access The Motley Fool's latest free report: "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

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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 December 18, 2013, at 2:50 AM, drewsands wrote:

    First Windows XP is gone this year and 40% of businesses will have to upgrade. MS will offer them windows 8x with a Start button for the same price as 7. and windows phones will gain market share. Peanut butter and jelly thing.

    2nd. Apple cost to much

    3rd. Android along with Samsung, HTC and Dell has devices so cheap along with all the knockoffs that now have quad core processors and sell for around 100 or a android on a hdmi stick for 40 dollars.

    Android has Google+ a direct competitor of Facebook. Google+ is gaining to but neither is important for the life of Apple. I think Apple is going to continue its slide down. The only thing helping it is the bull market.

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