Distilling market noise into market sense

VisionMobile is the leading research company in the app economy. Our Developer Economics research program tracks developer experiences across platforms, revenues, apps, tools, APIs, segments and regions, via the largest, most global developer surveys.

[Report] Mobile Platforms: The Clash of Ecosystems

[We at VisionMobile have been researching and helping to educate the industry about mobile platforms for the last five years. In this time mobile software has evolved from the world of “open OS” to the world of  complex ecosystems, network effects, app stores which are redefining the rules of telecom industry. Today we share much of this knowledge in our Mobile Platforms: The Clash of Ecosystems report – a critical analysis of major mobile platforms and their battle for dominance – free download here].  

VisionMobile - The Clash of Ecosystems
Mobile platforms are at the center of the epic battle between Internet and telecom giants. The competition is not just about technology, performance, user interface or openness. Today’s mobile platforms win and lose by the strength of their ecosystems of developers, service and content providers.

In the report the Mobile Platforms: Clash of Ecosystems (free download here) we break down  Android, BlackBerry OS, BREW, iOS, Symbian, Windows Phone and webOS across key elements such as history and origins, owner agenda, ecosystem adoption, market penetration, technology foundations and application development experience. Clash of Ecosystems is part-funded by webinos,  a project aiming to deliver an Open Source Platform and software components for web applications across mobile, PC, home media (TV/set-top boxes) and in-car devices.

The report dives into several key trends underpinning the era of mobile platforms and ecosystems – designed to help developers, software companies, entrepreneurs, enterprise CIOs, brands, handset makers and operators to better understand the dynamics of mobile platform competition on intersection of economics and technology.

Smartphones go mainstream, but the devil’s in the details. Just two years ago, smartphones were viewed as expensive toys for geeks and Apple fan boys. No longer. Smartphones have entered the mainstream in developed markets, and are taking a growing proportion of device sales in more cost-sensitive markets around the globe. In the third quarter of 2011, smartphone shipments penetration surpassed 29% globally, although this figure varies widely from nearly 65% in the USA and over 50% in Europe to 19% in Asia-Pacific, 17% in Latin America and 18% in Africa/Middle East.

VisionMobile - Clash of Ecosystems - Regional penetration

The leaders, iOS and Android, are driven by economics of demand. Handset sales are driven not by hardware features (“what the handset can do”) but the user interface and applications available (“what you can do with the handset”). Much like any smartphone platform, iOS and Android are driven by economics of demand, where the demand generated (incl. the number of applications) has a far stronger effect on sales than pure supply chain efficiencies. As of October 2011, iOS and Android are leading the way, with over 500,000 and 300,000 applications, respectively. The rest of the platforms trail far behind with order of magnitude less applications: BlackBerry has 35,000 applications, Windows Mobile 30,000 applications and Symbian 25,000 applications.

Successful platforms are a magnet for financial investment. Application platforms like iOS and Android are able to attract huge financial investments on the part of developers, investors and brands. Taking iOS as an example, and estimating that an app costs an average $30,000 to develop, the 500,000 iOS apps represent an average investment of $15B in the iOS ecosystem. This investment directly contributes to Apple’s bottom line, and its estimated $71B iOS-powered device sales.

App stores are about controlling ecosystems, not profiting from content. The app store business is the polar opposite of the telco content business. As such, application stores like Apple App Store and Google Android Market should not be mistaken for profit centres. Instead, Apple and Google leverage app stores as ecosystem control points. With over 85% of iOS and Android downloads coming from free apps, the 30% revenue share from paid apps subsidizes the operational cost of app intake and distribution, which runs at over $1.2B to date in the case of Apple.

VisionMobile - Clash of Ecosystems - Mobile Platform Status

The rising star of HTML5. HTML5 has the potential to become a common bridge system across smartphone platform islands and the sea of feature phones. HTML5 is the only common app technology supported by Android, iOS, new versions of BlackBerry OS and Windows Phone platforms. With 225 million Android devices and 146 million iOS devices (UPDATE: this figure only refers to iPhones and does not include other iOS devices) sold to date, HTML5 is supported by over 371 million mobile devices today, albeit with mixed levels of compatibility.

