Hardware has always remained a means to an end. As we near the end of the year and festive gaiety fills our hearts and discounts fill the stores, we take a look at one of the most important parts of the ecosystem of your new phones and tablets. Yes, it’s apps we are talking about, and if anything differentiates Android and iOS from the remaining smartphone OSs on offer; it’s their app stores. So while we have looked a fair bit at the new hardware on display for this year, let’s now turn the attention to the software side.
While Q3 2015 was yet another quarter where the two companies exhibited different growth patterns, what was interesting to note is that each one stuck to their guns and widened the lead from their competitor even more. Google Play Store pulled away with a sizeable lead of over 90% in worldwide App downloads when compared to Apple’s App store. This is pretty impressive, and one of the reasons behind it could just be due to the number of choices Android offers with the Play store offering 1.5 billion apps to Apple’s 1.25 billion. However, Apple Inc. (NASDAQ:AAPL) did what it does best, and the App Store raked in 80% more revenue than their Android counterpart. This can be directly traced back to the fact that on Android only a small fraction of apps are paid apps with most of them relying on an in-app purchases and ads for profits.
Potential Markets and Strategies:
Before we start diving more into the data and analyze the causes that have led these two giants to continue succeeding in what are now clearly different revenue models, let’s first look at why they choose them in the first place. It all stems mainly from the type of company that Google (Now Alphabet Inc. (NASDAQ:GOOGL)) and Apple are. Apple is a device company; they make excellent smartphones albeit at exorbitant prices and they look to make as much money from it as possible. These phones run on iOS, Apple’s proprietary OS, and having had the hardware priced so high, Apple can make sure that their consumers are ones with deep pockets who are able to afford the pricing structure of the App store that leads to higher revenue generation. A brilliant business model that has led them to have huge profits year over year.
Google, though, employ an entirely different line of thought when making their products and that is mainly because they are an Internet company, primarily an Ad company. Android is a free OS and Google makes their money off ads and services that the phone manufacturers have to bundle with all phones that run Google’s version of Android. This translates to a much larger target demographic as Android phone are found in all price ranges from the 50$ to more than 800$ for the premium ones. This has led to developers for Android devices become more conscious of the fact that their target audience may not have as much buying power and thus offer apps free with in-app purchases or with ads and an option to remove them for a small fee. With that in mind, we dive into the next segment where we see which markets fulfilled these criteria and shown excellent growth potential in the future for both these companies.
Apple Finds a New Kingdom In China
With the smartphone market reaching levels of saturation in countries like the US, Apple has been looking for markets to expand their iPhone market share lineup in different countries in Asia. They seem to have struck gold with China as the introduction of the much larger screen with the iPhone 6s ushered in a huge boom in sales figures of iPhones in China. The much bigger screen helped in the consumption of media and games which is evident as we saw games take the No 1 spot in the global lists for revenues.
There is another interesting trend on display here as well. While social networking apps have dropped one place from the downloads list, they still remain at the second position in revenue earners.
This can be explained by the fact that the China market that is now the parameter to judge Apple results by has matured as an ecosystem. The primary base of social apps like facebook and twitter and Instagram has been laid and thus there is a drop in downloads as people are not downloading any of these massively popular apps already having millions of downloads, anymore.
The focal point of the innovation now lies in newer apps that build upon the ecosystem by combining two of the features that are most desired by the consumers. Thus, we see the success of apps like iCast Show and MiaoPai, which combine the video consumption desires of their users with the ability to share on social networks. Applying the same strategy but with a different use case are apps like DidiDache, which combines lifestyle and social networking apps to provide a homegrown alternative to Uber.
India Shines For Android
Now looking at the Android side of things we find that India has come up to the number three spot in the most downloaded lists. This is in due to the surge of low-cost sub 50$ smartphones that have flooded the Indian market as of late. There are a lot of first-time smartphone buyers and India has been the largest market of growth for social media and communication apps like Facebook and WhatsaApp in Q3 2015. The majority of smartphone apps are dependent on social media and sharing and with that being laid in India, it’s only natural that despite being at no 3 in the download list it doesn’t feature in the revenue list at all as most of the larger social media and communication apps depend on ads and user information for revenue and thus are free to use.
An interesting trend is noticed across both systems where we find that games are the primary source of revenue across both ecosystems. The lower ranking of entertainment apps as compared to communications and tools hint that Android is more prevalent in utilitarian markets where people buy based on need rather than on desire. Interestingly, the lower rank of photography apps in the downloaded lists gives credibility to the public opinion that photo aficionados prefer iPhones.
What Does it Mean?
Well for the two companies – Apple and Google – it means they are right on track with their business models and Google is well on the way in their quest to connect the world with their apps and operating system, and siphon as much information as possible by offering free apps in their Play store that offer targeted ads. Apple too has found their place and a steady source of revenue and they will continue this path.
As for the consumers, as the app stores continue to grow and attract more developers and apps, they will continue to enjoy better content and apps and pay for it with their wallet or their information depending on which way they want to sway. However, the app stores affect two other groups other than the consumers and the owners, the developers and the businesses they develop for. Let’s take a quick glance at what the future holds for both!
For the Developers
For developers, it may be a tough job deciding which ecosystem to commit to if there are not enough resources available to develop for both simultaneously. There are a few pros for both the sides, and I’ll try to go briefly over each.
Android devs have the following things to look forward to
- A wider reach than iOS. India is a major market for Android, and it is only the start of smartphone penetration for India with about 10-15% of the population having access to one.
- A wider variety of apps to develop for as the OS is significantly less restrictive than iOS.
As for those siding with Apple,
- Higher revenues with piracy being a very small almost nonexistent issue
- Easier development cycle with only a few fixed screen sizes and resolutions to optimize for.
The best path may though be to first release in the Apple App Store with a paid app and use the revenue generated to release a similar app with ads and in-app purchases for the Android Play Store.
For the Businesses
The traditional app paradigm is about to hit a sea change. Social media is going to move from consumption to service sellers. This is evident with Facebook’s plans for Messenger. Other apps are moving this way too and tying up with services and often other apps to give a cohesive experience. In fact, we see this trend over the tech community at large with the Dell-EMC merger and the WD-Sandisk mergers, everyone is looking to provide a more centralized experience. That is why businesses shouldn’t just focus on building their own apps but look to integrate their services with social media platforms to increase their reach.
Download numbers and revenue is important, but we at Dazeinfo can’t but help the thought that these metrics to be one that will be relegated to secondary places in the near future. With Android looking to penetrate deeper into the Indian market that is set to be the next big battle stage for smartphone supremacy, the main ways of earning from apps may shift from content to data mining and e-commerce. With companies looking to change the way they sell things to their consumers, there are some exciting times ahead for app developers and publishers alike!
Bill Gates once said
Information technology and business are becoming inextricably interwoven
and the new generation apps are taking that one step further!