On the surface, the battle between Apple's (NASDAQ:AAPL) iOS and Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Android doesn't appear to be a fair fight. According to IDC, Android's worldwide smartphone operating system market share recently came in at above 80% where Apple reports a figure in the mid-teens, according to analyst firm IDC's data.
However, that's mostly a misleading comparison for investors, as the real measure of success for investors is how well each company does at turning its market share into earnings. And in that case, Apple's a clear victor -- unlike Alphabet, which generally doesn't monetize its operating system with device sales, leaving that to OEM partners -- because each one of Apple's users is using its high-margin iPhone line.
There's another way both companies are able to make money off of their operating systems, and that's through their respective App Stores. According to app analytics firm App Annie, Apple's iOS is the clear winner as it relates to making money from its iOS App Store as opposed to Alphabet's Google Play store.
App Annie notes continued dichotomy
In much the same manner Alphabet controls worldwide operating system market share, downloads in its Google Play app store dominated during the recently reported third quarter, coming in 90% higher -- up from 85% higher in Q2 -- than downloads from Apple's iOS App Store. App Annie points toward growth in developing markets of India, Indonesia, and Vietnam among first-time smartphone owners on low-cost Android phones as a reason for Android's gain.
For investors, however, worldwide revenue -- as in people actually paying for apps -- is noticeably larger on Apple's iOS than Google's Play Store. App Annie's data found Apple recorded 80% more revenue through its ecosystem than Google did, growing from 70% in Q2 on the back of strong Chinese results. The divergence in downloads and revenue is noteworthy, and is reflective of the difference between iOS user growth and Android user growth. For a visual representation, see the graphs below, courtesy of App Annie:
Two different strategies yield two different results
If you've been following Apple's growth during the past year, you know China's a large part of the picture. The company has registered three consecutive quarters of 70%-plus revenue growth in Greater China, with last quarter reporting a gain of nearly 123% on the back of strong iPhone 6 and iPhone 6 Plus sales -- what Tim Cook has referred to as a "gateway product." And it seems Apple has a plan to continue Apple's top-line growth in the country.
The second phase of Apple's growth in the Middle Kingdom should be ecosystem builders like app store and iTunes downloads, followed by the third leg -- more iDevice purchases like iPads and Macs. True to form, App Annie reports China was a major factor in Apple's App Store revenue growth, crediting games from Tencent for the strong performance.
On the other hand, app downloads for Google's Play Store were bolstered by first-time smartphone users in India. Many of these users are connecting on $50 smartphones, and downloading no-cost apps like Facebook and Facebook-owned WhatsApp Messenger, bringing in no revenue to Google Play at this point.
Of course, Google also makes money on the information extracted from these new users, as it mostly makes money on ads and search; but many of these new users aren't bringing in more money to the Google Play Store. For Apple, however, it may not have the biggest app store, but it'll settle for the most-profitable one.
Jamal Carnette owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Facebook. 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.