Thursday, 3 December 2015

Android's Weakness Forces Valuable Users To iPhone

During the last Apple earnings call, Tim Cook claimed that thirty percent of iPhone sales during that quarter had been purchased by consumers coming from the Android platform. Data from Consumer Intelligence Research Partner backs up those figures, highlighting a trend that helps Apple weaken the Android ecosystem.

The study (reported by BGR) suggests that twenty-six percent of recent sales of the iPhone 6S handset had come from consumers migrating from the Android platform. The data reflects the first month of sales of the iPhone 6S, and is one of the highest values recorded. CIRPs data last year pointed to twelve percent of iPhone 6 buyers were from Android, while the iPhone 5S saw twenty-three percent switch platforms.

While the release of the iPhone 6S (and the iPhone 6S Plus) would have given a boost to the monthly figures, CIRP’s Mike Levin noted that the trend of switchers from Android to iPhone continues to follow the long-term trend that favours Apple.

Worryingly for Android manufacturers, those consumers moving over are those with higher disposable incomes who are willing to pay extra for flagship devices and services. Contrast Apple with its nearest rival in terms of unit sales, Samsung. As Apple’s sales continue to increase and the price of the 6S family handsets remains consistently high, Samsung has cut the price of the Galaxy S6 and S6 Edge handsets through special offers or monetary discounts. The South Korean firm has seen sales of its flagship handset stagnate, and the only growth coming in the cheaper mid-range handsets.

Users looking for high-end devices are not staying with Android, and that’s a long-term problem for the Google-supported platform.

When you gather the whales around a product, the money stays within that ecosystem. Apple’s continued attraction of high-end Android users to iOS not only brings in more revenue to Apple, it increases the attractiveness of the add-on market, be it for physical peripherals or increased sales of third-party apps and games. The potential to grab a slice of the money in the iOS ecosystem looks higher than in the Android ecosystem.

This vicious circle weakens the value of the Android ecosystem for Google, the manufacturers, and the app developers. Advertisers are looking to engage with the high-value consumers, and Google is looking to profit from the advertising market. If that pool of users is reduced, then Google’s earnings from Android are reduced. Manufacturers forced to bulk out sales in the mid-range will face increasing unit sales with no associated increase in turnover, reducing the money available to invest in R&D for future products. And with less free cash in the app ecosystem, developers have one less route to monetize their increasingly diverse work and will follow the money.

This data shows Apple not only winning the user base, but weakening the competition in the same breath. As Android becomes less attractive, those users will look for the only real alternative and move to iOS, creating a virtuous cycle for Apple as the disparity between iOS and Android increases.

Android may still have the edge in terms of unit sales, but in terms of who is buying Android, it is losing out to Apple.

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