iOS Continues to dominate mobile market for mobile ads, but for how long?

Most recent reports suggest that Apple's iOS continues to dominate the mobile advertising market in terms of impressions and revenue generation delivering almost 44% of all ad impressions and almost 50% of revenue (Figure 1).  The mobile market is increasingly looking like a two horse race between Apple iOS and Android and whilst on the face of it Apple continues to dominate, the decline of any alternative operating system other than Android suggests that in the near term Android will soon pass iOS as it becomes the de-facto alternative operation system.

Traffic share (mobile phone OS)

OS Share	% of Traffic	% of Revenue
Android	31.24%	28.08%
Phone	30.58%	27.76%
Tablet	0.66%	0.32%
iOS	43.75%	49.36%
IPhone	30.88%	36.44%
iPad	8.04%	10.21%
iTouch	4.83%	2.71%
RIM	3.37%	5.41%
Symbian	5.16%	1.56%
Windows	0.26%	0.30%
Other	16.21%	15.27%

Source: Opera  mediaworks

The challenge presented by Android is strengthening as Google and its partners increase the rate of innovation.  Apple is clearly showing signs of innovation fatigue.  A recent report by Goldman Sachs pointed to several concerns, including “delayed product cycles, supply chain difficulties, product price erosion, and a slower pace of product innovation.” Apple’s ability to continue innovating at the breakneck pace it maintained over the past few years remains a major concern.  The recent performance of Google Play surpassing Apple's App Store downloads particularly in emerging markets underline the direction of travel.

This rebalancing of the market suggests that in the longer term the Android market is set to become the most important mobile advertising market.

The Appscape

Here are a number of interesting facts concerning the growth of mobile marketing and in particular the App market.

• Apple Apps – 700,000 (Nov 2012)
• Android Apps – 700,000 (Nov 2012)
• Microsoft – 120,000 (Dec 2012)
• 37mins the average time spent on apps per day
• Mobile apps will grow from a $6 billion industry today to $55.7 billion industry by 2015 (Forrester)
• The average Android smartphone user has downloaded 44 apps onto their phone
• 53% of American cellphone users now have a smartphone
• 38% of people who use social media on mobile devices cite general browsing as their main activity

The rapid growth of Android apps is very impressive, having caught up with Apple so quickly and will undoubtedly pass Apple in 2013.  The fact that Apple apply rigid "quality control" as to which apps make it on to the iPhone and Google pretty much set a minimum compliance approach cannot be the only reason Android has blossomed since Microsoft has failed to grow in quite the same way.  Apple need to decide whether they are going to carry denying other smartphone users the chance to use the Apple IOS and ultimately see the market they have owned slowly (or maybe not so slowly) eroded by Android as they did twenty years ago during the PC wars.

iPhone 5 Decline in face Samsung Challenge?

Sales of the iPhone 5 appear to be slowing dramatically in the UK and around the world. In what seems like a bid to drum up sales, for the first time I can recall, my mobile provider is making unsolicited calls to remind that I am due an upgrade and have the opportunity of getting my hands on an iPhone 5 as part of my package.  Previous it appeared I needed to be best friends with the chairman of the mobile operator to get such an offer.   Furthermore, according to the Wall Street Journal, Apple has cut an iPhone 5 display manufacturing order by half citing "weaker-than-expected demand." The display order, which was targeted for the January to March quarter, was cut along with other key component manufacturing in December.

Given the crowded marketplace that the smartphone arena has become, it is only good business that there should be changes to manufacturing orders.  However, this data seems to confirm that globally, Samsung is beginning to get the upper hand in sales of smartphones in head-on competition with Apple.  With 1.3 billion smartphones in use worldwide by end of 2012 and 465 million Android smartphones sold in 2012. Google’s operating system has now captured a 66% global market share.  Samsung has used the Android OS to drive sales with their latest smartphone the Galaxy SIII with shipments estimated to be 18 million units for the third quarter of 2012, while smartphone and overall mobile device shipments are projected at 59 million and 106 million units respectively.