Microsoft, Facebook, and mobile operators have very different motivations but are all eyeing HTML5 as a technology that could help dis-intermediate app stores as content distribution silos, reducing the power of Apple’s iOS and Google’s Android platforms.

However, in its present state HTML5 can neither challenge nor displace the leading mobile platforms. In order to become a viable alternative, HTML5 needs to move beyond being just a development tool, and to converge around a dominant solution for web application discovery, monetisation, distribution and retailing.

Mounting developer acquisition costs. Platforms need apps to thrive and developers are the growth engine of the smartphone ecosystems. At the same time, developer attention is scarce; developers are very critical “platform consumers” and need to make far higher investments when adopting a new platform. We estimate that the minimum acquisition cost for a publishing developer is over $2,300 in the case of Apple. As such, Apple, Google, Nokia, Microsoft and RIM have needed to invest billions of dollars in persuading developers to write apps for their platforms.

Moreover, developers are motivated by a complex set of incentives, which includes revenue potential, user reach, ability to raise funding, and the pure coolness or utility of a platform. These incentives vary widely across different types of developers and as such call for developer segmentation as a critical cornerstone of any developer strategy..

Software players put mobile operators on the defensive. The app innovation unleashed by smartphones puts pressure on traditional telecom profit centres, not only around value-added services, but also on core messaging and voice services.

Apple and Google combined control the user experience of nearly 400 million users through their iOS and Android platforms. Both are strategically reducing the role of mobile operators to that of “connectivity providers”.  Internet giants like Facebook and Amazon are using social-centric and retail-centric strategies to profit from mobile. Startups such as Foursquare and Instagram have pioneered mobile-first services. Communication companies like Skype, WhatsApp and Viber put pressure on core telecom services, notably SMS and voice.

Incumbent mobile platforms lose to next-generation challengers. In the last decade we‘ve seen over 20 mobile platforms rise and then die not being able to achieve critical mass. Next-generation platforms (iOS, Android and Windows Phone) have achieved sustainable growth by leveraging on network effects and developer economics. Legacy platforms on the other hand (Symbian, BlackBerry OS, BREW and Windows Mobile) have been designed to handset vendor rather than developer requirements; all have either been discontinued or pushed into narrow market niches. Companies with strong software DNA (common in the US) now dominate the smartphone platform landscape.

VisionMobile - Clash of Ecosystems - Smartphone penetration
No single winner: mobile platforms will remain a multi-horse race. The mobile market will continue to be a multi-horse race for many years to come.  iOS and Android will continue to lead, dividing the market between premium (iOS) and mass-market product segments (Android). Self-reinforcing network effects, gigantic application ecosystems and the rapid pace of platform evolution make the positions of Apple and Google unassailable.  Windows Phone may only challenge BlackBerry for the third place rank.

Patent wars. Apple and Microsoft are trying to leverage their own patent portfolios and paying billions of dollars in patent acquisitions in an attempt to slow down the meteoric growth of Android. Apple’s strategy is to block Android sales starting with Samsung, although with mixed, regional and temporary successes. Microsoft is using an altogether different tactic, namely patent taxes, to coax OEMs like Samsung and HTC away from a higher-cost Android. At the same time, Google is planning to defend Android through the pending acquisition of Motorola Mobile Devices, and its portfolio of over 17,000 patents. We expect a culmination of the patent wars in a multi-vendor consortium designed to standardise cross-licensing agreements across Android, iOS and WP7 handset vendors.

Comments welcome as always,

– Michael V

  • Aryan

    Wonderful report, just one niggling complaint: In a few articles, you have now mentioned the Huawei U8100 as the lowest price Android device and priced it at "$100 pre-tax and pre-subsidies". I know that in many countries, similar Huawei phones are much cheaper. Here in Australia for example, the Huawei U8150 goes for A$59 (around US$61), and that price includes GST (value added tax of 10%) and without subsidies.

    I know that in many developing countries like India, it's even cheaper.

    Just thought it might be time for you to re-consider the price of a cheap PAYG Android phone.

