If you've been following the smartphone industry, you know the two most dominant operating systems are Google's Android and Apple's iOS. If you have a smartphone, there's over a nine-in-10 chance you're using one of these operating systems.
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Over the last year, however, the two companies find themselves moving in opposite directions. Apple's closed-OS monetization strategy of relying on handsets for the bulk of its revenue has enriched shareholders while Google's open-ended monetization strategy of relying on mobile search and support has struggled in that regard. For an example of investor sentiment, look no further than the one-year chart:
But when it comes to operating system market share, however, this chart isn't quite reflective of the conditions on the ground. According to the recent IDC study, Android is still the most dominant operating system, by a substantive amount ... and they are growing. But here's the real story: market share doesn't matter; Apple is executing on its smartphone strategy better.
IDC full-year survey shows a milestone for Android
Recently, IDC came out with its Worldwide Quarterly Mobile Phone Tracker for 2014. And the survey brings Amazon to an amazing milestone: one billion devices shipped. Last year, Google's handset partners grew its units shipped 32% -- from 802.2 million to 1.06 billion devices -- increasing its market share from 78.7% to 81.5%. The market share growth was reflective of the company growing faster than the overall market that grew 27.7%.
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Even more interesting, Android was the only operating system in the big four that increased its operating system market share on a year-over-year basis. Boosted by Asian handset makers, especially high-growth Xiaomi, Android was able to steal market share away substantive market share from BlackBerry while driving Microsoft's Windows Phone and Apple iOS' market share percentages downward.
Apple's market share loss isn't the entire story
As previously stated, Apple did lose market share on a year-over-year basis in 2014, but it's not the entire story. The company did grow shipments 25.6% -- growing from 153.4 million to 192.7 million -- losing market share by not growing as fast as the overall market. The company saw its share of the market decline from 15.1% to 14.8%. But all factors considered, this is a phenomenal result for Apple.
The smartphone market has grown primarily in the low-end/developing markets where Apple continues a premium pricing strategy. Although Google's Android experienced amazing growth, sales of premium Android vendor Samsung were essentially flat while sales of lower-end devices from Xiaomi, Huawei, and ZTE accounted for the majority of Android's growth. These units are barely profitable if at all, and do very little to reward shareholders.
Market share means nothing
In the end, Google's market-share dominance is impressive, but it does very little to directly enrich shareholders. First, the company isn't really enriched from the initial hardware sale. Second, in developing markets many are forking Android and supplementing their own services, further hurting Android's monetization plans of its Google Play app and content store. In the end, Google will continue to be defined by its core business of search and the added traffic mobile brings will be monetized in that manner. Overall, a rather indirect monetization path for a market it dominates.
Apple, on the other hand, continues to grow sales of its high-margin phones at rates near the rate of the overall market. Last fiscal quarter they successfully raised the prices of their units $100 and reported record sales. Yes, Apple may only move 20% of Android's total units, but each unit contributes nearly $700 to Apple's revenue. If the last year is of any indication, investors have taken notice.
The article Despite What Youve Heard, Android Still Dominates Apple's iOS originally appeared on Fool.com.
Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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