Three Guys and a Podcast: Apple News, Analysis and Podcasts

Apple News, Analysis and Podcasts

Apple Cares Little About Market Share

February 02, 2011 at 12:18am Pacific Time
by: Karl Johnson
Categories: News
tagged: Apple, Google, iOS, Android, Market, Share

 Apple cares little about market share, much more about profits. For companies like Microsoft and Intel, market share and profits go hand in hand. This is not true for Apple.

Apple competed with Microsoft not through market share, but through margins. They proved this when Steve Jobs came back and ended the licensing program for the Mac OS. Steve showed you can make a lot of money without dominant market share. They are now doing the same thing with Android.

Google makes their money by selling ads. The more eyeballs they can get, the more money they can make. They are basically a broadcasting channel for the Internet. By offering free products to attract the largest amount of people, they can sell more ads. With Android, they need the largest market share possible in order to make a profit with ads, since they have no licensing fees and thus a very small margin.  Android is heading down the right path as its market share is growing at an astounding rate and is now moving past Apple's iOS. Android should continue to grow as it is on more devices, more networks, and in more stores.

While Android's increasing market share looks bad for Apple, the opposite is true. Apples makes more money by adding value to the product instead of competing on price, like the rest of the industry does. Apple would have to reduce its profit per device in order to go after market share. Apple's decision to go after margins instead of market is paying off as they rake in over 50% of the mobile market profits. This is even better news for Apple than market share is for Google. More profits makes Apple happy and continues development on Apple hardware and software.

It is very difficult to compare Android to the iOS because each company has separate objectives and separate ways of making money. Apple sells value-added hardware at a premium and Google displays ads to as many people as they can. While we are unsure how much Google makes on Android ads, we know Apple is raking it in selling hardware. As long as Apple can maintain a good amount of market share, they will retain developers and users, and keep the iOS ecosystem strong.

 

7 Comments

  1. elder norm ~ February 02, 2011 08:43

    At last, an analyst that gets it. Market share is somewhat important, but if you go broke getting it, you are just losing. Just a thought, en #

  2. David ~ February 02, 2011 11:33

    Market share is like the "time of possession" statistic in American football. Profit share is the actual points you put on the score board. You don't win the game by holding the ball; you win by scoring the most points. #

  3. Paul Akero ~ February 02, 2011 13:53

    Google says it hopes to make 1 billion a YEAR in mobile (Google says that includes "revenue from ads on non-PC platforms, including search, display, in-app etc." - BusinessInsider] Apple is heading towards $40-50 billion a year in mobile. Apple made $10.47 billion from iPhone alone last Quarter. (that does not include iAds, iPads, iTunes App Store etc. ITunes alone made another billion.) At current rate Google will need 50 years to match Apple's one year mobile revenue. When Android was announced in 2007 Google was larger than Apple in market cap and today after 3 years of Android 'success' Apple is $100 billion larger ( about 318 to 195 b) With Chinese O phones counted in Android stats but which don't run Google apps, and OEMs loading Bidu, Bing, Yahoo and locking them down, and private app stores rising who knows Google might be earning as much from iOS (Google is default search) as Android. If Apple decides to drop Google... #

  4. Odyssey67 ~ February 02, 2011 19:20

    "Market share is like the "time of possession" statistic in American football. Profit share is the actual points you put on the score board. You don't win the game by holding the ball; you win by scoring the most points." Yet you can't count out the team controlling the ball. I can't tell you how many games I've seen where a team is putting up mad points, but they get off the field so fast that their opponent keeps getting opportunities to come back and win in the end. And many do just that. If you follow your football game analogy to it's endpoint, it actually points to the problem in the real (business) world of thinking profit - points - is all that matters. In football, as in all games, eventually time expires. Thus it's always possible to put up more points/profit than your opponent could possibly overcome, no matter how much they control the ball/win market share. Life, however, is no game. There are no quarters, time outs, halftime ... indeed no artificial time-limits even end it. While the human organism eventually must 'give out', corporations can go on for many lifetimes. Thus market share - time of possession - takes on immense, latent power for them. If Google, or M$, ever eventually figure out how to make even half of what Apple does in profit margins, with their market dominance the value of those companies will pass Apple like they are standing still. #

  5. Werner - Guy #3 ~ February 02, 2011 20:23

    Nice comment Odyssey67. I like your analogy with American football. I'll have to remember that one. #

  6. Rip Ragged ~ February 02, 2011 21:13

    Time of possession is a cute analogy. It breaks down though because Apple has a whole team. All the other competitors are fielding individual players. Motorola, Samsung, Dell, HTC, Nokia, Sony, Acer et al: Hardware Microsoft, Google, Rhapsody, Linux: Software There isn't a single company that has the same team on the field as Apple. Apple has a computer/phone/mp3 player/tablet/OS ecosystem that all works together. Everybody has one or two products and they're competing against each other as well as Apple. Keep in mind that Apple is already six touchdowns ahead and playing a different game (profit vs. market share). Keep in mind Apple is establishing the rules for the rest of the players. Then consider that Apple hasn't even released the cool stuff they're currently developing that's going to make the iPad look like a stick with a rock tied to it. #

  7. Steven ~ February 05, 2011 02:50

    Good article, but sad for two reasons: 1) It's an obvious point, and has been for some time. 2) There are so many supposedly knowledgeable people who still don't get it that others can gain notoriety by continuing to belabor the obvious. #

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