    • @Aryan, thanks for the info! Will include this in the next version. Is there a link with this pricing info? Android prices seem to drop faster than we can update the report text…. ;^)

  • marko_cro

    there was 50,000 apps in Ovi store in April 2011 (not 25,000 as is stated in the article).

    • @marko_cro,

      OVI store contains both Symbian and J2ME apps. 25,000 is our estimation for Symbian apps.

  • And how do you this: http://www.intomobile.com/2011/09/01/study-smartp… – Nielsen saying that US Smartphone penetration is only 40%, Is it really the Canada which is making the difference?

    • @MPKangas, Nielsen usually does surveys to estimate penetration. We were using different sources.

  • deasystems

    The article states, "With 225 million Android devices and 146 million iOS devices sold to date."

    Those numbers appear to be wildly wrong: On October 18th, Tim Cook announced that Apple had sold 250 million iOS devices (far from the "146 million" stated in the article). On October 13th, Larry Page announced that Google had activated 190 million Android devices (compared to the "225 million" stated in the article). Both announcements were made during the respective companies earnings conference calls.

    Please explain or correct the article.

    • Stijn

      Apple has sold 146M iPhones to date. The 250M figure refers to all iOS devices, including iPads and iPod Touches, which are not the focus of this article about mobile platforms. (The text was adjusted to avoid any confusion).

      The 225M figure for Android devices is an estimate that refers to shipments of devices. The 190M that Larry Page reported are activations. The difference is explained by the devices that are currently still held in inventory in the distribution chain.
      Let's put this in perspective. Back in August, 2 months earlier, Google announced 150M shipments. The discrepancy between our shipments figure and your end-user sales figures therefore represents something like 2 months of sales. We are not distribution experts, but that seems reasonable considering the incredibly high demand. Google also reported that more than half a million devices are activated each day. Such numbers make any estimate extremely sensitive to time jitter as well.

      • deasystems

        Thanks for your reply. I have a few comments.

        First, I presume you wish this analysis and discussion to be a fair one. If so, and you arbitrarily decide to exclude certain devices from one platform's population, you must do the equivalent for all other market players being discussed. Therefore, the numbers for Android (and others) must likewise exclude tablet and other devices running that platform. So I ask the author of this study to make the appropriate adjustment. Alternately, the logical thing to do when analyzing *platforms* is to include all devices running that platform and therefore the unadjusted numbers should be used.

        Second, unit sales numbers, i.e. installed base, for iOS are explicitly known as they are revealed from audited data by the platform owner (Apple). There is no equivalently reliable data available for Android. In fact, even Google's "activation" numbers are NOT derived from audited data. The difference in data reliability for the two platforms should therefore be noted in the analysis.

        Third, you stated that the number for Android is a gross-up value that includes channel inventory. No such adjustment was made for the iOS platform device data. The author should either remove the gross-up from the Android data or adjust the iOS data on a basis equivalent to the adjustment made for Android.

        I trust that the author intends for this article to be a serious and trustworthy analysis. If not, he should state at the outset that it is an opinion piece, not meant to be relied upon for market data and analysis. If you are the author, I would appreciate your response to these comments.

  • That's a very interesting report, but one thing that seems to have been missed out on in the majority of reports that I have read is the actual social aspect of the equipment – the peer pressure element, especially amongst the younger end of users. The kudos of having the right phone and the kudos of having a phone that does a particular thing is enormous!

  • Nexia

    In the report you state that the development costs for Apple is around $2,300 (min) do you know roughly what kind of figures were talking to develop for Android, Symbian, RIM?

  • It was not very long ago that mobile phone applications were optionally available resources that businesses could choose to set up or neglect. With a significant move of situation,mobile phone applications have become the most effective resource that will either work towards making or splitting the business of an enterprise.

  • Is there a new version of the report coming out soon? I am really interested on how cheap Androids are doing in Africa

    • No immediate plans for an update 🙂

      • Thanks for the quick reply.

        Could you, however, point me to the source has the date on feature phone vs. smartphone penetration in Africa cumulatively. how many feature phone are out there and what are the projections of the next couple of years.

        thank you once again!




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