Why Developers Love the iPhone

Not all smartphone users are created equal. Those who use iPhones are more apt to buy apps, a new report from AdMob says.

Roughly half of iPhone users purchase at least one app per month from Apple's (Nasdaq: AAPL  ) iTunes Store. Google's (Nasdaq: GOOG  ) Android and Palm's (Nasdaq: PALM  ) webOS didn't make out as well. Only 21% of Android users and 24% of webOS handset owners buy at least one app per month from their respective app stores, the report says. Research In Motion (Nasdaq: RIMM  ) was not included in this part of the report.

RIM's BlackBerry OS was responsible for just 5% of smartphone traffic in January, or one-tenth of Apple's share. Perhaps that's why Mike Lazaridis, RIM's co-CEO, has called for penalizing the iPhone. Palm's webOS accounted for 2% of global traffic, the same as Microsoft's (Nasdaq: MSFT  ) Windows Mobile.

No matter. Regardless of what Lazaridis says, data usage isn't the issue here. AT&T (NYSE: T  ) is perfectly happy to have the iPhone continue to be a data pig. Executives at the telco have said as much.

No, the big issue for its competitors is that the iPhone attracts bigger spenders. Combine that with its platform-sharing cousin, the iPod touch, which has 35% of users paying for an app per month, and you have a huge problem for Apple's rivals.

Developers, on the other hand, must love data like this. They're stuck with too many smartphone platforms to choose from. Knowing where the money is should make it easier for them to decide which OSes to write code for. (Platforms are only as good as the dollars they attract, after all.)

Put differently: If developers haven't created more software for Palm and RIM, it's because their mobile OSes -- good though they may be -- show no signs of being the moneymakers that the iPhone has already proven to be.

That's why I continue to short both stocks in my Motley Fool CAPS portfolio. Think I'm wrong? Kick up some dust in the comment box below.

Apple is a Motley Fool Stock Advisor selection. Google is a Motley Fool Rule Breakers recommendation. Microsoft is a Motley Fool Inside Value pick. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He had stock and options positions in Apple and a stock position in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is waving at you. See?


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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 February 26, 2010, at 2:16 PM, accelerando wrote:

    Right you are!! Until the government steps in somewhere far down the road, if ever, apple will own a near monopoly on smart phones in the not-to-distant future, similar to the monopoly on operating systems microsoft once enjoyed.

    The iphone is slightly better still than its rivals. Its interface is much fun for developers, especially game developers (me). The more and better the apps, the more people buy iphones and iphone apps, the more developers focus on the iphone, the more and better the apps, the more people buy iphones. This is called network externalities, or something like that -- but what it all adds up to is a coming bonanza of wealth for folks perspicacious enough to own aapl stock.

  • Report this Comment On February 26, 2010, at 2:29 PM, demodave wrote:

    Awesome: app developers want to make money, so they develop for OS's whose users spend money.

    Brilliant!

    Almost as good as buying stocks that will go up!

  • Report this Comment On February 26, 2010, at 3:11 PM, DefunctAcct wrote:

    A correction regarding use of "monopoly". Neither Microsoft nor Apple has any sort of monopoly on Operating System.

    Microsoft became immensely popular because of its licensing model and cheap hardware. Every hardware manufacturer out there starting with Mom and Pop PC makers lining Castro street in Mountain View back in the early 80's can make a PC, slap on DOS or Windows and make a sale. As sales increased, developers flocked to make software for DOS and Windows and the rest is history.

    Apple's iPhone is even farther away from any sort of monopoly. The iPhone OS runs only on the iPhone and is not licensed to other hardware manufacturers. This alone will actually keep iPhone market share somewhat constrained. Unlike the past, Apple did not give Microsoft or anyone else a chance to steal and copy the iPhone before it launched, so iPhone has been a success in terms of market traction and continuing growth. Thus developers are happy to build applications for iPhone.

    Looking at the big picture, iPhone is not one to dominate the smart phone segment like Windows dominate the PC market. There are many other competitors out there making competing hardware that runs Android and Palm OS and Nokia's wannabe Mo-whatchamacallit and Symbian. The competition will continue and the dominant horse has yet to show itself and break from the pack. We will see in about 24 to 36 more months when LTE comes online, when iPad is shipping.

    Why bring up LTE and iPad? First the iPad. Apple, unlike Google or Microsoft or Acer or Dell, is not selling a single piece of gadget like a cell phone or a laptop or a single OS. Apple is selling an experience. The experience is based on relatively well thought-out software. The experience integrates across different hardware devices. Those who prefer this experience will quickly find Apple's integrated family of hardware and software palatable.

    LTE will make this integrated family that much more powerful if it delivers on its promise of speed and larger bandwidth.

    In 24 months, if all goes according to plan, a self-enforcing cycle will form. LTE makes web surfing, email, browsing, voice all natural and ubiquitous. Users of Apple UI no longer even think about those issues. They can focus on using their fingers, eyes and ears to do their daily tasks. What is more natural than applying our appendages and sensory systems? Those who use iPhone only will cross over to iPad. Those who use iPad will cross into iPhone. Those who need more power than both will consider iMac or Mac or laptops.

    Only when this happens can we begin to see Apple breaking from the pack and begin to have the first opportunity at dominating the Smart Mobile Devices segment. Apple will never dominate the "Smart Phone" segment because Apple does not make "Phone", Apple makes "Mobile Computing Devices".

    So there is no monopoly, there is only fair competition and fair choices and the consumers get to pick. Developers like us will go where there is the most money to be made.

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