Apple is rumoured to be accelerating the launch of the iPhone 6 to combat this growing Korean threat and thus it is of little surprise that they are ramping down iPhone 5 production to make way for a newer model.  Clearly being sued by Apple is good commercial business for Samsung since it has crystallized the belief that the once mighty Apple may have a worthy competitor in the form of Samsung.  Litigation can have unexpected consequences and certainly it seems it may be the case that Apples lawyers are better at marketing Samsung's products than helping their own side win.

Goldman Sachs Technology Symposium - Apple Developments

Here are the highlights of Tim Cook the COO of Apple comments at the Goldman Sach Technology Conference currently going on in Redwood City, California and favourite to replace Steve Jobs as CEO.  There are some very interesting comments here as to the future direction of Apple.

Economic decline

“I’m not saying Apple’s immune to the economy. But if you look at last quarter as an example … last quarter in the U.S., the GDP growth was less than one percent.  It was miserable by anybody’s calculation. Apple, in the U.S., grew 27 percent.

For us, we’re focused on what we can control. And what we can control is how much we innovate, what products we do, the experience in our stores, the experience in our channel — all of those things. I think Apple’s success depends on how we do on those things versus whether the GDP is slightly above one (percent) or slightly below zero or whatever.”

IPod Touch cannibalizing iPhone sales

“I’d rather Apple cannibalize Apple than somebody else cannibalize Apple. It was very key for the iPod line to go in this direction.”

The iPhone SDK and platforms vs. products

“First of all, I think it’s really important to realize that very few companies in the world know how to build a platform. You can count them on a few fingers. Apple is one of them. We’ve had the Mac platform for years and really understand this.

When we started with the phone, we started by getting developers to focus on web 2.0 apps. And there’s over a thousand of these today. There are probably many people in this room that use them. But people also want to do more than that. And as we got into the phone more and more, it became clear to us that we should release an SDK and we’re going to talk more about that next week at our event. But in essence what it does is it will make the product even more compelling. This is a product that has the highest customer satisfaction (rate) of any Apple product ever shipped, which is a very, very high bar. We’re super excited about where this can take us.”

The real iPhone controversy (aka the missing iPhones)

“The real controversy, if you will, from some people’s point of view is the difference between phones that are activated on Apple-chosen carriers, and the total number of phone sales. So people want to know where are the iPhones? Here’s my short version of this: We have a situation where we’ve purposefully rolled out iPhone in four markets (the U.S., the U.K., Germany and France). We did this at this chosen speed so we would learn, and could apply those learnings to future rollouts, etc. And we are right on track where we want to be. The four million units that we’ve sold over the first 200 days gives us confidence that we can achieve 10 million units in 2008.

So where are the iPhones? Here’s the privilege, so to speak, of this problem. The demand for the iPhone is so intense in the markets where we aren’t offering it that people are exporting it out of the U.S. in many different ways and then running it on local carriers … The thing that I like about that is it shows there’s a lot of worldwide demand. And I think the most important thing for Apple by far in this first 8-10 months of selling in the iPhone world is to deliver a product that would delight customers.

Of all the problems we face, this is the one I face looking at with a little bit of a smile. Because it means there’s great demand for the phone. And to have people stepping over each other to have the phone isn’t a bad thing.”

The one carrier model vs. multiple carriers for the iPhone

“In the U.S., our fundamental choice was do we want to develop two phones: a CDMA phone and a GSM phone. We didn’t. We wanted to do the simplest approach in the beginning because that’s the fastest way to learn. We wanted GSM. GSM is a worldwide standard and AT&T is the largest carrier. The business relationship that we could work with AT&T allowed Apple to be Apple and AT&T to be AT&T. This is the power of this relationship. We feel very good about that. We went into Europe and picked the top carriers in three countries and got going in those countries. Now, are we married to his model? Will we do this everywhere? We’re not married to any business model. What we’re married to is shipping the best phone in the world and continuing everyday to innovate to make (the iPhone) better and turn it from a device into a platform. We are married to that.”