“There are two competing companies. One is named Appy and the other is called Andy. Both companies make competing widgets,” Nigam Arora writes for MarketWatch.
“Appy sells 30 widgets at $600 per widget. Appy makes gross profit of $240 per widget. The total gross profit made on 30 widgets is $7200,” Arora writes. “Andy sells 50 widgets at $200 per widget. Andy makes a gross profit of $20 per widget. The total gross profit made on 50 widgets is $1000.”
“In the foregoing example Andy outsold Appy by 2 to 1, but Appy made 720% more gross profits that Andy,” Arora writes. “Which company is the better investment, Appy or Andy?”
Arora writes, “Apple is like the hypothetical company Appy and Android is like the hypothetical company Andy.”
Read more in the full article here.
Siri, what’s Google?
– a worm
Siri, can you do a Google search?
– I’m not that kind of girl.
Plus, it’s always possible for Apple to reduce their prices should they need/want to. Android makers can’t easily raise their prices and thus they’re broadly stuck at the bottom.
Just need to make sure customers are willing to pay the difference
Customers don’t pay the difference, upfront, the cellphone carriers subsidize the phones so that Appy and Andy’s widgets have roughly the same upfront cost.
You are right,KenC. But carriers then have to be willing to subsidize them as much.
Android is like those pots and pans you buy when you’re first setting out and fitting up your new apartment- found anywhere, even in dollar marts, cheap and not at all sufficient for extensive culinary expertise or entertaining. They will wear out quickly and season improperly. You will simply replace them with others from time to time without attention to utility or improvement in your cooking skills. iOS is like a chef’s set which is well-made out of quality materials and will only help to improve your meals, your taste, and your interest in the world.
Nice analogy. We want to last year’s Tulsa State Fair. My wife had recently bought a non-stick pan at Walmart for $40 or so. We saw the Titanium Elite booth. Since my wife is not one to spend frivolously, I told her that if she wanted them I’d get them. 5 pots and pans with lids for about $1000 another one for a friend for another $200 or so. GREAT INVESTMENT! My wife is thrilled. (And we just got two more as gifts to friends).
I am just as happy with my iPad as the day I got it. I’ve been tempted to upgrade, but not because I miss any functionality, but just for the RAM And maybe the camera. But at least I’m not scrimping and buying a plastic slab with an outdated OS that will be abandoned 2 months after birth like an unwanted child.
I ordered one of those pans that the New Zealander sells, but when I received it, there were no rocks in it, so I sent it back.
He may be South African. Anyway he talks funny – like me – an ex Limey.
I still have every piece of the original set of all-clad that we got as a wedding present… 25 years ago. Quality ends up costing basically the same (sometimes less) in the long run, and you have the benefit of having had something that was a joy to use every time you picked it up.
Mind you, in 25 years we have added many pieces of cookware, but that original all-clad set is the most often used.
Appy users are appier.
I think this analogy if flawed in that Appy produces hardware and software and Andy only produces software and licences it to manufactures, so the actual cost of to Andy is much lower. This was the same strategy that made Microsoft or Oracal the behemoths that they are today without having to invest a cent in manufacturing until they wanted to.
I agree with the analogy, but Microsoft and Oracle sold there software, what is Google selling?
For investors, there is no major debate here. Strategically, though, there is a significant importance to market share.
Application developers must make a calculated choice, for which platform they decide to develop first. What guides their decision? Primarily, it is the bottom line — which platform will generate more money. This largely depends on the platform’s market share, but not exclusively. Other factors are the user habits on each platform (iOS users pay for apps, Android users want free with ads), piracy rates on the platforms, development effort required (simplicity of the SDK, simplicity / fragmentation of the target platform, etc), distribution and revenue collection model, etc. Today, iOS still has larger absolute numbers (thanks to iPad and iPod touch; iPhone is already second place as a phone platform to Android), and even just for mobile phone market, it is still more attractive to developers, even though there are more Android phones, because it is unified, vs. the fragmented Android market, in addition to the piracy and willingness to pay disparity. However, if the growth trends continue for Android (and if the patent suits fail to bear fruit), Android will reach a critical mass that might tip the balance over, and we may begin seeing best applications first developed for Android, and then for iOS. I don’t see this coming anytime soon, especially considering such powerful brand awareness that Apple has, but there is a strong possibility that it might happen in the future.
In the end, it may not really be that important. As long as Apple continues to vigorously innovate, iOS will remain a relevant platform for a very long time.
In order for the scenario to proceed as you propose, large numbers of serious smartphone users need to start buying Android phones. Right now, all the evidence points to Android’s market share being inflated by all the 2-for-1 and free phone deals, which shove large numbers of Android phones into the hands of people who don’t really even want a smartphone, but hey it’s cheap and better than what they had. This is evidenced by Android users downloading fewer apps on average than iPhone users, and by iOS web share being far larger than it’s market share. People just don’t use Android phones like they use iPhones.
Developers aren’t going to find the Android platform more attractive if they see all their serious customers with iPhones, no matter how many Android phones are sold.
——RM
the real facts are more interesting than hypothetical profits:
Google says it is ‘on track’ to make 1 to 2 billion off mobile (all revenues from search and services from non PC platforms). Also it says two thirds of that is from iOS searches. So it probably makes less than 1 billion a year off Android.
Apple easily makes over 50 billion from mobile (10 b alone every quarter from iPhone before iAds, iPad, App store etc).
So Apple makes at least 50 times what Google makes off android.
an easier demo of Apple’s success with iOS and Google’s lack of it for Android is that since Android’s and iOS launch: Apple’s stock has more than tripled , Google’s has stayed near flat. From being a smaller company than Google at Android’s launch Apple is now near twice Google’s size in market cap.
Apple’s business model is long-term and solid, but this article misses the point, by conflating Google with Android handset manufacturers. Google’s model is not to make any money from the hardware, but from advertising sales, something they have been successful at – though there are long-term doubts which is reflected in the Google stock price.
Unless Google can find new markets, I can’t see where they can find major new upside, unlike Apple which despite being the largest company (by market cap), clearly has huge headroom to grow… so AAPL is still a no brainer stock buy, but GOOG is a hold at best, probably a sell.